REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT is dated as of January 28, 2008, by and among
Movie Star, Inc., a New York corporation (the “Company”), Fursa Alternative
Strategies LLC (formerly known as Mellon HBV Alternative Strategies LLC), a
Delaware limited liability company, acting on behalf of itself and the Fursa
Managed Accounts (as defined below) (“Fursa,” and together with the Fursa
Managed Accounts and their Permitted Assignees (as defined below), the “Fursa
Group”), TTG Apparel, LLC, a Delaware limited liability company (“Apparel”), and
Tokarz Investments, LLC, a Delaware limited liability company (“Investments,”
and together with Apparel, “TTG,” and together with their Permitted Assignees,
the “TTG Group”) (the Fursa Managed Accounts and TTG are also sometimes
hereafter referred to herein as an “Investor,” or collectively, as the
“Investors” and the Fursa Group and the TTG Group are also sometimes hereafter
referred to individually, as a “Group”).

WHEREAS, the Company has entered into that certain Merger Agreement dated as of
December 18, 2006 by and among the Company and the other parties thereto (as
amended, the “Merger Agreement”) providing for the merger (the “Merger”) of a
wholly-owned subsidiary of the Company with FOH Holdings, Inc., a Delaware
corporation;

WHEREAS, pursuant to the Merger Agreement, the Company is issuing to the
stockholders of FOH Holdings, Inc., shares (the “Merger Shares”) of its common
stock (the “Common Stock”);

WHEREAS, in accordance with the terms of the Merger Agreement, the Company
commenced an offering of $20,000,000 of its Common Stock pursuant to a rights
offering (the “Rights Offering”);

WHEREAS, in connection with the execution of the Merger Agreement, the Company
and certain of the Investors entered into the Standby Purchase Agreement, dated
as of December 18, 2006 (as amended, the “Standby Purchase Agreement”), pursuant
to which such Investors agreed to purchase from Movie Star, Inc. upon expiration
of the Rights Offering, shares of Common Stock not purchased by Movie Star,
Inc.’s shareholders in the Rights Offering, up to $20,000,000 on a several but
not on a joint and several basis (such shares, the “Unsubscribed Shares”), on
the terms and subject to the conditions set forth in Standby Purchase Agreement
(the “Standby Purchasers”);

WHEREAS, pursuant to the Standby Purchase Agreement, solely as compensation to
the Standby Purchasers for their commitments under the Standby Purchase
Agreement, Movie Star, Inc. has agreed to issue to the Standby Purchasers
warrants (the “Guarantor Warrants”) representing the right to purchase
additional shares of Common Stock (the “Warrant Shares”);

WHEREAS, pursuant to the Merger Agreement, Movie Star, Inc. will issue to
certain of the Fursa Managed Accounts shares of its Series A 7.5% Convertible
Preferred Stock

 

 

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(the “Preferred Stock Shares”), convertible to Common Stock (such shares of
Common Stock issuable upon any conversion, the “Preferred Stock Conversion
Shares”); and

WHEREAS, in connection with and pursuant to the Standby Purchase Agreement, the
Company has agreed with the Investors to provide certain rights as set forth
herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1. Demand Registrations.

(a) Demand Registrations. Subject to Sections 1(c) and 1(d) below, during the
Effective Period, an Initiating Holder may request in writing, with a copy of
such request delivered simultaneously to the non-Initiating Holder, that the
Company effect an underwritten Public Offering by filing a Registration
Statement under the Securities Act (“Demand Registration”) covering the
registration of at least twenty percent (20%) of the Registrable Securities (if
applicable, calculated on an as converted basis) held by such Initiating Holder,
the members of its Group and any other affiliates, which request will specify
the intended plan and method of disposition of such shares; provided that a
request for a Demand Registration shall not be effective if the Registrable
Securities of the Initiating Holder and its Affiliates requested to be included
in such Demand Registration do not have an aggregate market value of at least
$10 million (if applicable, calculated on an as converted basis) (based upon the
average daily closing price of the Common Stock (on its principal trading
market), rounded to two decimal places, for the ten (10) trading days
immediately preceding the date that the Initiating Holder’s request for
registration is received by the Company). The making of such demand by an
Initiating Holder shall be binding upon all of the holders of the Registrable
Securities within the Initiating Holder’s Group with respect to the number of
demand registration rights provided for in Section 1(c). After the date on which
the Company receives such a request, the Company shall use reasonable best
efforts (i) to file a Registration Statement under the Securities Act on the
appropriate form therefor covering all of the Registrable Securities specified
by the Initiating Holder within seventy-five (75) days after the date of such
request; provided, however, that such seventy-five (75) day period shall be
extended by the number of days having elapsed from the time the Company
furnishes to the Initiating Holder a reasonably complete draft of the proposed
Registration Statement to be filed, and the date on which the Initiating Holder,
acting as representative of the holders of Registrable Securities within the
Initiating Holder’s Group to which the proposed Registration Statement relates,
notifies the Company that such draft is acceptable to such Initiating Holder
insofar as the draft of the proposed Registration Statement contains information
that relates to them and the intended method or methods of distribution as
furnished by them to the Company and (ii) to cause such Registration Statement
to be declared effective as quickly as reasonably possible after the filing
referenced in clause (i) above. The Company will keep the Demand Registration
current and effective for at least one hundred twenty (120) days (such 120-day
period to be calculated without regard to any Deferral Period), or a shorter
period during which the holders of such demand shall have sold all Registrable
Securities covered by the Demand Registration.

 

 

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(b) Demand Withdrawal. If an Initiating Holder makes a demand to register
pursuant to Section 1(a) and later determines, prior to the Registration
Statement being declared effective by the Commission, not to sell Registrable
Securities pursuant to such registration, the Company shall cease all efforts to
register the offer and sale of such holder’s Registrable Securities and shall
take all action necessary to prevent the effectiveness for any pending
registration prepared in connection with the withdrawn request, and such
holder’s Demand Registration shall be reinstated as if never exercised, only if
such Initiating Holder withdrawing such demand pays in full to the Company,
within ten (10) days after presentation of an invoice by the Company therefor,
all reasonably documented costs and expenses incurred by the Company in
connection with such withdrawn demand registration, including, but not limited
to, Registration Expenses, unless the withdrawal is a result of a breach by the
Company of its obligations under this Agreement or action by the Company under
Section 1(d).

(c) Demands. The Fursa Group on the one hand, and the TTG Group on the other,
shall each as a separate Group be entitled to request two (2) Demand
Registrations pursuant to Section 1(a), and the making of an appropriate Demand
Registration under Section 1(a) by any one Group, subject to Section 1(b), shall
be binding upon all the holders of Registrable Securities within such Group for
the purpose of determining the number of Demand Registration rights provided for
in this Section 1(c).

(d) Company Rights. Notwithstanding the provisions of Section 1(a), if the
Company is requested to file any Demand Registration:

(i) the Company will not be required to take any action pursuant to
Section 1(a):

(A) if prior to the date of such request, the Company has effected each of the
Demand Registrations set forth in Section 1(c);

(B) if a Registration Statement is effective at the time such request is made
and the holders of Registrable Securities were offered the opportunity to
include Registrable Securities on such Registration Statement;

(ii) the Company shall have the right to defer the filing of a Registration
Statement relating to a Demand Registration until the expiration of the
one-hundred twenty (120)-day period (or for such longer period of time as
required by the Managing Underwriter) following the effective date of any other
Registration Statement pertaining to an underwritten public offering of
securities for the account of the Company or for the account of selling security
holders of the Company; or

(iii) the Company shall have the right to defer the filing after receipt of the
Initiating Holder’s request or if a Registration Statement pertaining to any
Demand Registration has already been filed, the Company may cause the
Registration Statement to be withdrawn and its effectiveness to be terminated,
or may postpone amending or supplementing the Registration Statement, until the

 

 

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Board of Directors determines that the circumstances requiring the withdrawal or
postponement no longer exist, if, in the judgment of the Company, (A) it is
advisable to suspend use of the Prospectus for a period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company or (B) the Board of Directors of the Company
determines in good faith that there is a valid business purpose or reason for
delaying such filing or effectiveness. The Company shall deliver a certificate
in writing, signed by its Chief Executive Officer or Chief Financial Officer, to
the holders of Registrable Securities, the Special Counsel and the Managing
Underwriters, if any, to the effect of the foregoing and, upon receipt of such
certificate, each such holder’s Selling Period will not commence until such
holder’s receipt of copies of a supplemented or amended Prospectus, or until it
is advised in writing by the Company that the Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such Prospectus. The Company will use
reasonable best efforts to ensure that the use of the Prospectus may be resumed,
and the Selling Period will recommence, upon the earlier of (x) public
disclosure of such pending material corporate development or similar material
event or (y) a determination by the Company that, in the judgment of the
Company, public disclosure of such material corporate development or similar
material event would not be prejudicial to the Company. Notwithstanding the
foregoing, the Company shall not under any circumstances be entitled to exercise
its right under this Section 1(d)(iii) to defer the commencement of a Selling
Period more than one-hundred twenty (120) days during any twelve (12)-month
period.

(e) Registration Expenses. The Company will pay all lawful Registration Expenses
incurred in connection with any Demand Registration that is not subsequently
withdrawn under Section 1(b) (including, without limitation, the cost of one
Special Counsel).

(f) Demand Effectiveness. A Demand Registration shall not count as such until a
Registration Statement becomes effective; provided, however, that if, after it
has become effective, the offering pursuant to the Registration Statement is
interfered with by any stop order injunction or other order or requirement of
the Commission or any other governmental authority, such registration shall be
deemed not to have been effected unless such stop order, injunction or other
order shall subsequently have been vacated or otherwise removed within sixty
(60) days of the imposition thereof.

(g) Registration Statement Form. Demand Registrations shall be on such
appropriate registration form promulgated by the Commission as shall be selected
by the Company, and shall be reasonably acceptable to the holders of a majority
of the Registrable Securities to which such registration relates, and shall
permit the disposition of such Registrable Securities in accordance with the
intended method or methods specified in their request for such registration.
Anything to the contrary notwithstanding provided in Section 1(a), the time
within which a Demand Registration Statement is otherwise to be filed following
receipt of a demand by the Initiating Holder shall be extended by the number of
days having elapsed from the time

 

 

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the Company furnishes to the Initiating Holder a reasonably complete draft of
the proposed Registration Statement to be filed, and the date on which the
Initiating Holder, acting as representative of the holders of Registrable
Securities within the Initiating Holder’s Group to which the proposed
Registration Statement relates notifies the Company that such draft is
acceptable to such Initiating Holder insofar as the draft of the proposed
Registration Statement contains information that relates to them and the
intended method or methods of distribution as furnished by them to the Company.

(h) Priority in Cutback Registrations. If a Demand Registration becomes a
Cutback Registration, the Company will include in any such registration to the
extent of the number which the Managing Underwriter advises the Company can be
sold in such offering (i) first, Registrable Securities requested to be included
in such registration by the Initiating Holder, pro rata on the basis of the
number of Registrable Securities requested to be included by the Initiating
Holder for the accounts of the holders of Registrable Securities included in
such Initiating Holder’s Group, and (ii) second, other Registrable Securities
requested to be included in such registration by the other Requesting Holders,
pro rata on the basis of the number of Registrable Securities requested as to be
included by such holders, and (iii) third, other securities of the Company
proposed to be included in such registration, allocated among the holders
thereof in accordance with the priorities then existing among the Company and
the holders of such other securities; and any securities so excluded shall be
withdrawn from and shall not be included in such Demand Registration.

2. Preemption of Demand.

Notwithstanding anything to the contrary contained herein, at any time within
twenty (20) days after receiving a written request for a Demand Registration,
the Company may elect to effect an underwritten primary registration in lieu of
the requested registration if the Company’s Board of Directors believes that
such primary registration would be in the best interests of the Company or if
the Managing Underwriter for the requested registration advises the Company in
writing that in its opinion, in order to sell the Registrable Securities to be
sold, the Company should include its own securities. If the Company so elects to
effect a primary registration, the Company shall give prompt written notice to
all holders of Registrable Securities of its intention to effect such a
registration and shall afford the holders of the Registrable Securities rights
contained in Section 3 with respect to Piggyback Registrations. In the event
that the Company so elects to effect a primary registration after receiving a
request for a requested registration, the requests for such a registration shall
be deemed to have been withdrawn and such primary registration shall not be
deemed to be an Effective Registration.

3. Piggyback Registrations.

(a) Right to Include Registrable Securities. Notwithstanding any limitation
contained in Section 1(c), if the Company at any time proposes after the date
hereof to effect a Piggyback Registration, including in accordance with
Section 2, it will each, at such time, give prompt written notice (a “Notice of
Piggyback Registration”) at least twenty (20) days prior to the anticipated
filing date, to all holders of Registrable Securities of its intention to do so
and of such holders’ rights under this Section 3 which Notice of Piggyback
Registration shall include a

 

 

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description of the intended method of disposition of such securities. Upon the
written request of any such holder made within fifteen (15) days after receipt
of a Notice of Piggyback Registration (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will, subject to the other
provisions of this Agreement, include in the registration statement relating to
such Piggyback Registration all Registrable Securities which the Company has
been so requested to register, all to the extent requisite to permit the
disposition of such Registrable Securities in accordance with the intended
method of disposition set forth in the Notice of Piggyback Registration.
Notwithstanding the foregoing, if, at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith) without prejudice, however, to the rights of any Requesting Holder
entitled to do so to request that such registration be effected as a Demand
Registration under Section 1(a), but subject in any case to the provisions in
Section 1(d) and (ii) in the case of a determination to delay registering, shall
be permitted to delay registering any Registrable Securities for the same period
as the delay in registering such other securities. No registration effected
under this Section 3 shall relieve the Company of its obligations to effect a
registration under Section 1(a).

(b) Registration Expenses. All Registration Expenses incurred in connection with
any Piggyback Registration shall be allocated among all Persons (including the
Company if it sells shares) on whose behalf securities of the Company are
included in such registration, pro rata on the basis of the respective amounts
of the securities then being registered on their behalf, provided, however, that
the Company shall pay all lawful Registration Expenses (except for those
expenses required to be paid pro rata by a Holder pursuant to the Securities Act
and the Exchange Act and the rules and regulations of the Commission thereunder)
incurred in connection with any registration that was originally commenced as a
Demand Registration but was not effected as a Demand Registration because of an
election by the Company in accordance with Section 2.

(c) Priority in Cutback Registrations. If a Piggyback Registration becomes a
Cutback Registration, the Company will include in such registration to the
extent of the amount of the securities which the Managing Underwriter advises
the Company can be sold in such offering:

(i) if such registration as initially proposed by the Company was solely a
primary registration of its securities, (A) first, the securities proposed by
the Company to be sold for its own account, (B) second, any Registrable
Securities requested to be included in such registration by Requesting Holders,
pro rata on the basis of the number of Registrable Securities requested to be
included by such holders, and (C) third, any other securities of the Company
proposed to be included in such registration, allocated among the holders
thereof

 

 

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in accordance with the priorities then existing among the Company and such
holders pro rata; and

(ii) if such registration as initially proposed by the Company was in whole or
in part requested by holders of securities of the Company, other than holders of
Registrable Securities in their capacities as such, pursuant to demand
registration rights, (A) first, such securities held by the holders initiating
such registration and, if applicable, any securities proposed by the Company to
be sold for its own account, allocated in accordance with the priorities then
existing among the Company and such holders, (B) second, any Registrable
Securities requested to be included in such registration by Requesting Holders,
pro rata on the basis of the number of Registrable Securities requested to be
included by such holders, and (C) third, any other securities of the Company
proposed to be included in such registration, allocated among the holders
thereof in accordance with the priorities then existing among the Company and
the holders of such other securities;

and any securities so excluded shall be withdrawn from and shall not be included
in such Piggyback Registration.

4. Demand Registration and Piggyback Registration Procedures. If and whenever
the Company is required to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 1(a) and Section 3(a) of this
Agreement, the Company will use its reasonable best efforts to effect the
registration of such Registrable Securities. Without limiting the foregoing, the
Company in each such case will, as expeditiously as possible, use its reasonable
best efforts:

(a) to prepare and file with the Commission (in the case of a Demand
Registration, not later than seventy-five (75) days after the Company’s receipt
of the request therefor from the Initiating Holder or as soon thereafter as
possible) the requisite registration statement to effect such registration and
to cause such registration statement to become effective; provided that as far
in advance as practical before filing such registration statement or any
amendment thereto, the Company will furnish to the Requesting Holders copies of
reasonably complete drafts of all such documents proposed to be filed (including
exhibits), and any such holder shall have the opportunity to object to any
information pertaining solely to such holder that is contained therein, and the
Company will make the corrections reasonably requested by such holder with
respect to such information prior to filing any such registration statement or
amendment;

(b) prepare and file with the Commission such amendments and supplements to such
registration statement and any prospectus used in connection therewith as may be
necessary to maintain the effectiveness of such registration statement during
the period of time during which such registration statement is to remain
effective as provided in this Agreement and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement, in accordance with the intended methods
of disposition thereof, until the earlier of (i) such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers

 

 

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thereof set forth in such registration statement and (ii) ninety (90) days after
such registration statement becomes effective;

(c) promptly notify each Requesting Holder and the underwriter or underwriters,
if any:

(i) when such registration statement or any prospectus used in connection
therewith, or any amendment or supplement thereto, has been filed and, with
respect to such registration statement or any post-effective amendment thereto,
when the same has become effective;

(ii) of any written comments from the Commission with respect to any filing
referred to in clause (i) and of any written request by the Commission for
amendments or supplements to such registration statement or prospectus;

(iii) of the notification to the Company by the Commission of its initiation of
any proceeding with respect to the issuance by the Commission of, or of the
issuance by the Commission of, any stop order suspending the effectiveness of
such registration statement; and

(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
applicable securities or blue sky laws of any jurisdiction;

(d) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
holder’s Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable Securities;

(e) to register or qualify all Registrable Securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions as each holder thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be reasonably
necessary or advisable to enable such holder to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such holder, except
that the Company shall not for any such purpose be required (i) to qualify
generally to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this paragraph (e) be obligated to be so
qualified, (ii) to subject itself to taxation in any such jurisdiction or
(iii) to consent to general service of process in any jurisdiction;

(f) use its reasonable best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental

 

 

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agencies or authorities as may be necessary to enable each holder thereof to
consummate the disposition of such Registrable Securities;

(g) only with respect to underwritten Public Offerings, furnish to each
Requesting Holder a signed counterpart, addressed to such holder and the
underwriters of:

(i) an opinion of counsel for the Company, dated the date of any closing under
the underwriting agreement, in form and substance as provided below, and

(ii) if received by the Company, a “comfort” letter, dated the date of any
closing under the underwriting agreement, signed by the independent public
accountants who have issued an opinion with respect to the Company’s financial
statements included in such registration statement,

in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants’ letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer’s counsel
and in accountants’ letters delivered to the underwriters in underwritten Public
Offerings of securities; provided, however, (x) the opinion of counsel to the
Company to be delivered to the Initiating Holder shall be limited as to subject
matter, form and scope to:

(A) a negative assurance opinion that such counsel has participated in
conferences with officers and other representatives of the Company,
representatives of the independent public or certified public accountants for
the Company and with representatives of the underwriters, if any, at which the
contents of the registration statement were discussed and, although such counsel
will neither pass upon nor assume any responsibility for, the accuracy,
completeness or fairness of the statements contained or incorporated by
reference in the registration statement or the prospectus, and any supplements
or amendments thereto, and have not made any independent check or verification
thereof, during the course of such participation nothing has come to such
counsel’s attention which would lead them to believe that either the
registration, at the time the registration statement became effective or as of
the date of their opinion, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to be stated
therein or necessary to make the statements therein, not misleading or that the
prospectus, as of its issue date or as of the date of their opinion, contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being understood that such
counsel will express no belief as to the financial statements, schedules and
other financial and statistical data, included or incorporated by reference in
the registration statement or the prospectus or any amendments or supplements
thereto);

 

 

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(B) opining that the registration statement and the prospectus, and each
amendment or supplement thereto (other than (i) the financial statements, notes
or schedules thereto and (ii) other financial and statistical information
included or incorporated by reference in the registrations statement or the
prospectus or omitted therefrom) as of their respective effective or issue
dates, appeared on their face to comply as to form in all material respects with
the requirements for registration statements on the Form under which the
registration statement was filed under the Securities Act and the Exchange Act
and the rules and regulations of the Commission thereunder; and

(C) opining that the registration statement has been declared effective by the
Commission under the Securities Act and to the knowledge of such counsel, no
stop order suspending the effectiveness of the registration statement has been
issued under the Securities Act and no proceedings for such purpose have been
instituted or are pending or are contemplated or threatened by the Commission,
and all other matters pertaining to the Company and the registration statement
as customarily covered in opinions of issuer’s counsel shall be the subject of a
separate opinion of the counsel to the Company.

(h) notify, in writing, each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (which notice shall include a certificate of the Chief
Executive Officer or President of the Company as to the nature of such event),
and at the request of any such holder promptly prepare and furnish to such
holder a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

(i) otherwise use its reasonable best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, if required, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder;

(j) make available for inspection by any underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other agent

 

 

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retained by any such underwriter (collectively, the “Inspectors”), all financial
and other records, pertinent corporate documents and properties of the Company
(collectively, the “Records”) as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information reasonably requested by any
such Inspector in connection with such registration statement. Records which the
Company determines, in good faith, to be confidential, shall be made available
to the Inspectors upon their prior execution and delivery to the Company of a
customary confidentiality agreement;

(k) provide a transfer agent and registrar for all Registrable Securities
covered by such registration statement not later than the effective date of such
registration statement; and

(l) use its reasonable best efforts to cause all Registrable Securities covered
by such registration statement to be listed, upon official notice of issuance,
on any securities exchange on which any of the securities of the same class as
the Registrable Securities are then listed.

The Company may require each holder of Registrable Securities as to which any
registration is being effected to, and each such holder, as a condition to
including Registrable Securities in such registration, shall, furnish the
Company with such information and affidavits regarding such holder and the
distribution of such securities as the Company may from time to time reasonably
request in writing in connection with such registration. Any delay in providing
such requested information shall toll the time periods provided for in this
Agreement for the filing of any registration statement provided for in this
Agreement.

Each holder of Registrable Securities agrees by acquisition of such Registrable
Securities that upon receipt of any notice from the Company of the happening of
any event of the kind described in paragraph (h) of this Section, such holder
will forthwith discontinue such holder’s disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by paragraph (h) of this Section and, if so directed by
the Company, will deliver to the Company (at the Company’s expense) all copies,
other than permanent file copies, then in such holder’s possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period referred to in paragraph (b) of this Section shall be extended by a
number of days equal to the number of days during the period from and including
the giving of notice pursuant to paragraph (h) of this Section and to and
including the date when each holder of any Registrable Securities covered by
such registration statement shall receive the copies of the supplemented or
amended prospectus contemplated by paragraph (h) of this Section.

5. Underwritten Offerings.

(a) Underwritten Requested Offerings. In the case of any underwritten Public
Offering being effected pursuant to a Demand Registration, subject to
Section 1(c), the Managing Underwriter and any other underwriter or underwriters
with respect to such offering

 

 

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shall be selected by the Company with the consent of the Initiating Holder,
which consent shall not be unreasonably withheld. The Company shall not be
required to consult with the holders of Registrable Securities with respect to
an underwritten primary public offering of any securities of the Company. The
Company shall enter into an underwriting agreement in customary form with such
underwriter or underwriters, which shall include, among other provisions,
indemnities and reciprocal indemnities to the effect and to the extent provided
in Section 7. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement. No holder of
Registrable Securities shall be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder and its
ownership of the securities being registered on its behalf and such holder’s
intended method of distribution and any other representation required by law. No
Requesting Holder may participate in such underwritten offering unless such
holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such holder may elect to withdraw therefrom and from such
registration by notice to the Company and the Managing Underwriter, and each of
the remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn in the proportion which the number of Registrable
Securities being registered by such remaining Requesting Holder bears to the
total number of Registrable Securities being registered by all such remaining
Requesting Holders.

(b) Underwritten Piggyback Offerings. If the Company at any time proposes to
register any of its securities in a Piggyback Registration and such securities
are to be distributed by or through one or more underwriters, the Company will,
subject to the provisions of Section 1(h) and Section 3(c), use its reasonable
best efforts, if requested by any holder of Registrable Securities, to arrange
for such underwriters to include the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such underwriters,
and such holders shall be obligated to sell their Registrable Securities in such
Piggyback Registration through such underwriters on the same terms and
conditions as apply to the other Company securities to be sold by such
underwriters in connection with such Piggyback Registration. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriter or
underwriters. No holder of Registrable Securities shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder and its ownership of the securities being registered on its behalf and
such holder’s intended method of distribution and any other representation
required by law. No Requesting Holder may participate in such underwritten
offering unless such holder agrees to sell its Registrable Securities on the
basis provided in such underwriting agreement and completes and executes all
questionnaires, powers of attorney, indemnities and other documents reasonably
required under the terms of such underwriting agreement. If any Requesting
Holder disapproves of the terms of an underwriting, such holder may elect to
withdraw therefrom and from such registration by notice to the Company and the
Managing Underwriter, and each of the remaining Requesting Holders shall be
entitled to increase the number of Registrable Securities being registered to
the extent of the Registrable Securities so withdrawn in the proportion which

 

 

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the number of Registrable Securities being registered by such remaining
Requesting Holder bears to the total number of Registrable Securities being
registered by all such remaining Requesting Holders.

6. Holdback Agreement.

(a) By the Holders of Registrable Securities. If and to the extent requested by
the Managing Underwriter (or, in the case of a non-underwritten Public Offering,
the Company), each holder of Registrable Securities, by acquisition of such
Registrable Securities, agrees, to the extent permitted by law, not to effect
any public sale or distribution (including a sale under Rule 144) of such
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the thirty (30) days prior to and up to one-hundred
twenty (120) days after the effective date of any registration statement filed
by the Company in connection with a Public Offering (or for such longer period
of time as required by the Managing Underwriter (or, in the case of a
non-underwritten Public Offering, the Company), except as part of such
registration statement, whether or not such holder participates in such
registration.

(b) By the Company and Other Securityholders. If and to the extent requested by
the Managing Underwriter, the Company agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the thirty (30) days
prior to and the one-hundred twenty (120) days after the effective date of the
registration statement filed in connection with an underwritten offering made
pursuant to a Demand Registration (or for such longer period of time as is
sufficient and appropriate, in the opinion of the Managing Underwriter, in order
to complete the sale and distribution of the securities included in such
registration), except as part of such underwritten registration and except
pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission
or any successor or similar forms thereto.

(c) Exception. The foregoing provisions shall not apply to any holder of
securities of the Company to the extent such holder is prohibited by applicable
law from agreeing to withhold from sale.

7. Indemnification.

(a) Indemnification by the Company. The Company shall, to the full extent
permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Demand Registration or a Piggyback Registration, its directors and officers, and
each other Person, if any, who controls any such seller within the meaning of
the Securities Act, against any losses, claims, damages, expenses or
liabilities, joint or several (together, “Losses”), to which such seller or any
such director or officer or controlling Person may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or

 

 

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necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, and the
Company will reimburse such seller and each such director, officer and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such Loss (or action or
proceeding in respect thereof); provided that the Company shall not be liable in
any such case to the extent that any such Loss (or action or proceeding in
respect thereof) arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in any such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such seller specifically stating
that it is for use in the preparation thereof or (ii) such seller’s failure to
send or give a copy of the final prospectus to the Persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer
or controlling Person, and shall survive the transfer of such securities by such
seller. The Company shall also indemnify each other Person who participates
(including as an underwriter) in the offering or sale of Registrable Securities,
their officers and directors and each other Person, if any, who controls any
such participating Person within the meaning of the Securities Act to the same
extent as provided above with respect to sellers of Registrable Securities.

(b) Indemnification by the Sellers. Each holder of Registrable Securities which
are included or are to be included in any registration statement filed in
connection with a Demand Registration or a Piggyback Registration, as a
condition to including Registrable Securities in such registration statement,
shall, to the full extent permitted by law, indemnify and hold harmless the
Company, its directors and officers, and each other Person, if any, who controls
the Company within the meaning of the Securities Act, against any Losses to
which the Company or any such director or officer or controlling Person may
become subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such seller specifically stating that it is for use in the
preparation thereof; provided, however, that the obligation to provide
indemnification pursuant to this Section 7(b) shall be several, and not joint
and several, among such Indemnifying Parties on the basis of the number of
Registrable Securities included in such registration statement and the aggregate
amount which may be recovered from any holder of Registrable Securities pursuant
to the indemnification provided for in this Section 7(b) in connection with any
registration and sale of Registrable Securities shall be limited to the total
proceeds received by such holder from the sale of such Registrable Securities.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or

 

 

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on behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. Such holders shall
also indemnify each other Person who participates (including as an underwriter)
in the offering or sale of Registrable Securities, their officers and directors
and each other Person, if any, who controls any such participating Person within
the meaning of the Securities Act to the same extent as provided above with
respect to the Company.

(c) Notices of Claims, etc. Promptly after receipt by an Indemnified Party of
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraph (a) or (b) of this Section 7, such
Indemnified Party will, if a claim in respect thereof is to be made against an
Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action; provided, however, that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under the preceding paragraphs of this
Section 7, except to the extent that the Indemnifying Party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and, unless, in the reasonable judgment of any Indemnified Party,
a conflict of interest between such Indemnified Party and any Indemnifying Party
exists with respect to such claim, to assume the defense thereof, jointly with
any other Indemnifying Party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such Indemnified Party, and after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; provided, however, that the Indemnified Party may participate in
such defense at the Indemnified Party’s expense; and provided, further, that the
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a conflict of interest may exist between such Indemnified Party and any
other Indemnified Parties with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel for the Indemnified Parties or counsels. No Indemnifying
Party shall consent to entry of any judgment or enter into any settlement
without the consent of the Indemnified Party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnifying Party shall be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.

(d) Contribution. If the indemnity and reimbursement obligation provided for in
any paragraph of this Section 7 is unavailable or insufficient to hold harmless
an Indemnified Party in respect of any Losses (or actions or proceedings in
respect thereof) referred to therein,

 

 

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then the Indemnifying Party shall contribute to the amount paid or payable by
the Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party on the one hand and the Indemnified Party on the
other hand in connection with statements or omissions which resulted in such
Losses, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this paragraph were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this paragraph. The amount paid by an Indemnified Party as a result of the
Losses referred to in the first sentence of this paragraph shall be deemed to
include any legal and other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any Loss which is the
subject of this paragraph.

No Indemnified Party guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
the Indemnifying Party if the Indemnifying Party was not guilty of such
fraudulent misrepresentation.

(e) Other Indemnification. Indemnification similar to that specified in the
preceding paragraphs of this Section 7 (with appropriate modifications) shall be
given by the Company and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any federal
or state law or regulation of any governmental authority other than the
Securities Act. The provisions of this Section 7 shall be in addition to any
other rights to indemnification or contribution which an Indemnified Party may
have pursuant to law, equity, contract or otherwise.

(f) Indemnification Payments. The indemnification required by this Section 7
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Losses are
incurred; provided that the Indemnified Party executes an agreement in form
reasonably satisfactory to the Company to repay all such advances upon a finding
that the Company was not liable therefor by reason of the provisions contained
in Section 7(a) hereof.

8. Covenants Relating to Rule 144. The Company will file reports in compliance
with the Exchange Act, will comply with all rules and regulations of the
Commission applicable in connection with the use of Rule 144 and take such other
actions and furnish such holder with such other information as such holder may
request in order to avail itself of such rule or any other rule or regulation of
the Commission allowing such holder to sell any Registrable Securities without
registration. If at any time the Company is not required to file reports in
compliance with either Section 13 or Section 15(d) of the Exchange Act, the
Company at its expense will, forthwith upon the written request of the holder of
any Registrable Securities, make available adequate current public information
with respect to the Company within the meaning of paragraph (c)(2) of Rule 144.

 

 

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9. Other Registration Rights.

(a) No Existing Agreements. The Company represents and warrants to the Investor
that, except as set forth in the Parent Disclosure Schedule delivered by the
Company under the Merger Agreement, there is not in effect on the date hereof
any agreement by the Company (other than this Agreement) pursuant to which any
holders of Common Stock have a right to cause the Company to register or qualify
such securities under the Securities Act or any securities or blue sky laws of
any jurisdiction.

(b) Future Agreements. From and after the date hereof and until there are no
longer any Registrable Securities outstanding or they have otherwise ceased to
be Registrable Securities, the Company will not enter into any registration
rights or similar agreements, contracts or understandings which materially
adversely affect the Investors’ rights under this Agreement.

 

 

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10. Definitions.

(a) Except as otherwise specifically indicated, the following terms will have
the following meanings for all purposes of this Agreement:

“Agreement” means this Registration Rights Agreement, as the same shall be
amended from time to time.

“Business Day” means a day other than Saturday, Sunday or any other day on which
banks located in the State of New York are authorized or obligated to close.

“Commission” means the United States Securities and Exchange Commission, or any
successor governmental agency or authority.

“Common Stock” means shares of Common Stock, par value $0.01 per share, of the
Company, as constituted on the date hereof, and any stock into which such Common
Stock shall have been changed or any stock resulting from any reclassification
of such Common Stock.

“Company” has the meaning ascribed to it in the preamble.

“Cutback Registration” means any Demand Registration to be effected as an
underwritten Public Offering in which the Managing Underwriter with respect
thereto advises the Company and the Initiating Holder in writing that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceed the number which can be sold in such offering without a material
reduction in the selling price anticipated to be received for the securities to
be sold in such Public Offering.

“Deferral Period” means the period during which the Company has elected to
postpone the sale or other transfer of Registrable Securities by the holders
thereof pursuant to the applicable terms of Section 1(d) of this Agreement or
any other period during which a stop order or other order suspending the
effectiveness of a Registration Statement is in effect.

“Demand Registration” means any registration of Registrable Securities under the
Securities Act effected in accordance with Section 1(a), and further includes a
Cutback Registration.

“Effective Period” means the period commencing on the eighteen (18) month
anniversary of the closing under the Standby Purchase Agreement and ending the
earlier of the date that all of the Registrable Securities shall have ceased to
be Registrable Securities.

“Effective Registration” means, subject to the last sentence of Section 2, a
Demand Registration which (i) has been declared or ordered effective in
accordance with the rules of the Commission, and (ii) has been kept effective
for the period of time contemplated by Section 4(b).

 

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Fursa” has the meaning ascribed to it in the recitals.

“Fursa Group” has the meaning ascribed to it in the recitals.

“Fursa Managed Accounts” shall mean certain funds and accounts affiliated with,
managed by, or over which Fursa or any of its Affiliates exercises investment
authority, including, without limitation, with respect to voting and dispositive
rights, set forth on Schedule 1 or such funds and accounts to whom proper
assignments have been made pursuant to Section 11(g) herein.

“Group” has the meaning ascribed to it in the recitals.

“Guarantor Warrants” has the meaning ascribed to it in the recitals.

“Indemnified Party” means a party entitled to indemnity in accordance with
Section 7.

“Indemnifying Party” means a party obligated to provide indemnity in accordance
with Section 7.

“Initiating Holder” means either Fursa, as representative of the Fursa Group, or
TTG, as representative of the TTG Group, making a Demand Registration pursuant
to Section 1(a) for the registration of Registrable Securities.

“Inspectors” has the meaning ascribed to it in Section 4(j).

“Investments” has the meaning ascribed to it in the recitals.

“Investors” has the meaning ascribed to it in the recitals.

“Losses” has the meaning ascribed to it in Section 7(a).

“Managing Underwriter” means, with respect to any Public Offering, the
underwriter or underwriters managing such Public Offering.

“Merger” has the meaning ascribed to it in the recitals.

“Merger Agreement” has the meaning ascribed to it in the recitals.

“NASD” means the National Association of Securities Dealers.

“Notice of Piggyback Registration” has the meaning ascribed to it in
Section 3(a).

“Parent Disclosure Schedule” has the meaning ascribed to it in the Merger
Agreement.

 

 

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“Permitted Assignee” has the meaning ascribed to it in Section 11(g).

“Person” means any natural person, corporation, general partnership, limited
partnership, proprietorship, other business organization, trust, union or
association.

“Piggyback Registration” means any registration of equity securities of the
Company under the Securities Act (other than a registration in respect of a
dividend reinvestment or similar plan for stockholders of the Company or on Form
S-4 or Form S-8 promulgated by the Commission, or any successor or similar forms
thereto or relating to a transaction under Rule 145 under the Securities Act),
whether for sale for the account of the Company or for the account of any holder
of securities of the Company (other than Registrable Securities) on a form that
would permit the registration of Registrable Securities for the sale to the
public under the Securities Act, under the circumstances described in Section 2.

“Preferred Stock Conversion Shares” means shares of Common Stock issuable upon
conversion of the Preferred Stock.

“Preferred Stock Shares” means shares of Series A 7.5% Convertible Preferred
Stock, par value $0.01 per share, of the Company issued to Fursa pursuant to the
Merger Agreement.

“Public Offering” means any offering of Common Stock to the public, either on
behalf of the Company or any of its securityholders, pursuant to an effective
registration statement under the Securities Act.

“Records” has the meaning ascribed to it in Section 4(j).

“Registrable Securities” means (i) any Merger Shares issued by the Company to
the Investors, (ii) any Unsubscribed Shares issued by the Company to the
Investors, (iii) any Warrant Shares issued upon exercise of the Guarantor
Warrants, (iv) any Preferred Stock Conversion Shares issued upon conversion of
the Preferred Stock and (v) any additional shares of Common Stock issued or
distributed by way of a dividend, stock split or other distribution in respect
of shares of Common Stock issued by the Company to the Investors in respect of
the Merger Shares, the Unsubscribed Shares, the Warrant Shares, the Preferred
Stock Shares and the Preferred Stock Conversion Shares. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities upon the earliest to occur of (A) the date on which a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (B) the date on
which such securities may be sold pursuant to Rule 144 under the Securities Act
during any three-month period, (C) the date on which such securities may be sold
pursuant to Rule 144(k) under the Securities Act, (D) the date on which such
securities are transferred to or become owned by a Person who is not an Investor
or a Permitted Assignee, (E) the 10th year anniversary following the date
hereof, or (F) the date on which such securities shall have ceased to be
outstanding.

“Registration Expenses” means all expenses of the Company incident to the
Company’s performance of or compliance with its obligations under this Agreement
to effect the

 

 

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registration of Registrable Securities in a Demand Registration or a Piggyback
Registration, including, without limitation, any and all registration, filing,
securities exchange listing and NASD fees, all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of “cold comfort”
letters required by or incident to such performance and compliance, subject to
Section 1(b), the reasonable fees and disbursements of a single counsel retained
by the holders of a majority of the Registrable Securities being registered, and
any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions, and
transfer taxes, if any, in respect of Registrable Securities, which shall be
payable by each holder thereof, provided, however, that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.

“Requesting Holders” means, with respect to any Demand Registration or Piggyback
Registration, the holders of Registrable Securities requesting to have
Registrable Securities included in such registration in accordance with this
Agreement.

“Rights” has the meaning ascribed to it in the recitals.

“Rights Offering” as the meaning ascribed to it in the recitals.

“Rights Shares” has the meaning ascribed to it in the recitals.

“Rule 144” means Rule 144 promulgated by the Commission under the Securities
Act, and any successor provision thereto.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Selling Period” means the period during which a holder of Registrable
Securities shall be entitled to sell its Rights Shares pursuant to a Prospectus
under applicable provision of Section 1.

“Shareholders Agreement” has the meaning ascribed to it in the Merger Agreement.

“Special Counsel” means any law firm retained from time to time by an Initiating
Holder, as shall be specified by such Initiating Holder to the Company and to
whom the Company has no reasonable objection; provided that at no time shall
there be more than one Special Counsel the fees and expenses of which will be
paid by the Company pursuant to this Agreement, subject to the provisions of
Section 1(b) in which case the Company shall have no obligation or
responsibility for such fees.

 

 

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“Standby Purchase Agreement” has the meaning ascribed to it in the recitals.

“TTG Group” has the meaning ascribed to it in the recitals.

“Unsubscribed Shares” has the meaning ascribed to it in the recitals.

“Warrant Shares” has the meaning ascribed to it in the recitals.

(b) Unless the context of this Agreement otherwise requires, (i) words of any
gender include each other gender, (ii) words using the singular or plural number
also include the plural or singular number, respectively, (iii) the terms
“hereof,” “herein,” “hereby” and derivative or similar words refer to this
entire Agreement; and (iv) the term “Section” refers to the specified Section of
this Agreement. Whenever this Agreement refers to a number of days, such number
shall refer to calendar days unless Business Days are specified.

11. Miscellaneous.

(a) Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and shall be
deemed duly given (i) upon delivery if hand delivered at the address designated
below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received), (ii) on the fifth business day after deposit into the
mail, if deposited in the mail, registered or certified, return receipt
requested, postage prepaid, addressed to the address designated below, (iii)
upon delivery if delivered by reputable express courier service to the address
designated below, or (iv) upon confirmation of transmission if transmitted by
facsimile to the facsimile number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received).
The addresses and facsimile numbers for such communications shall be:

If to Fursa or any Fursa Managed Account, at:

 

Fursa Alternative Strategies LLC

 

444 Merrick Road, Suite 104

 

Lynbrook, NY 11563

 

Attention:  

Patrick Brennan

 

Facsimile:  

(646) 205-6201

with a copy (which shall not constitute notice) to:

 

Fursa Alternative Strategies LLC

 

444 Merrick Road, Suite 104

 

Lynbrook, NY 11563

 

Attention:  

Guy Molinari

 

Facsimile:  

(646) 205-6201

 

 

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If to the Company, at:

 

Movie Star, Inc.

 

1115 Broadway

 

New York, NY 10010

 

Attention:  

Melvin Knigin

 

Facsimile:  

(212) 213-4925

with a copy (which shall not constitute notice) to:

 

Cooley Godward Kronish LLP

 

1114 Avenue of the Americas

 

New York, NY 10036

 

Attention:  

Scott L. Kaufman

 

Facsimile:  

(212) 401-4772

and a copy (which shall not constitute notice) to:

 

Graubard Miller

 

405 Lexington Avenue, 19th Floor

 

New York, NY 10174

 

Attention:  

Marci J. Frankenthaler

 

Facsimile:  

(888) 225-4764

If to TTG, at:

 

Tokarz Investments, LLC

 

287 Bowman Avenue

 

Purchase, NY 10577

 

Attention:  

Michael Tokarz

 

Facsimile:  

(914) 251-1816

with a copy (which shall not constitute notice) to:

 

Wildman, Harrold, Allen & Dixon LLP

 

225 W. Wacker Drive, Suite 3000

 

Chicago, IL 60606

 

Attention:  

John L. Eisel

 

Facsimile:  

(312) 201-2555

With respect to any other holder of Registrable Securities, such notices,
requests and other communications shall be sent to the addresses set forth in
the stock transfer records regularly maintained by the Company. Either party
hereto may from time to time change its address or facsimile number for notices
under this Section 11(a) by giving at least ten (10) days’ prior written notice
of such changed address or facsimile number to the other party hereto.

 

 

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(b) Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof, and
contains the sole and entire agreement between the parties hereto with respect
to the subject matter hereof.

(c) Amendment. This Agreement may be amended, supplemented or modified only by a
written instrument (which may be executed in any number of counterparts) duly
executed by or on behalf of each of the Company and Persons owning fifty-one
percent (51%) or more of the Registrable Securities.

(d) Waiver. Subject to paragraph (e) of this Section, any term or condition of
this Agreement may be waived at any time by the party that is entitled to the
benefit thereof, but no such waiver shall be effective unless set forth in a
written instrument duly executed by or on behalf of the party waiving such term
or condition. No waiver by any party of any term or condition of this Agreement,
in any one or more instances, shall be deemed to be or construed as a waiver of
the same term or condition of this Agreement on any future occasion.

(e) Consents and Waivers by Holders of Registrable Securities. Any consent of
the holders of Registrable Securities pursuant to this Agreement, and any waiver
by such holders of any provision of this Agreement, shall be in writing (which
may be executed in any number of counterparts) and may be given or taken by
Fursa and TTG as representatives of the Fursa Group and the TTG Group,
respectively, and any such consent or waiver so given or taken will be binding
on all the holders of Registrable Securities.

(f) No Third Party Beneficiary. The terms and provisions of this Agreement are
intended solely for the benefit of each party hereto, their respective
successors or permitted assigns and any other holder of Registrable Securities,
and it is not the intention of the parties to confer third-party beneficiary
rights upon any other Person other than any Person entitled to indemnity under
Section 7.

(g) Successors and Assigns. Subject to the restrictions on transfers under the
Shareholders Agreement, this Agreement shall only be assignable by an Investor
to (i) a Person that acquires from such Investor in a private transfer exempt
from registration under the Securities Act and other applicable securities laws,
as confirmed by an opinion of counsel reasonably acceptable to the Company,
Registrable Securities equal to at least five percent (5%) of the total
outstanding shares of Common Stock and (ii) any Affiliate (as defined in Rule
12b-2 under the Exchange Act) of an Investor or any other Person, managed fund
or managed client account over which such Investor or any of its Affiliates
exercises investment authority, including, without limitation, with respect to
voting and dispositive rights, in a private transaction exempt from registration
under the Securities Act and other applicable securities laws, as confirmed by
an opinion of counsel reasonably acceptable to Movie Star, Inc.; provided that
the Demand Registration rights of the Initiating Holders can only be assigned or
transferred to a wholly-owned subsidiary, Affiliate or any other Person, managed
fund or managed client account over which such Investor or any of its Affiliates
exercises investment authority, including, without limitation, with respect to
voting and dispositive rights; and provided, further, that such transferee
shall, as a condition to the effectiveness of such assignment, execute within 5
Business Days of any such transfer, a counterpart to this Agreement assuming all
of the

 

 

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obligations of an Investor and agreeing to be treated as if an original party
hereto, whereupon such transferee shall have the benefits of and shall be
subject to the restrictions contained in this Agreement as if such transferee
was originally included in the definition of an Investor and had originally been
a party hereto (a “Permitted Assignee”). Notwithstanding the foregoing or any
other provisions herein, no such assignment will relieve such Investor of its
obligations hereunder. The Company may not assign any of its rights or delegate
any of its duties under this Agreement without the prior written consent of
Fursa and TTG as representatives of the Fursa Group and the TTG Group,
respectively.

(h) Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

(i) Severability. If any provision of this Agreement or the application thereof
to any person or circumstances is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to persons or circumstances other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby, so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination, the parties shall negotiate in good faith in an
effort to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.

(j) Remedies; Specific Performance. Except as otherwise expressly provided for
herein, no remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy, and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.

Damages in the event of breach of this Agreement by a party hereto or any other
holder of Registrable Securities would be difficult, if not impossible, to
ascertain, and it is therefore agreed that each such Person, in addition to and
without limiting any other remedy or right it may have, will have the right to
an injunction or other equitable relief in any court of competent jurisdiction,
enjoining any such breach, and enforcing specifically the terms and provisions
hereof and the Company and each holder of Registrable Securities, by its
acquisition of such Registrable Securities, hereby waives any and all defenses
it may have on the ground of lack of jurisdiction or competence of the court to
grant such an injunction or other equitable relief. The existence of this right
will not preclude any such Person (including the Company) from pursuing any
other rights and remedies at law or in equity which such Person may have or to
assert any defense, counter-claim, cross-claim, or third-party claim available
to such person or which may be asserted by such person; provided, however, that
no party hereto may recover from any other party any consequential or punitive
damages by reason of the breach of this Agreement. With respect to the
construction, interpretation and application of this paragraph, any period of
time contained in this Agreement within which or during which the Company is to
do, commence doing, complete doing or refrain from doing any act shall not be of
the essence; provided, however, that the Company has acted in good faith and
utilized its reasonable best efforts.

 

 

25

 

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(k) Governing Law And Venue; Waiver Of Jury Trial. THIS AGREEMENT SHALL BE
DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK. The parties hereto hereby
irrevocably submit exclusively to the jurisdiction of the courts of the State of
New York and the Federal courts of the United States of America located in the
County of New York in connection with all disputes, claims or controversies
arising out of or relating to this Agreement and the documents referred to in
this Agreement, and in respect of the transactions contemplated hereby and
thereby, and hereby waive, and agree not to assert, as a defense in any action,
suit or proceeding for the interpretation or enforcement hereof or of any such
document, that it is not subject thereto or that such action, suit or proceeding
may not be brought or is not maintainable in said courts or that the venue
thereof may not be appropriate or that this Agreement or any such document may
not be enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard and
determined in such a New York State or Federal court. The parties hereto hereby
consent to and grant any such court jurisdiction over the person of such parties
for purposes of the foregoing.

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS PARAGRAPH 11(k).

(l) Counterparts. This Agreement may be executed in any number of counterparts
(including by facsimile), each of which will be deemed an original, but all of
which together will constitute one and the same instrument.

[Remainder of Page Left Intentionally Blank]

 

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.

 

 

 

 

 

MOVIE STAR, INC.

 

 

By: 

/s/ Melvyn Knigin

 

 

 

 

Name: Melvyn Knigin

 

 

 

 

Title: Chief Executive Officer

 

 

 

 

 

 

 

FURSA ALTERNATIVE STRATEGIES LLC,
(on its behalf and on behalf of certain funds and
managed accounts set forth on Schedule 1)

 

 

By: 

/s/ Patrick Brennan

 

 

 

 

Name: Patrick Brennan

 

 

 

 

Title: Chief Administrative Officer

 

 

 

 

 

 

 

TTG APPAREL, LLC

 

 

By: 

/s/ Michael Tokarz

 

 

 

 

Name: Michael Tokarz

 

 

 

 

Title: Manager

 

 

 

 

 

 

 

TOKARZ INVESTMENTS, LLC

 

 

By: 

/s/ Michael Tokarz

 

 

 

 

Name: Michael Tokarz

 

 

 

 

Title: Manager

[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]

 

 

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SCHEDULE 1

Fursa Managed Accounts

Fursa Master Global Event Driven Fund L.P. (formerly known as Mellon HBV Master
Global Event Driven Fund L.P.), a limited partnership organized under the laws
of the Cayman Islands

Fursa Capital Partners LP (formerly known as Mellon HBV Capital Partners LP), a
Delaware limited partnership

Blackfriars Master Vehicle LLC – Series 2, a Delaware limited liability company

Fursa Master Rediscovered Opportunities Fund L.P. (formerly known as Mellon HBV
Master Rediscovered Opportunities Fund L.P.), a limited partnership organized
under the laws of the Cayman Islands

 

 

A-1

 

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