Document:

ESCROW AGREEMENT

THIS ESCROW A
GREEMENT (“Agreement”) is made and entered into as of January 28, 2008, by and between:  MOVIE STAR
 INC.,
 a New York corporation (“Parent”); and 
PATRICK BRENNAN and
 MICHAEL TOKARZ, as joint representatives (the “Company Stockholder Representatives”), of the Persons identified from time to time on Schedule 1 hereto; and Continental Stock Transfer & Trust Company, a New York corporation (the “Escrow Agent”).

RECITALS

WHEREAS, Parent, Fred Merger Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), FOH Holdings, Inc., a Delaware corporation (the “Company”), and the Company Stockholder Representatives  have entered into an Agreement and Plan of Merger and Reorganization dated as of December 18, 2006 (the “Merger Agreement”), pursuant to which, among other things, (i) Merger Sub is merging with and into the Company, and (ii) certain stock issuances are to be made to the Company Stockholders (as defined below). A copy of the Merger Agreement is attached hereto as Exhibit A;

WHEREAS, the Merger Agreement and the Company Stockholders Agreement (as defined in the Merger Agreement), attached hereto as Exhibit B, contemplate the establishment of an escrow fund to secure certain rights of (x) the Parent Indemnified Persons (as defined in the Merger Agreement) and (y) the Company Stockholders to indemnification, compensation and reimbursement as provided in the Merger Agreement; and

WHEREAS, pursuant to Section 4 of the Company Stockholders Agreement, Patrick Brennan and Michael Tokarz have been irrevocably appointed by the Company Stockholders to serve as the joint Company Stockholder Representatives in connection with all matters under this Agreement and the resolution of all indemnification claims under the Merger Agreement.

AGREEMENT

The parties, intending to be legally bound, agree as follows:

Section 1. Defined Terms.

1.1 Capitalized terms used and not defined in this Agreement shall have the meanings given to them in the Merger Agreement.

1.2 As used in this Agreement, the term “Company Stockholders” refers to the Persons who were stockholders of the Company immediately prior to the Effective Time or their respective Affiliates to which the rights under this Agreement have been assigned as set forth herein.

 

 

Section 2. Escrow and Indemnification.

2.1 Shares and Stock Powers Placed in Escrow. At or following the Effective Time, in accordance with the Merger Agreement, (a) Parent shall issue certificates for the Company Escrowed Shares registered in the names of each of the Company Stockholders evidencing the shares of Parent Common Stock to be held in escrow under this Agreement in the amounts set forth on Schedule 1, and shall cause such certificates to be delivered to the Escrow Agent, together with the appropriate amount of cash, in lieu of a fractional share that each Company Stockholder is entitled to receive (if applicable) pursuant to the terms of the Merger Agreement, (b) Parent shall issue a certificate for the Parent Escrowed Shares registered in the name of Parent evidencing the shares of Parent Common Stock to be held in escrow under this Agreement as set forth on
Schedule 2, and shall cause such certificate to be delivered to the Escrow Agent and (c) each of the Company Stockholders and Parent shall deliver to the Escrow Agent five “assignments separate from certificate” (“Stock Powers”) endorsed by each such Company Stockholder and Parent in blank. The Company Stockholder Representatives shall ensure that all signatures on the Stock Powers delivered to Parent in accordance with the preceding sentence have been guaranteed by a national bank or an American Stock Exchange member firm. 

2.2 Escrow Funds. The Company Escrowed Shares being held in escrow pursuant to this Agreement, together with any cash received in respect of fractional shares and other distributions on the Company Escrowed Shares, shall collectively constitute an escrow fund (the “Company Escrow Fund”) securing the indemnification, compensation and reimbursement rights of Parent and the other Parent Indemnified Persons under the Merger Agreement and the Company Stockholders Agreement. The Parent Escrowed Shares being held in escrow pursuant to this Agreement shall collectively constitute an escrow fund (the “Parent Escrow Fund” and, together with the Company Escrow Fund, the “Escrow Funds”) securing the indemnification, compensation and reimbursement rights of the Company Stockholders under the Merger Agreement. The
Escrow Agent agrees to accept delivery of the Escrow Funds and to hold the Company Escrow Fund and the Parent Escrow Fund in separate escrow accounts (such accounts, the “Company Escrow Account” and the “Parent Escrow Account,” respectively, and together, the “Escrow Accounts”), subject to the terms and conditions of this Agreement and the Merger Agreement.

2.3 Voting of Escrow Shares. The record owner of the Company Escrowed Shares shall be entitled to exercise all voting rights with respect to such Company Escrowed Shares. The Escrow Agent is not obligated to distribute to the Company Stockholders or to the Company Stockholder Representatives any proxy materials and other documents relating to the Escrow Shares received by the Escrow Agent from Parent.

 

 

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2.4 Investments. The Escrow Agent shall invest and reinvest the cash (if any) held in the Escrow Accounts from time to time in (a) short-term securities issued or guaranteed by the United States Government, its agencies or instrumentalities; and/or (b) repurchase agreements relating to such securities. Upon the request of either Parent or the Company Stockholder Representatives, the Escrow Agent shall provide a statement to the requesting party that describes any deposit, distribution or investment activity or deductions with respect to any funds held in the Escrow Accounts in addition to quarterly account statements from the Escrow Agent.

2.5 Interest, Etc. Parent and the Company Stockholder Representatives, on behalf of each of the Company Stockholders, agree that any interest accruing on or income otherwise earned (including any ordinary cash dividends paid in respect to the Company Escrowed Shares) on any investment of any funds in the Company Escrow Account shall be held by the Escrow Agent in the Company Escrow Account. The aggregate amount of all interest and other income earned on any investment of any funds in the Company Escrow Account shall be distributed by the Escrow Agent as set forth in Section 3. 

2.6 Dividends, Etc. Parent and the Company Stockholder Representatives, on behalf of each of the Company Stockholders, agree that any shares of Parent Common Stock or other property (including ordinary cash dividends) distributable or issuable (whether by way of dividend, stock split or otherwise) in respect of or in exchange for any Company Escrowed Shares or Parent Escrowed Shares (including pursuant to or as a part of a merger, consolidation, acquisition of property or stock, reorganization or liquidation involving Parent) shall not be distributed or issued to the beneficial owners of such Company Escrowed Shares or Parent, as the case may be, but rather shall be distributed or issued to and held by the Escrow Agent in the Company Escrow Account as part of the Company Escrow Fund or in the Parent Escrow Account as part of the Parent
Escrow Fund, as applicable. Any securities or other property received by the Escrow Agent in respect of any Company Escrowed Shares or Parent Escrow Shares held in escrow as a result of any stock split or combination of shares of Parent Common Stock, payment of a stock dividend or other stock distribution in or on shares of Parent Common Stock, or change of Parent Common Stock into any other securities pursuant to or as a part of a merger, consolidation, acquisition of property or stock, reorganization or liquidation involving Parent, or otherwise, shall be held by the Escrow Agent as part of the Company Escrow Fund or the Parent Escrow Fund, as applicable.

2.7 Transferability. Except as provided for herein or by operation of law, the interests of the Company Stockholders in the Company Escrow Fund and in the Company Escrowed Shares, and the interests of Parent in the Parent Escrow Fund and in the Parent Escrowed Shares, shall not be assignable or transferable. 

2.8 Trust Fund. The Company Escrow Fund and the Parent Escrow Fund shall be held as trust funds and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any Company Stockholder or Parent, respectively, or of any party hereto. The Escrow Agent shall hold and safeguard the Company Escrow Fund and the Parent Escrow Fund until the Termination Date (as defined in Section 6) or earlier distribution in accordance with this Agreement.

 

 

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Section 3. Release of Escrow Shares. 

3.1 General. Within 10 Business Days after receiving either (a) joint written instructions from Parent and the Company Stockholder Representatives (“Joint Instructions”), (b) a decision and/or award from the Arbitrator (an “Arbitration Award”) or (c) an order issued by a court of competent jurisdiction (a “Court Order”) relating to the release of any Company Escrowed Shares or Parent Escrowed Shares from the Company Escrow Fund or the Parent Escrow Fund, as the case may be, the Escrow Agent shall release or cause to be released any such Company Escrowed Shares or Parent Escrowed Shares and any other amounts from the Company Escrow Fund or the Parent Escrow Fund, as the case may be, in the amounts, to the Persons and in the manner set forth in such Joint Instructions, Arbitration Award or Court Order.   If
the Indemnity Claims Committee makes a determination under Section 4.2 of the Merger Agreement and such determination is either not disputed or Parent and the Company Stockholder Representatives reach an agreement with respect to such issue, then if such resolution requires the distribution of shares from the Company Escrow Fund or the Parent Escrow Fund, as applicable, Parent and Company Stockholder Representatives shall jointly instruct the Escrow Agent to make such distribution.

3.2 Potential Tax Liability. (a) Within 5 Business Days following the 18-month anniversary of the Closing Date (the “Initial Escrow Period Termination Date”), Parent shall provide to the Company Stockholder Representatives and Escrow Agent a notice setting forth the amount of the Tax Liability Amount as of the Initial Escrow Period Termination Date (the “Tax Liability Notice”). If within 30 days after delivery of the Tax Liability Notice (the “Response Period”), Parent and the Escrow Agent do not receive an Extension Election (as defined below) from the Company Stockholder Representatives electing to extend the date for payment of the Tax Liability Amount until the Sales Tax Extension Termination Date (as defined below), the Escrow Agent shall deliver within 10 Business Days of the expiration of
the Response Period, Company Escrowed Shares to Parent in an amount equal to the value of the Tax Liability Amount. For purposes of this Agreement, the value of any shares of Parent Common Stock shall be based upon the average daily closing price of the shares of Parent Common Stock (on its principal trading market), rounded to two decimal places, for the ten (10) trading days immediately ending the two Business Days prior to the date of any distribution hereof. If the shares then held in the Company Escrow Fund are valued at an amount that is less than the Tax Liability Amount (the “Shortfall Amount”), the Escrow Agent shall deliver to Parent all Company Escrowed Shares together with any cash and such other property in the Company Escrow Fund necessary to make up for the Shortfall Amount, to the extent available. If any Company Escrowed Shares or other property remain in the Company Escrow Fund after settlement of the Tax Liability Amount, then (x) if there are any Claims
against the Company Escrow Fund that have not been finally resolved and paid, the Escrow Agent shall reserve a number of Company Escrowed Shares equal in value to 120% of the amount of any such Claims pending as of the Initial Escrow Period Termination Date and the balance of Company Escrowed Shares and other property in the Company Escrow will be distributed to the Company Stockholders on a pro rata basis; and (y) if there are no Claims against the Company Escrow Fund that have not been finally resolved and paid, the balance of Company Escrowed Shares and other property will be distributed to the Company Stockholders on a pro rata basis.

 

 

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For purposes of this Agreement, (i) all pro rata distributions to the Company Stockholders shall be made based on the percentages set forth on Schedule 1, as may be amended from time to time pursuant to Section 3.5 of this Agreement, (ii) “Extension Election” shall mean a written notice  from the Company Stockholder Representatives delivered to Parent and the Escrow Agent electing to extend the date for payment of the Tax Liability Amount until the Sales Tax Extension Termination Date and (iii) “Sales Tax Extension Termination Date” shall mean the 24-month anniversary of the Closing Date.

3.3 Extension Election. 

(a) If an Extension Election is timely made by the Company Stockholder Representatives, within 10 Business Days after such election, to the extent that the value of the Company Escrowed Shares, cash and other property held in the Company Escrow Account exceed the sum of (i) the Tax Liability Amount and (ii) an amount equal in value to 120% of the amount of any Claims against the Company Escrow Fund that have not been finally resolved and paid as of the Initial Escrow Period Termination Date, the Escrow Agent shall distribute to the Company Stockholders on a pro rata basis Company Shares equal in value to such excess.

(b) If an Extension Election is timely made by the Company Stockholder Representatives, within 5 Business Days after the Sales Tax Extension Termination Date, Parent shall deliver a notice to the Company Stockholder Representatives and the Escrow Agent (the “Final Tax Liability Notice”) setting forth the amount, as of the Sales Tax Extension Termination Date, of the Tax Liability Amount (the “Final Tax Liability Amount”). 

(c) If the Final Tax Liability Amount is lower than the Sales Tax Claim Liability Amount as a result of a payment or payments by Parent, then promptly following each such payment, Parent and the Company Stockholder Representatives shall deliver a joint instruction to the Escrow Agent directing the Escrow Agent to deliver Company Escrowed Shares to Parent equal in value to the amount of such payment or payments by Parent.

(d) Within 10 Business Days after the delivery to the Company Stockholder Representatives and the Escrow Agent of the Final Tax Liability Notice, the Escrow Agent shall deliver Company Escrowed Shares to Parent in an amount equal to the value of the Final Tax Liability Amount. If the Company Escrowed Shares then held in the Company Escrow Fund are valued at an amount that is less than the Final Tax Liability Amount (the “Final Shortfall Amount”), the Escrow Agent shall deliver to Parent all Company Escrowed Shares together with any cash and such other property in the Company Escrow Fund necessary to make up for the Final Shortfall Amount, to the extent available. If any shares or other property remain in the Company Escrow Fund after settlement of the Final Tax Liability Amount, then (x) if there are any Claims against the
Company Escrow Fund that have not been finally resolved and paid, the Escrow Agent shall reserve a number of Company Escrowed Shares equal in value to 120% of the amount of any such Claims then pending and the balance of Company Escrowed Shares and other property in the Company Escrow will be distributed to the Company Stockholders on a pro rata basis; and (y) if there are no Claims against the Company Escrow Fund that are unresolved, the balance of Company Escrowed Shares and other property will be distributed to the Company Stockholders on a pro rata basis.

 

 

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3.4 Release of the Parent Escrowed Shares. Within 10 Business Days following the Initial Escrow Period Termination Date, if there are no Claims against the Parent Escrow Fund that have not been finally resolved and paid, the Escrow Agent shall deliver to Parent the balance of shares of Parent Common Stock and other property held in the Parent Escrow Account at such time.  If, on the Initial Escrow Period Termination Date there shall be Claims against the Parent Escrow Fund that have not been finally resolved, then, within 10 Business Days of the Initial Escrow Period Termination Date, the Escrow Agent shall deliver to Parent the excess, if any, by which the value of the amounts held in the Parent Escrow Account exceed an amount equal to 120% of the amount of any Claims against the Parent Escrow Fund that have not been finally resolved
and paid at such time.

3.5 Distributions. Whenever a distribution of a number of shares of Parent Common Stock is to be made pursuant to the terms of this Agreement, the Escrow Agent shall requisition the appropriate number of shares from Parent’s stock transfer agent, delivering to the transfer agent the appropriate stock certificates accompanied by the respective Stock Powers, together with the specific instructions, as appropriate. Any distributions of Parent Common Stock shall be subject to Section 4.6 of the Merger Agreement. Within 5 Business Days prior to the date the Escrow Agent is required to make a distribution of shares of Parent Common Stock or other property (including ordinary cash dividends) to the Company Stockholders pursuant to the terms of this Agreement, the Escrow Agent shall provide the Company Stockholder Representatives with a
notice specifying that a distribution will be made and requesting that the Company Stockholder Representatives update the then current Schedule 1 to this Agreement. The Escrow Agent shall make the corresponding distributions to the Persons listed on such updated Schedule 1 in accordance with the terms hereof, to their respective addresses as set forth therein. Notwithstanding anything to the contrary set forth herein, the Escrow Agent shall not be obligated to make any distribution under this Agreement to the Company Stockholders unless it has received from the Company Stockholders Representatives an updated Schedule 1 to this Agreement as provided herein. Any distributions to Parent pursuant to the terms of this Agreement shall be made to the address set forth in Schedule 2 hereto.

3.6 Disputes. All disputes, claims, or controversies arising out of or relating to Section 3 of this Agreement that are not resolved by mutual agreement between Parent and the Company Stockholder Representatives shall be resolved solely and exclusively as set forth in Section 4.3 of the Merger Agreement.

Section 4. Fees and Expenses.

The Escrow Agent shall be entitled to receive, from time to time, fees in accordance with Schedule 3. In accordance with Schedule 3, the Escrow Agent will also be entitled to reimbursement for reasonable and documented out-of-pocket expenses incurred by the Escrow Agent in the performance of its duties hereunder and the execution and delivery of this Agreement. All such fees and expenses shall be paid by Parent.

 

 

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Section 5. Limitation of Escrow Agent’s Liability.

5.1 The Escrow Agent undertakes to perform such duties as are specifically set forth in this Agreement only and shall have no duty under any other agreement or document, and no implied covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent shall incur no liability with respect to any action taken by it or for any inaction on its part in reliance upon any notice, direction, instruction, consent, statement or other document believed by it in good faith to be genuine and duly authorized, nor for any other action or inaction except for its own negligence or willful misconduct. In all questions arising under this Agreement, the Escrow Agent may rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Escrow Agent based upon such advice the Escrow Agent
shall not be liable to anyone. In no event shall the Escrow Agent be liable for incidental, punitive or consequential damages.

5.2 Parent and the Company Stockholder Representatives, acting on behalf of the Company Stockholders hereby agree to indemnify the Escrow Agent and its officers, directors, employees and agents for, and hold it and them harmless against, any loss, liability or expense incurred without negligence or willful misconduct on the part of Escrow Agent, arising out of or in connection with the Escrow Agent’s carrying out its duties hereunder. This right of indemnification shall survive the termination of this Agreement and the resignation of the Escrow Agent.

Section 6. Termination.

This Agreement shall terminate upon the release by the Escrow Agent of the final amounts held in the Escrow Fund in accordance with Section 3 (the date of such release being referred to as the “Termination Date”).

Section 7. Successor Escrow Agent.

In the event the Escrow Agent becomes unavailable or unwilling to continue as escrow agent under this Agreement, the Escrow Agent may resign and be discharged from its duties and obligations hereunder by giving its written resignation to the parties to this Agreement. Such resignation shall take effect not less than 30 days after it is given to all the other parties hereto. In such event, Parent may appoint a successor Escrow Agent (acceptable to the Company Stockholder Representatives, acting reasonably). If Parent fails to appoint a successor Escrow Agent within 15 days after receiving the Escrow Agent’s written resignation, the Escrow Agent shall have the right to apply to a court of competent jurisdiction for the appointment of a successor Escrow Agent. The successor Escrow Agent shall execute and deliver to the Escrow Agent an instrument accepting such appointment, and
the successor Escrow Agent shall, without further acts, be vested with all the estates, property rights, powers and duties of the predecessor Escrow Agent as if originally named as Escrow Agent herein. The Escrow Agent shall act in accordance with written instructions from Parent and the Company Stockholder Representatives as to the transfer of the Escrow Funds to a successor Escrow Agent.

 

 

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Section 8. Company Stockholder Representatives. 

8.1 Unless and until Parent and the Escrow Agent shall have received written notice of the appointment of a successor Company Stockholder Representatives in accordance with the terms of the Company Stockholders Agreement, Parent and the Escrow Agent shall be entitled to rely on, and shall be fully protected in relying on, the power and authority of the Company Stockholder Representatives to act on behalf of the Company Stockholders.

Section 9. Miscellaneous.

9.1 Attorneys’ Fees. In any action at law or suit in equity to enforce or interpret this Agreement or the rights of any of the parties hereunder, the prevailing party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

9.2 Notices. Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received when delivered (by hand, by registered mail, by courier or express delivery service or by facsimile) to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):

if to Parent:

	
       
 	
    Movie Star, Inc.
 	
     
 

	
       
 	
    1115 Broadway
 	
     
 

	
       
 	
    New York, NY 10015
 	
     
 

	
       
 	
      Attention:
 	
       Melvyn 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
 

with a second 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
 

 

 

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if to the Company Stockholder Representatives: 

	
       
 	
    Patrick Brennan
 	
     
 

	
       
 	
    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
 

	
       
 	
    Michael Tokarz
 	
     
 

	
       
 	
    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
 

	
       
 	
    if to the Escrow Agent:
 	
     
 

	
     
 	
    Continental Stock Transfer & Trust Company
 

	
       
 	
    17 Battery Place
 	
     
 

	
       
 	
    New York, NY 10004
 	
     
 

	
       
 	
      Attention:
 	
       Mark Zimkind
 

	
       
 	
      Facsimile:
 	
       (212) 616-7616
 

Notwithstanding the foregoing, notices addressed to the Escrow Agent shall be effective only upon receipt. If any notice or other document is required to be delivered to the Escrow Agent

 

 

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and any other Person, the Escrow Agent may assume without inquiry that notice or other document was received by such other Person on the date on which it was received by the Escrow Agent.

9.3 Headings. The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

9.4 Counterparts and Exchanges by Facsimile or Other Electronic Transmission. This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement. The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile or other means of electronic transmission shall be sufficient to bind the parties to the terms and conditions of this Agreement.

9.5 Applicable Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Subject to Section 3.5 of this Agreement, in any action between the parties arising out of or relating to this Agreement or any of the transactions contemplated by this Agreement: (a) each of the parties irrevocably and unconditionally consents and submits to the non-exclusive jurisdiction and venue of the state and federal courts located in the State of New York; (b) if any such action is commenced in a state court, then, subject to applicable law, no party shall object to the removal of such action to any federal court located in the
State of New York; and (c) each of the parties irrevocably waives the right to trial by jury.

9.6 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and each of their respective permitted successors and assigns, if any. The rights of a Company Stockholder under this Agreement may be assigned, delegated or transferred, in whole or in part, by each of the Company Stockholders to any Affiliate (as defined in Rule 12b-2 under the Exchange Act) of such Company Stockholder, or any other Person, managed fund or managed client account over which such Company Stockholder or any of its Affiliates exercises investment authority, including, without limitation, with respect to voting and dispositive rights.

9.7 Waiver. No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy. No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

 

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9.8 Amendment. This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered on behalf of Parent, the Company Stockholder Representatives and the Escrow Agent; provided, however, that any amendment executed and delivered by the Company Stockholder Representatives shall be deemed to have been approved by and duly executed and delivered by all of the Company Stockholders.

9.9 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

9.10 Parties in Interest. Except as expressly provided herein, none of the provisions of this Agreement, express or implied, is intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns, if any.

9.11 Entire Agreement. This Agreement and the Merger Agreement set forth the entire understanding of the parties hereto relating to the subject matter hereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof.

9.12 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any action arising out of or related to this Agreement or the transactions contemplated hereby.

9.13 Tax Reporting Information. Parent agrees to provide the Escrow Agent with a certified tax identification number for Parent and the Company Stockholder Representatives agree to provide the Escrow Agent with certified tax identification numbers for each of the Company Stockholders by furnishing appropriate forms W-9 (or Forms W-8, in the case of non-U.S. persons) and any other forms and documents that the Escrow Agent may reasonably request (collectively, “Tax Reporting Documentation”) to the Escrow Agent within 30 days after the date hereof. The parties hereto understand that, if such Tax Reporting Documentation is not so furnished to the Escrow Agent, the Escrow Agent shall be required by the Code to withhold a portion of any interest or other income earned on the investment of monies held by the Escrow Agent pursuant to
this Agreement, and to immediately remit such withholding to the Internal Revenue Service.

 

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9.14 Cooperation. The Company Stockholder Representatives on behalf of the Company Stockholders and Parent agree to cooperate fully with each other and the Escrow Agent and to execute and deliver such further documents, certificates, agreements, stock powers and instruments and to take such other actions as may be reasonably requested by Parent, the Company Stockholder Representatives or the Escrow Agent to evidence or reflect the transactions contemplated by this Agreement and to carry out the intent and purposes of this Agreement.

9.15 Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neutral genders; the feminine gender shall include the masculine and neutral genders; and the neutral gender shall include masculine and feminine genders.

(b) The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d) Except as otherwise indicated, all references in this Agreement to “Sections”, “Schedules” and “Exhibits” are intended to refer to Sections of this Agreement, Schedules to this Agreement and Exhibits to this Agreement.

 

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

 

	
                         
 	
                         
 	
                         
 	
                        MOVIE STAR, INC., a New York corporation
 
	 	 	 	 	 
	
                         
 	
                          
 	
                         
 	
      By: 
 	
                        /s/ Melvyn Knigin
 
	
                         
 	
                         
 	
                         
 	
                        Name: 
 	
                        Melvyn Knigin
 
	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
                        Chief Executive Officer
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        MICHAEL TOKARZ solely in his capacity as a Stockholders’ Representative
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
      /s/ Michael Tokarz
 
	
                         
 	
                         
 	
                         
 	
                        PATRICK BRENNAN solely in his capacity as a Stockholders’ Representative
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
      /s/ Patrick Brennan
 
	
                         
 	
                         
 	
                         
 	
                        CONTINENTAL STOCK TRANSFER & TRUST
 COMPANY, a New York corporation
 
	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                        By: 
 	
                        /s/ Mark B. Zimkind
 
	
                         
 	
                         
 	
                         
 	
                        Name: 
 	
                         Mark B. Zimkind
 
	
                         
 	
                         
 	
                         
 	
                        Title: 
 	
                        Vice President
 

 

 

[Escrow Agreement Signature Page]

 

 

SCHEDULE 1

 

COMPANY STOCKHOLDERS

 

	
                        
Name of Company
 Stockholder
 	
                         
 	
                        Address for Notice and
 Distributions to Company
 Stockholders
 	
                         
 	
                        
Number of Company
 Escrowed Shares
 	
                         
 	
                        
Specified
 Percentage
 	
                         
 
	
      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
 	
                         
 	
      Fursa Alternative Strategies LLC
 444 Merrick Road, Suite 104 
 Lynbrook, NY 11563
 Attention:         Patrick Brennan

      Facsimile:      (646) 205-6201
 	
                         
 	
                        222,165
 	
                         
 	
                        9.4%
 	
                         
 
	
      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 Alternative Strategies LLC
 444 Merrick Road, Suite 104 
 Lynbrook, NY 11563
 Attention:      Patrick Brennan
 Facsimile:      (646) 205-6201
 	
                         
 	
                        813,894
 	
                         
 	
                        34.4%
 	
                         
 
	
      Fursa Capital Partners LP (formerly known as Mellon HBV Capital Partners LP), a Delaware limited partnership
 	
                         
 	
                        Fursa Alternative Strategies LLC
 444 Merrick Road, Suite 104 
 Lynbrook, NY 11563
 Attention:      Patrick Brennan
 Facsimile:      (646) 205-6201
 	
                         
 	
                        62,413
 	
                         
 	
                        2.6%
 	
                         
 
	
      Blackfriars Master Vehicle LLC – Series 2, a Delaware limited liability company
 	
                         
 	
                        Fursa Alternative Strategies LLC
 444 Merrick Road, Suite 104 
 Lynbrook, NY 11563
 Attention:      Patrick Brennan
 Facsimile:      (646) 205-6201
 	
                         
 	
                        85,984
 	
                         
 	
                        3.6%
 	
                         
 
	
      Tokarz Investments, LLC
 	
                         
 	
                        Tokarz Investments LLC
 287 Bowman Avenue
 Purchase, NY 10577
 Attention:      Michael Tokarz
 Facsimile:      (914) 251-1816
 	
                         
 	
                        1,184,460
 	
                         
 	
                        50%
 	
                         
 

 

 

 

 

 

	
       
 	
                         
 	
      Total Number of Escrowed

      Shares:
 	
                         
 	
                        2,368,916
 	
                         
 	
                        Total: 100%
 	
                         
 

 

A-2

 

SCHEDULE 2

 

PARENT ESCROWED SHARES

Number of Parent Escrowed Shares: 618,283

Address for distributions to Parent:

	
      Movie Star, Inc.

	

      1115 Broadway

	
	  New York, NY 10015

	

      Attention:  
 	
      Melvyn Knigin
 
	
      Telephone:  
 	
           (212) 798-4700
 
	
      Facsimile:  
 	
       (212) 213-4925
 

 

 

SCHEDULE 3

ESCROW AGENT’S FEES AND EXPENSES

 

	
                        Monthly Fee for holding securities and/or cash:
 	
                         
 	
                        $200 per month
 
	
                        Additional out of pocket expenses including postage and stationary: 
 	
                         
 	
                        Additional
 

 

 

EXHIBIT A

MERGER AGREEMENT

Included as Annex A of the Definitive Proxy Statement (No. 001-05893), filed November 30, 2007 and incorporated herein by reference.

 

EXHIBIT B

Company Stockholders Agreement is attached to the Merger Agreement as Exhibit MSHAREHOLDERS AGREEMENT

This Shareholders Agreement (this “Agreement”), dated as of January 28, 2008, by and among Fursa Alternative Strategies LLC (formerly known as Mellon HBV Alternative Strategies LLC), a Delaware limited liability company (“Fursa”) acting on behalf of itself and Fursa’s affiliated and/or managed funds and accounts listed in paragraph (a) of Schedule 1 hereto (the “Fursa Group”) and the persons and entities listed in paragraph (b) of Schedule 1
(“TTG,” and collectively with the Fursa Group, the “Shareholders,” and individually, a “Shareholder”) and Movie Star, Inc. (“Parent,” and together with the Shareholders, the “Parties” and individually, a “Party”). 

WHEREAS, as an inducement to Parent’s willingness to enter into the Agreement and Plan of Merger and Reorganization, dated as of December 18, 2006 (as amended, the “Merger Agreement”), by and among Parent, FOH Holdings, Inc. (“FOH”) and Fred Merger Corp., a wholly owned subsidiary of Parent (“Merger Sub”), the Shareholders have agreed to enter into this Agreement upon the consummation of the merger of FOH and Merger Sub (the “Merger”).

WHEREAS, pursuant to the Merger Agreement, Parent will issue to the Shareholders shares (the “Merger Shares”) of its common stock (the “Common Stock”);

WHEREAS, pursuant to the Merger Agreement, Parent will issue to 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, and Fursa SPV LLC (formerly known as Mellon HBV SPV LLC), a Delaware limited liability company, shares of its Series A 7.5% Convertible Preferred Stock (the “Preferred Stock Shares”), convertible to Common Stock (such shares of Common Stock issuable upon any conversion, the “Preferred Stock Conversion Shares”);

WHEREAS, in accordance with the terms of the Merger Agreement, Parent 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, Parent and certain Shareholders entered into the Standby Purchase Agreement dated as of December 18, 2006 (as amended, the “Standby Purchase Agreement”) pursuant to which certain Shareholders (the “Standby Purchasers”) agreed to purchase from Parent upon expiration of the Rights Offering, shares of Common Stock not purchased by Parent’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;

WHEREAS, pursuant to the Standby Purchase Agreement, solely as compensation to the Standby Purchasers for their commitments under the Standby Purchase Agreement, Parent 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”); and

 

 

WHEREAS, after giving effect to the issuance of the Merger Shares and issuance of the Preferred Stock Shares upon consummation of the Merger, the purchase of the Unsubscribed Shares under the Standby Purchase Agreement, the issuance of the Guarantor Warrants representing the right to purchase the Warrant Shares and any other shares of Common Stock currently held by the Shareholders, the Shareholders will hold directly or otherwise “beneficially own” (as hereinafter defined) the shares of Common Stock and Preferred Stock Shares as set forth on Schedule 1 hereto.

NOW, THEREFORE, in consideration of and reliance upon the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Representations and Warranties of Parent. Parent hereby represents and warrants to the Shareholders that this Agreement has been duly authorized, executed and delivered by Parent, and is a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms except for (a) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting the rights of creditors generally and (b) the effect of equitable principles of general application.

2. Representations and Warranties of Fursa and the Shareholders. Each of the Shareholders and Fursa represents and warrants to Parent that: (a) this Agreement has been duly authorized, executed and delivered by such Person, and is a valid and binding obligation of such Person, enforceable against such Person in accordance with its terms except for (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting the rights of creditors generally and (ii) the effect of equitable principles of general application; (b) except with regard to the agreements expressly contemplated by this Agreement, none of the Shareholders designated on Schedule 1 as members
of the Fursa Group, nor any of its Affiliates or Associates, has formed, joined or in any way participates, in a “group” (within the meaning of Section 13d-5(b)(1) of the Exchange Act) with the Shareholders designated on Schedule 1 as members of the Tokarz Group, nor any of its Affiliates or Associates, with respect to any Parent security; and (c) after giving effect to the issuance of Common Stock to the Shareholders upon consummation of the Merger and the purchases of Common Stock by the Shareholders in connection with the Rights Offering, in the case of TTG, the Shareholders included in the Tokarz Group and their Affiliates and Associates (as such terms are hereinafter defined), and in the case of the Fursa Group, the Shareholders included in the Fursa Group and their Affiliates and Associates, each will in the aggregate hold directly and/or will be the “beneficial owners” of the
number of shares of Common Stock as set forth on Schedule 1, and that neither of such groups and their respective Affiliates or Associates will beneficially own, or have any rights, options or agreements to acquire or vote, any other shares of Common Stock. For purposes of this Agreement: the term “Shares” shall mean with respect to each Shareholder, the shares of Common Stock set forth opposite such Shareholder’s name on Schedule 1, together with any shares of Common Stock acquired or otherwise beneficially owned after the date hereof in accordance with the terms of this Agreement; the terms “Affiliate” and “Associate” shall have the respective meanings set forth in Rule 12b-2 promulgated by the

 

 

2

 

Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); the terms “beneficial owner” and “beneficially own” shall have the same meanings as set forth in Rule 13d-3 promulgated by the SEC under the Exchange Act except that a person shall also be deemed to be the beneficial owner of all Shares which such person has the right to acquire pursuant to the exercise of any rights in connection with any securities or any agreement, regardless of when such rights may be exercised and whether they are conditional; and the terms “person” or
“persons” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability or unlimited liability company, joint venture, estate, trust, association, organization or other entity of any kind or nature.

3. Standstill Agreements.

(a) During the period commencing on the date hereof and expiring on the 18-month anniversary of this Agreement (the “Standstill Period”), no Shareholder shall, nor shall it permit any of its Affiliates to, directly or indirectly, except with respect to the Merger Shares issued in the Merger, any Unsubscribed Shares purchased pursuant to the Standby Purchase Agreement, the Guarantor Warrants issued pursuant to the Standby Purchase Agreement, any Warrant Shares issuable upon exercise of the Guarantor Warrants, the Preferred Stock Shares issued pursuant to the Merger Agreement and any Preferred Stock Conversion Shares issued upon conversion of the Preferred Stock Shares, acquire or enter into any agreement, arrangement or undertaking of any kind the purpose of which is to acquire, directly or
indirectly, any direct or indirect interest in any security (whether debt, equity or otherwise) of any kind or nature in Parent or any of its Affiliates or their respective successors (each, an “Acquisition”), unless, after giving effect to such Acquisition, such Shareholder’s beneficial ownership of Common Stock, together with the beneficial ownership of its Affiliates, does not exceed 1.0% more than the percentage of outstanding shares of Common Stock beneficially owned (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) in the aggregate by such Shareholder and its Affiliates (including all managed funds and client accounts over which such Shareholder or any of its Affiliates exercises investment authority, including, without limitation, with respect to voting or dispositive rights) after giving effect to the issuance of the Merger Shares, the Unsubscribed
Shares, the Warrant Shares issuable upon exercise of the Guarantor Warrants and the Preferred Stock Conversion Shares issuable upon conversion of the Preferred Stock Shares or such Acquisition is approved by a majority of the “independent” (as defined under the American Stock Exchange rules) members of the of the Board of Directors of Parent who are also not an Affiliate, or nominee, of the Shareholder involved in such transaction (the “Parent Independent Directors”).

(b) Subject to the compliance with the other obligations under this Agreement, notwithstanding the foregoing limitations on Acquisitions of Parent securities, any Shareholder or group of Shareholders may make and consummate a proposal or a tender offer to acquire all, but not less than all, shares of Common Stock not owned by such Shareholder(s).

(c) During the Standstill Period, no Shareholder shall, nor shall it permit any of its Affiliates to sell or enter into any agreement, arrangement or undertaking of any kind the purpose of which is to sell, directly or indirectly, or transfer, assign, pledge, encumber, contribute, give or otherwise dispose of, grant a proxy or power of attorney with respect to,

 

 

3

 

deposit in any voting trust, or create or permit to exist any liens of any nature with respect to, any direct or indirect ownership interests in Parent or the Shares owned by such Shareholder (a “Transfer”) except for Transfers in accordance with Section 9 of this Agreement and Transfers in compliance with the volume limits and the other provisions of Rule 144 under the Securities Act of 1933, as amended, (the “Securities Act”), without the approval of the Parent Independent Directors, which approval shall not be unreasonably withheld. 

(d) If a Transfer is not made pursuant to a registration statement that is declared effective by the SEC, and otherwise complies with the plan of distribution and other requirements of such registration statement, the legends that the Merger Shares, the Unsubscribed Shares, the Guarantor Warrants, the Warrant Shares, the Preferred Stock Shares and the Preferred Stock Conversion Shares bear, may only be removed following the expiration of the Standstill Period in connection with a Transfer, upon the receipt by Parent of an opinion of legal counsel, reasonably satisfactory to Parent, to the effect that such Transfer is exempt from the registration requirements of the Securities Act and any applicable securities laws.

(e) During the Standstill Period, except with regard to the agreements expressly contemplated by this Agreement or as permitted by Paragraph 3(b), none of the Shareholders designated on Schedule 1 as members of the Fursa Group, nor any of their Affiliates or Associates, may in any way otherwise participate in a “group” (within the meaning of Section 13d-5(b)(1) of the Exchange Act) with the Shareholders designated on Schedule 1 as members of the Tokarz Group, nor any of its Affiliates or Associates, with respect to any Parent security.

4. Board Nomination. During the Standstill Period, each Shareholder shall, and shall cause each of its Affiliates to (a) vote all of its Shares or execute written proxies with respect to such Shares in favor of the election to Parent’s Board of Directors of the individuals set forth on Exhibit E to the Merger Agreement (including any successor directors elected in accordance with the provisions of this Agreement and Parent’s by-laws, the “Post-Merger Directors”), and (b) take (or, if applicable, shall cause its designees to take) all necessary action to maintain a Board of Directors consisting of the directors designated on Schedule 2 hereto. If any Post-Merger Director dies, resigns or becomes disabled during the Standstill Period, Parent’s Board of Directors shall elect in his stead a person recommended to the Board of Directors by Parent’s nominating committee. During the Standstill Period, each Shareholder covenants and agrees that it shall not, and shall cause each of its Affiliates not to, directly or indirectly, make or direct, encourage or in any way participate in any “solicitations” of “proxies” (as such terms are used in the proxy rules of the Exchange Act) to vote, or to seek to advise or influence any person with respect to the voting of any security (whether debt, equity or otherwise) of Parent, to contest, object or to vote the Shares against or frustrate the intent of this Agreement or take any action to prevent or disable Parent or any of the Shareholders from performing any of their respective obligations hereunder.

5. Further Assurances. Each of the Shareholders hereby covenants and agrees that during the Standstill Period each Shareholder shall not, and shall cause each of its Affiliates and Associates not to, alone or through or in concert with others, directly or indirectly, request any amendment or waiver of any provision of Paragraphs 3, 4 or 5 by Parent or otherwise assist, participate in, facilitate, encourage or solicit any effort or attempt by any person to do any of the foregoing. 

 

 

 

4

6. Amendments and Waivers. Subject to the provisions of Paragraph 5 and applicable law (i) this Agreement may be amended, modified or supplemented only in writing executed by each of the Parties by action of the Board of Directors of each such Party, and (ii) any provisions herein may be waived only in writing executed by the Party or Parties against whom such waiver is asserted by action of such Party or Parties’ Board of Directors; provided, however, that no such waiver be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of
any prior or subsequent such default, misrepresentation, or breach of warranty or covenant.

7. Governing Law And Venue; Waiver Of Jury Trial. (a) 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.

(b) 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 7.

 

 

5

 

8. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any person or any circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable the remaining provisions hereof, shall, subject to the following sentence, 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 either party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

9. Assignment. Except as provided herein, none of the Parties may assign any of its rights or delegate any of its duties under this Agreement. Any purported assignment in violation of this Agreement will be void ab initio. In addition to Transfers in accordance with Rule 144 permitted by Section 3(c), a Shareholder may Transfer Parent securities to its Affiliates or to any managed fund or managed client account over which such Shareholder or any of its Affiliates exercises investment authority, including without limitation, with respect to voting or dispositive rights, in a private transaction exempt from registration under the Securities Act and other applicable securities laws, as confirmed in each case by an opinion of
counsel reasonably acceptable to Parent, provided that such transferee shall, as a condition to the effectiveness of such transfer, execute within five Business Days (as such term is defined in the Merger Agreement) of any such transfers, a counterpart to this Agreement assuming all of the obligations of the transferring Shareholder with respect to such securities and agreeing to be treated as if an original party hereto. Notwithstanding the foregoing or any other provisions herein, no such assignment will relieve such Shareholder of its obligations hereunder.

10. Notices. Any notice, request, instruction or other document to be given hereunder by any Party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, facsimile, email or by overnight courier at the address or facsimile shown in this Agreement below each Party’s signature, or such other address as may be designated in writing hereafter by such Party. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving Party upon actual receipt, if delivered personally; three Business Days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile or email
(provided that if given by facsimile or email such notice, request, instruction or other document shall be followed up within one business day by delivery pursuant to one of the other methods described herein); or on the next business day after deposit with an internationally recognized overnight courier, if sent by such a courier.

11. Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. Facsimile signatures on this Agreement shall be deemed to be original signatures for all purposes.

 

 

6

 

12. Interpretation; Absence of Presumption.

(a) For the purposes hereof, (1) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (2) the terms “hereof”, “herein”, and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including the schedule hereto) and not to any particular provision of this Agreement, and Paragraph and Schedule references are
to the Paragraphs and Schedules to this Agreement unless otherwise specified, (3) the word “including” and words of similar import when used in this Agreement shall mean “including without limitation” unless the context otherwise requires or unless otherwise specified, (4) the word “or” shall not be exclusive, (5) provisions shall apply, when appropriate, to successive events and transactions, and (6) all references to any period of days shall be deemed to be to the relevant number of calendar days unless otherwise specified.

(b) The Parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

13. Specific Performance. The Parties agree that irreparable damage would occur in the event that any provision of this Agreement is not performed in accordance with the terms of this Agreement and that therefore the Parties shall be entitled to seek specific performance of the terms of this Agreement in addition to any other remedy at law or equity, without the necessity of proving irreparable harm or posting bond or other security.

14. Entire Agreement. This Agreement constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements and representations made by or between the Parties, whether written or oral, to the extent they relate in any way to the subject matter hereof. 

[Remainder of this Page Intentionally Left Blank]

 

 

7

 

IN WITNESS WHEREOF, this Agreement has been executed by or on behalf of each of the Parties hereto as of the date first above written.

 

	
                         
 	
                         
 	
                         
 	
                        MOVIE STAR, INC.
 
	 	 	 	 	 	 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        By: 
 	
                        /s/ Melvyn Knigin  
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: Melvyn Knigin
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: Chief Executive Officer
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                         
 	
                         
 	
                         
 	
       
 	
                        Address:
 	
      Movie Star, Inc.
 1115 Broadway
 New York, NY 10010
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Attention:
 	
                        Melvin Knigin
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Facsimile:
 	
                        (212) 213-4925
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        FURSA ALTERNATIVE STRATEGIES LLC,
 (on its behalf and on behalf of certain funds and managed accounts set forth in paragraph (a) of Schedule 1)
 

 

	
                         
 	
                         
 	
                         
 	
       
 	
                        By: 
 	
                        /s/ Patrick Brennan  
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: Patrick Brennan
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title:  Chief Administrative Officer
 

 

	
                         
 	
                         
 	
                         
 	
       
 	
                        Address:
 	
      Fursa Alternative Strategies LLC
 444 Merrick Road, Suite 104
 Lynbrook, NY 11563
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Attention:
 	
                        Patrick Brennan
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Facsimile:
 	
                        (646) 205-6201
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

 

[SIGNATURE PAGES TO THE SHAREHOLDERS AGREEMENT]

 

 

	
                         
 	
                         
 	
                         
 	
                        TTG APPAREL, LLC
 
	
                         
 	
                         
 	
                         
 	
                         
 	
      

      By: 
 	
                        /s/ Michael Tokarz  
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: Michael Tokarz
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: Manager
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                         
 	
                         
 	
                         
 	
       
 	
                        Address:
 	
      Tokarz Investments, LLC
 287 Bowman Avenue
 Purchase, NY 10577
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Attention:
 	
                        Michael Tokarz
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Facsimile:
 	
                        (914) 251-1816
 

 

	
                         
 	
                         
 	
                         
 	
                        TOKARZ INVESTMENTS, LLC
 
	
                         
 	
                         
 	
                         
 	
                         
 	
      

      By: 
 	
                        /s/ Michael Tokarz  
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Name: Michael Tokarz
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                        Title: Manager
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 

 

	
                         
 	
                         
 	
                         
 	
       
 	
                        Address:
 	
      Tokarz Investments, LLC
 287 Bowman Avenue
 Purchase, NY 10577
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Attention:
 	
                        Michael Tokarz
 
	
                         
 	
                         
 	
                         
 	
                         
 	
                        Facsimile:
 	
                        (914) 251-1816
 

 

 

[SIGNATURE PAGES TO THE SHAREHOLDERS AGREEMENT]

 

SCHEDULE 1

 

	
                        Name
 	
                         
 	
                        Outstanding 
 Shares
 Directly Held
 	
                         
 	
                        Other Shares Issuable
 Upon Conversion or
 Exercise of
 Convertible Securities
 	
                         
 	
                        Total Shares
 	
                         
 
	
                        (a)
 	
                        Fursa Group:
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        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
 	
                         
 	
                        6,534,145
 	
                         
 	
                        1,138,537
 	
                         
 	
                        7,672,682
 	
                         
 
	
                         
 	
                        Fursa Capital Partners LP (formerly known as Mellon HBV Capital Partners LP), a Delaware limited partnership
 	
                         
 	
                        312,065
 	
                         
 	
                        78,395
 	
                         
 	
                        390,460
 	
                         
 
	
                         
 	
                        Blackfriars Master Vehicle LLC – Series 2, a Delaware limited liability company
 	
                         
 	
                        429,923
 	
                         
 	
                        168,248
 	
                         
 	
                        598,171
 	
                         
 
	
                         
 	
                        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
 	
                         
 	
                        1,110,827
 	
                         
 	
                        425,336
 	
                         
 	
                        1,536,163
 	
                         
 
	
                        (b)
 	
                        Tokarz Group:
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 	
                         
 
	
                         
 	
                        TTG Apparel, LLC
 	
                         
 	
                        1,766,322
 	
                         
 	
                        0
 	
                         
 	
                        1,766,322
 	
                         
 
	
                         
 	
                        Tokarz Investments, LLC
 	
                         
 	
                        8,386,977
 	
                         
 	
                        298,296
 	
                         
 	
                        8,685,273
 	
                         
 

 

SCHEDULE 2

Members of Parent’s Board of Directors

Peter Cole

John L. Eisel 

Linda LoRe

Milton J. Walters

William F. Harley

Rose Peabody Lynch

Melvyn Knigin

Michael A. Salberg

Joel M. Simon

Thomas Rende

Thomas J. Lynch

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00135-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00135-of-00352.parquet"}]]