AGREEMENT dated as of December 9, 1997 by and among Xxxxxx Xxxxxx, an
individual residing at 000 00xx Xxxxxx, Xxxxxxx, Xxx Xxxxxx 00000 ("Knigin"),
Xxxx Xxxxxxxxx, an individual residing at 000 Xxxx 00xx Xxxxxx, Xxx. 00X, Xxx
Xxxx, Xxx Xxxx 00000 ("Xxxxxxxxx"), Xxxxxx Xxxxx, an individual residing at 000
Xxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxx"), Xxxx X. Xxxx, an individual
residing at 000 Xxxxx Xxxxxx, Xxx. 0X, Xxx Xxxx, Xxx Xxxx 00000 ("Krat"), Xxxx
X. Xxxxx, an individual residing at 00 Xxxxxxx Xxxxx, Xxxxxx, Xxx Xxxx 00000
("Simon") on behalf of himself and the individuals listed in Schedule 1 annexed
hereto and made a part hereof, Xxxx Xxxxxxx, an individual residing at 0
XxXxxxxxx Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxx") and Movie Star, Inc., a
New York corporation having an office at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (the "Company") (Knigin, Pomerantz, Rende, Krat, Simon, the individuals
listed in Schedule 1 and Xxxxxxx are hereinafter sometimes referred to
individually as an "Affiliate" and collectively as the "Affiliates").
RECITALS
X. Xxxxxx and Xxxxxxxxx are officers, directors and employees of the
Company, Xxxxx is an employee of the Company, Krat and Simon are directors of
the Company, the individuals listed in Schedule 1 are relatives of Simon and
Xxxxxxx is the wife of Xxxxxxx X. Xxxxxxx who is a member of the law firm which
acts as general counsel to the Company. The Affiliates have acquired an
aggregate of $278,500 in principal amount (the "Affiliates' Aggregate Amount")
of the Company's 8% Convertible Senior Notes, which are convertible into an
aggregate of 742,667 shares of the Company's common stock , par value $.01 (the
"Notes").
B. The Affiliates have agreed to certain limitations on their rights to (i)
sell the Notes; (ii) convert the Notes to common stock; and (iii) sell the
common stock after conversion of the Notes, all as hereinafter more fully set
forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises
made herein, the parties hereto agree as follows:
1. The Affiliates, jointly and severally, agree that
(a) they (i) will not sell all or any portion of the Notes or the
underlying shares of common stock in any manner other than as provided in
this Agreement; and (ii) will convert all of the Notes into shares of
common stock on or before midnight Eastern Time on March 31, 1999 (the
"Mandatory Conversion Date"). Nothing herein shall, in any way, restrict or
prohibit an Affiliate from converting all or any portion of the Notes into
shares of common stock at any time prior to the Mandatory Conversion Date.
The shares of common stock into which the Notes are convertible are
hereinafter called, the "Underlying Shares";
(b) If an Affiliate desires to sell all or any portion of the Notes,
such Affiliate shall first offer to sell such Notes to the other
Affiliates, in the first instance, and any Notes not purchased by the other
Affiliates shall be offered to the Company. The offer by a selling
Affiliate to the other Affiliates and the Company shall be made in writing
setting forth the aggregate principal amount of the Notes being offered and
the price at which the selling Affiliate wishes to sell the Notes (a
"Transfer Notice"). Upon receipt of a Transfer Notice, the other Affiliates
shall have the right to purchase the offered Notes for the price set forth
in the Transfer Notice in proportion to their respective ownership of the
Affiliates' Aggregate Amount. Any offered Notes not purchased by one or
more of the other Affiliates may be purchased by the remaining Affiliates
and any offered Notes not purchased by the remaining Affiliates may be
purchased by the Company. If the other Affiliates and the Company do not
purchase all of the offered Notes, the selling Affiliate shall continue to
hold the Notes subject to and in accordance with this Agreement. Any
purchase of the offered Notes by the other Affiliates or the Company shall
be completed within ten business days after the receipt of the Transfer
Notice.
2. (a) During the period commencing on the date upon which any Affiliate
converts all or any portion of the Notes into shares of common stock and ending
at midnight on December 31, 1998, Underlying Shares may not be sold unless the
closing sale price of the Company's common stock in consolidated trading on the
American Stock Exchange is at least $1.00 per share for each of the twenty
consecutive trading days ending not more than three days prior to giving the
"Sale Notice" (as hereinafter defined) (a "1998 Trigger Event"). If a 1998
Trigger Event occurs, an Affiliate may during calendar year 1998, subject to
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Rule 144 if applicable, sell up to an aggregate of 35% of the Underlying Shares
held by such Affiliate (the "1998 Maximum"), from time to time in accordance
with the procedures set forth in Section 2(c) of this Agreement.
(b) Commencing on January 1, 1999, an Affiliate may from time to time
during calendar year 1999, subject to Rule 144 if applicable, sell all or
any portion of the Underlying Shares held by such Affiliate, provided the
closing sale price of the Company's common stock in consolidated trading on
the American Stock Exchange is at least $1.00 per share for each of the
twenty consecutive trading days ending not more than three days prior to
giving the "Sale Notice" (as hereinafter defined) (a "1999 Trigger Event")
and such Affiliate has complied with the procedures set forth in Section
2(c) of this Agreement.
(c) Provided a 1998 Trigger Event or 1999 Trigger Event has occurred,
an Affiliate shall, in each instance prior to selling any Underlying Shares
on the open market, give the Company written notice of an intention to sell
setting forth the aggregate number of Underlying Shares intended to be sold
(a "Sale Notice") and the Company shall have three business days following
receipt of a Sale Notice to purchase not less than all of the Underlying
Shares specified in the Sale Notice (the "Company Purchase Period") at a
price equal to 90% of the closing sale price of the Company's common stock
in consolidated trading on the American Stock Exchange on the date the Sale
Notice is received (the "Company Purchase Price"). If the Company
determines to purchase the Underlying Shares from a selling Affiliate, the
Company shall, on or before the expiration of the Company Purchase Period,
deliver to the selling Affiliate a check for the full amount of the Company
Purchase Price against receipt of the share certificates for the Underlying
Shares to be sold duly endorsed in blank for transfer with signature
medallion guaranteed. If the Company does not exercise its right to
purchase the Underlying Shares or fails to deliver the Company Purchase
Price before the expiration of the Company Purchase Period, the Affiliate
shall be free to sell the Underlying Shares on the open market; provided
that any such sales shall be made within ten business days after the end of
the Company Purchase Period.
3. Any Underlying Shares remaining unsold at the close of business in
December 31, 1999 may not be sold thereafter until the earlier to occur of the
date upon which (i) the selling Affiliate has obtained the express prior written
consent of the Company's Chairman of the Board:
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(ii) the Company has completed a refinancing of its 12.875% Subordinated
Debentures and its 8% Senior Notes and 8% Senior Convertible Notes; and (iii)
January 2, 2001. In addition to the foregoing, if any underwriter engaged by the
Company requires the Affiliates to agree to any other or further restrictions on
the sale of the Underlying Shares than those set forth in this Agreement, the
Affiliates shall, promptly following the request from an underwriter, enter into
written agreements containing such other or further restrictions.
4. Upon the expiration of ninety days after the date upon which an
Affiliate is no longer (i) employed by the Company; or (ii) deemed to be an
"affiliate" of the Company as defined in Rule 144(a)(1) promulgated under the
Securities Act of 1933, as amended, the terms and conditions of this Agreement
shall not apply to any such Affiliate, the Notes or the Underlying Shares.
5. To the extent the provisions of Section 16 of the Securities Exchange
Act of 1934 are applicable to an Affiliate, all such Affiliates shall be
required to comply with those provisions.
6. All of the Affiliates acknowledge that they are familiar with the
Company's written policies and procedures with respect to purchases and sales of
the Company's securities, all of the provisions of which are incorporated herein
by reference. Each of the Affiliates agrees to be bound by and comply with the
Company's policies and procedures in connection with the sale or other
disposition of the Notes and Underlying Shares. Notwithstanding anything to the
contrary herein, no Affiliate may sell the Notes or Underlying Shares at any
time when such Affiliate has knowledge of material non-public information
regarding the Company.
7. This Agreement has been entered into in, and shall be governed by and
construed in accordance with the internal laws of the State of New York.
8. All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and to their respective
successors and permitted assigns. This Agreement contains the entire agreement
among the parties with respect to the subject matter hereof and shall supersede
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all previous and contemporaneous negotiations, commitments and understandings,
whether written or oral. No waiver of or amendment to this Agreement will be
effective unless it is signed by the party or parties sought to be bound
thereby.
IN WITNESS WHEREOF, each of the parties hereto has executed, or caused to
be executed, this Agreement, as of the day and year first above written.
MOVIE STAR, INC.
By:----------------------------- --------------------------
Xxxx X. Xxxxx, Chairman Xxxxxx Xxxxxx
-------------------------------- --------------------------
Xxxx Xxxxxxxxx Xxxxxx Xxxxx
-------------------------------- --------------------------
Xxxx X. Xxxx Xxxx X. Xxxxx
--------------------------------
Xxxx Xxxxxxx
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SCHEDULE 1
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