EXECUTION COPY

NON-QUALIFIED STOCK OPTION AGREEMENT

AGREEMENT made as of January 28, 2008, by and between Frederick’s of Hollywood
Group Inc. (formerly Movie Star, Inc.), a New York corporation (the “Company”),
and Thomas Rende (the “Employee”).

WHEREAS, effective on January 28, 2008 (the “Grant Date”), pursuant to the terms
and conditions of the Company’s 2000 Performance Equity Plan (the “Plan”), the
Compensation Committee of the Board of Directors of the Company (the
“Committee”) authorized the grant to the Employee of an option (the “Option”) to
purchase an aggregate of 78,750 post-split shares of the authorized but unissued
Common Stock of the Company, $.01 par value (the “Common Stock”), conditioned
upon the Employee’s acceptance thereof upon the terms and conditions set forth
in this Agreement and subject to the terms of the Plan; and

WHEREAS, the Employee desires to acquire the Option on the terms and conditions
set forth in this Agreement.

IT IS AGREED:

1. Grant of Stock Option. The Company hereby grants the Employee the Option to
purchase all or any part of an aggregate of 78,750 post-split shares of Common
Stock (the “Option Shares”) on the terms and conditions set forth herein and
subject to the provisions of the Plan.

2. Non-qualified Stock Option. The Option represented hereby is not intended to
be an Option which qualifies as an “Incentive Stock Option” under Section 422 of
the Internal Revenue Code of 1986, as amended.

3. Exercise Price. The exercise price of the Option shall be $3.10 per share,
subject to adjustment as hereinafter provided.

4. Exercisability. Subject to the terms and conditions of the Plan, this Option
is exercisable immediately and shall remain exercisable except as otherwise
provided herein, until the

 

 

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close of business on the day immediately preceding the seventh (7th) anniversary
of the Grant Date (the “Exercise Period”).

5. Effect of Termination of Employment.

5.1 Termination Due to Death. If Employee’s employment by the Company terminates
by reason of death, the Option may thereafter be exercised by the legal
representative of the estate or by the legatee of the Employee under the will of
the Employee for a period of one (1) year from the date of such death or until
the expiration of the Exercise Period, whichever period is shorter.

5.2 Termination Due to Disability. If Employee’s employment by the Company
terminates by reason of Disability (as such term is defined in the Employment
Agreement, dated as of January 24, 2008, between the Company and Employee
(“Employment Agreement”)), the Option may thereafter be exercised by Employee
for a period of one (1) year from the date of termination of employment or until
the expiration of the Exercise Period, whichever period is shorter.

5.3 Termination for Cause. If Employee’s employment by the Company is terminated
for Cause (as such term is defined in the Employment Agreement), (i) this Option
shall immediately expire and (ii) the Company may require the Employee to return
to the Company the economic value of any Option Shares purchased hereunder by
the Employee within the six (6) month period prior to the date of such
termination of employment. In such event, the Employee hereby agrees to remit to
the Company, in cash, an amount equal to the difference between the Fair Market
Value of the Option Shares on the date of such termination of employment (or the
sales price of such shares if the Option Shares were sold during such six (6)
month period) and the Exercise Price of such shares.

5.4 Termination by the Company Without Cause or Due to Normal Retirement or by
Employee for Good Reason. If Employee’s employment is terminated by the Company
without Cause (as such term is defined in the Employment Agreement) or due to
Normal Retirement (as such term is defined in the Plan) or by Employee for Good
Reason (as such term is defined in the Employment Agreement), the Option may
thereafter be exercised by the Employee until the expiration of the Exercise
Period.

 

 

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5.5 Other Termination. If Employee’s employment is terminated for any reason
other than (i) death, (ii) Disability, (iii) for Cause, (iv) Normal Retirement,
(iv) without Cause by the Company or (v) by the Employee for Good Reason (a)
prior to December 31, 2009, then the Option may thereafter be exercised by the
Employee until ninety (90) days from the date of termination of employment or
until the expiration of the Exercise Period, whichever is shorter or (b) on or
after December 31, 2009, then the Option may thereafter by exercised by the
Employee until the expiration of the Exercise Period.

6. Withholding Tax. Not later than the date as of which an amount first becomes
includible in the gross income of the Employee for Federal income tax purposes
with respect to the Option, the Employee shall pay to the Company, or make
arrangements satisfactory to the Committee regarding the payment of, any
Federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount (“Withholding Tax”). The obligations of the
Company under the Plan and pursuant to this Agreement shall be conditional upon
such payment or arrangements with the Company and the Company shall, to the
extent permitted by law, have the right to deduct any Withholding Taxes from any
payment of any kind otherwise due to the Employee from the Company.

7. Adjustments.

7.1 In the event of a stock split, stock dividend, combination of shares, or any
other similar change in the Common Stock of the Company as a whole, the Board of
Directors of the Company shall make equitable, proportionate adjustments in the
number and kind of shares covered by the Option and in the option price
hereunder.

7.2 In the event of any reclassification or reorganization of the outstanding
shares of Common Stock other than a change covered by Section 7.1 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), the Employee shall have the right
thereafter (until the expiration of the right of exercise of this Option) to
receive upon the exercise hereof after such event, for the same aggregate
Exercise Price payable hereunder immediately prior to such reclassification,
reorganization, merger or consolidation, the amount and kind of consideration
receivable by a holder of the number of shares of

 

 

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Common Stock of the Company obtainable upon exercise of this Option immediately
prior to such event. The provisions of this Section 7.2 shall similarly apply to
successive reclassifications, reorganizations, mergers or consolidations, sales
or other transfers.

8. Method of Exercise.

8.1 Notice to the Company. The Option shall be exercised in whole or in part by
written notice in substantially the form attached hereto as Exhibit A directed
to the Company at its principal place of business accompanied by full payment as
hereinafter provided of the exercise price for the number of Option Shares
specified in the notice and of the Withholding Taxes, if any.

8.2 Delivery of Option Shares. The Company shall deliver a certificate for the
Option Shares to the Employee as soon as practicable after payment therefor.

8.3 Payment of Purchase Price. The Employee shall make cash payments by
certified or bank check, in each case payable to the order of the Company; the
Company shall not be required to deliver certificates for Option Shares until
the Company has confirmed the receipt of good and available funds in payment of
the purchase price thereof and of the Withholding Taxes, if any.

9. Nonassignability. The Option shall not be assignable or transferable except
by will or by the laws of descent and distribution in the event of the death of
the Employee. No transfer of the Option by the Employee by will or by the laws
of descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and such other evidence as the Company may deem necessary to establish the
validity of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of the Option.

10. Company Representations. The Company hereby represents and warrants to the
Employee that:

(i) the Company, by appropriate and all required action, is duly authorized to
enter into this Agreement and consummate all of the transactions contemplated
hereunder; and

(ii) the Option Shares, when issued and delivered by the Company to the Employee
in accordance with the terms and conditions hereof, will be duly and validly
issued and fully paid and non-assessable.

 

 

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11. Employee Representations. The Employee hereby represents and warrants to the
Company that:

(i) he is acquiring the Option and shall acquire the Option Shares for his own
account and not with a view towards the distribution thereof;

(ii) he has received a copy of all reports and documents required to be filed by
the Company with the Commission pursuant to the Exchange Act within the last 24
months and all reports issued by the Company to its stockholders;

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

(iv) in his position with the Company, he has had both the opportunity to ask
questions and receive answers from the officers and directors of the Company and
all persons acting on its behalf concerning the terms and conditions of the
offer made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;

(v) he is aware that the Company shall place stop transfer orders with its
transfer agent against the transfer of the Option Shares in the absence of
registration under the 1933 Act or an exemption therefrom as provided herein;
and

(vi) in the absence of an effective registration statement under the 1933 Act,
the certificates evidencing the Option Shares shall bear the following legend:

“The shares represented by this certificate have been acquired for investment
and have not been registered under the Securities Act of 1933. The shares may
not be sold or transferred in the absence of such registration or an exemption
therefrom under said Act.”

12. Restriction on Transfer of Option Shares. Anything in this Agreement to the
contrary notwithstanding, the Employee hereby agrees that he shall not sell,
transfer by any means or otherwise

 

 

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dispose of the Option Shares acquired by the Employee without registration under
the 1933 Act, or in the event that they are not so registered, unless (i) an
exemption from the 1933 Act registration requirements is available thereunder,
and (ii) the Employee has furnished the Company with notice of such proposed
transfer and the Company’s legal counsel, in its reasonable opinion, shall deem
such proposed transfer to be so exempt.

13. Miscellaneous.

13.1 Notices. All notices, requests, deliveries, payments, demands and other
communications which are required or permitted to be given under this Agreement
shall be in writing and shall be either delivered personally or sent by
registered or certified mail, or by private courier, return receipt requested,
postage prepaid to the parties at their respective addresses set forth herein,
or to such other address as either shall have specified by notice in writing to
the other. Notice shall be deemed duly given hereunder when delivered or mailed
as provided herein.

13.2 Plan Paramount; Conflicts with Plan. This Agreement and the Option shall,
in all respects, be subject to the terms and conditions of the Plan, whether or
not stated herein. In the event of a conflict between the provisions of the Plan
and the provisions of this Agreement, the provisions of the Plan shall in all
respects be controlling.

13.3 Stockholder Rights. The Employee shall not have any of the rights of a
stockholder with respect to the Option Shares until such shares have been issued
after the due exercise of the Option.

13.4 Waiver. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach.

13.5 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof. This Agreement may not be
amended except by writing executed by the Employee and the Company.

13.6 Binding Effect; Successors. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and, to the extent not prohibited herein,
their respective heirs, successors, assigns and representatives. Nothing in this
Agreement, expressed or implied, is intended

 

 

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to confer on any person other than the parties hereto and as provided above,
their respective heirs, successors, assigns and representatives any rights,
remedies, obligations or liabilities.

13.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to choice of
law provisions.

13.8 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.

13.9 Section 409A. The Option granted hereunder is intended to be exempt from
the provisions of Section 409A of the Internal Revenue Code of 1986, as amended
(“Section 409A “). To the extent that the Options or any payments or benefits
provided hereunder are considered deferred compensation subject to Section 409A,
the Company intends for this Agreement and the Option to comply with the
standards for nonqualified deferred compensation established by Section 409A
(the “409A Standards”). Notwithstanding anything herein to the contrary, to the
extent that any terms of this Agreement or the Option would subject the Employee
to gross income inclusion, interest or an additional tax pursuant to Section
409A, those terms are to that extent superseded by the 409A Standards. The
Company reserves the right to amend the Option granted hereunder to cause such
Option to comply with or be exempt from Section 409A.

 

 

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

 

EMPLOYEE:

 

FREDERICK’S OF HOLLYWOOD GROUP INC.
(formerly MOVIE STAR, INC.)

 

 

 

/s/ Thomas Rende

 

By: 

/s/ Peter G. Cole

Name: 

Thomas Rende

 

Name: 

Peter G. Cole

 

 

 

Title: 

Executive Chairman

 

 

 

 

1115 Broadway
New York, New York 10010

 

 

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EXHIBIT A

FORM OF NOTICE OF EXERCISE OF OPTION

_________________

DATE

Frederick’s of Hollywood Group Inc.

(formerly Movie Star, Inc.)

1115 Broadway

11th Floor

New York, New York 10010

Attention: The Board of Directors

 

Re:

Purchase of Option Shares

Gentlemen:

In accordance with my Stock Option Agreement dated as of ___________________
(“Agreement”) with Frederick’s of Hollywood Group Inc. (formerly Movie Star,
Inc.) (the “Company”), I hereby irrevocably elect to exercise the right to
purchase _________ shares of the Company’s common stock, par value $.01 per
share (“Common Stock”), which are being purchased for investment and not for
resale.

As payment for my shares, enclosed is a certified or bank check payable to Movie
Star, Inc. in the sum of $___________.

I hereby represent, warrant to, and agree with, the Company that

(i) I acquired the Option and shall acquire the Option Shares for my own account
and not with a view towards the distribution thereof;

(ii) I have received a copy of all reports and documents required to be filed by
the Company with the Commission pursuant to the Exchange Act within the last 24
months and all reports issued by the Company to its stockholders;

(iii) I understand that I must bear the economic risk of the investment in the
Option Shares, which cannot be sold by me unless they are registered under the
Securities Act of 1933 (the “1933 Act”) or an exemption therefrom is available
thereunder and that the Company is under no obligation to register the Option
Shares for sale under the 1933 Act;

(iv) in my position with the Company, I have had both the opportunity to ask
questions and receive answers from the officers and directors of the Company and
all persons acting on its behalf concerning the terms and conditions of the
offer made hereunder and to obtain any additional information to the extent the
Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;

 

 

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(v) I am aware that the Company shall place stop transfer orders with its

transfer agent against the transfer of the Option Shares in the absence of
registration under the 1933 Act or an exemption therefrom as provided herein;

(vi) my rights with respect to the Option Shares shall, in all respects, be
subject to the terms and conditions of this Company’s 2000 Performance Equity
Plan and this Agreement; and

(vii) in the absence of an effective registration statement under the 1933 Act,
the certificates evidencing the Option Shares shall bear the following legend:

“The shares represented by this certificate have been acquired for investment
and have not been registered under the Securities Act of 1933. The shares may
not be sold or transferred in the absence of such registration or an exemption
therefrom under said Act.”

Kindly forward to me my certificate at your earliest convenience.

 

Very truly yours,

 

 

 

       

 

 

(Signature)

 

 

(Address)

 

 

 

 

 

 

 

 

(Print Name)

 

 

(Address)

 

 

 

 

 

 

 

 

 

 

 

(Social Security Number)

 

 

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