EXHIBIT 10.2
STANDBY PURCHASE AGREEMENT
This STANDBY PURCHASE AGREEMENT (this "Agreement") dated as of
December
18, 2006 by and among Movie Star, Inc., a New York corporation (the
"Company"),
Fursa Alternative Strategies LLC (formerly known as Mellon HBV
Alternative
Strategies LLC) ("Fursa"), a Delaware limited liability company,
the Fursa
Managed Accounts (hereinafter defined), TTG Apparel, LLC, a
Delaware limited
liability company ("Apparel"), and Tokarz Investments, LLC, a
Delaware limited
liability company ("Investments," and together with Apparel, "TTG")
(TTG and the
Fursa Managed Accounts are hereafter collectively referred to as
the "Standby
Purchasers", and individually, as a "Standby Purchaser").
WHEREAS, the Company has entered into that certain Agreement and
Plan of
Merger and Reorganization dated as of the date hereof by and among
the Company
and the other parties thereto (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 will issue
to the
Fursa Managed Accounts and Investments shares (the "Merger Shares")
of its
common stock (the "Common Stock");
WHEREAS, pursuant to the Merger Agreement, the Company will issue
to Fursa
Master Rediscovered Opportunities Fund L.P. (formerly known as
Mellon HBV Master
Rediscovered Opportunities Fund L.P.), a Delaware limited
partnership, 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 connection with the Merger, the Company is proposing,
as soon
as practicable after the Rights Offering Effective Date and the
date of mailing
of the Proxy Statement (each as defined herein), to distribute to
holders of
Common Stock of record as of the close of business on the Record
Date (as
defined herein), non-transferable rights (the "Rights") to
subscribe for and
purchase additional shares of Common Stock (the "Rights Shares") at
a
subscription price (the "Subscription Price") in accordance with
the term sheet
attached hereto as Exhibit A (such term sheet, the "Term Sheet" and
such
offering, the "Rights Offering");
WHEREAS, pursuant to the Rights Offering, stockholders of record
will
receive the number of Rights for each share of Common Stock held by
them as of
the Record Date as set forth in the Term Sheet, and each Right will
entitle the
holder to purchase the number of Rights Shares as determined
pursuant to the
Term Sheet at the Subscription Price (the "Basic Subscription
Privilege");
WHEREAS, the Company has requested the Standby Purchasers to agree
to
purchase from the Company upon expiration of the Rights Offering,
and the
Standby Purchasers are willing, subject to the terms and conditions
set forth
herein, to so purchase the specified number of Rights Shares set
forth herein,
at the Subscription Price, to the extent such Rights Shares are not
purchased by
stockholders pursuant to the exercise of Rights;
WHEREAS, solely in order to further induce the Standby Purchasers
to enter
into this Agreement and as compensation to the Standby Purchasers
for their
commitments hereunder, the Company has agreed to grant to the
Standby Purchasers
(including any of their permitted assignees) warrants (the
"Guarantor Warrants")
representing the right to purchase additional shares of Common
Stock (the
"Warrant Shares") pursuant to this Agreement, which Guarantor
Warrants shall be
substantially in the form attached hereto as Exhibit B; and
WHEREAS, in order to further induce the Standby Purchasers to enter
into
this Agreement, the Company has agreed to grant the Standby
Purchasers
(including any of their permitted assignees) registration rights
with respect to
the Securities (as defined herein) purchased by them pursuant to
this Agreement
pursuant to a registration rights agreement substantially in the
form attached
hereto as Exhibit C (the "Registration Rights Agreement");
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:
Section 1.
Certain Other Definitions. The following terms used herein
shall have the meanings set forth below:
"Affiliate" shall have the meaning set forth in the Merger
Agreement.
"Agreement" shall have the meaning set forth in the preamble
hereof.
"Basic Subscription Privilege" shall have the meaning set forth in
the
recitals hereof.
"Business Day" shall mean any day that is not a Saturday, a Sunday
or a
day on which banks are required or permitted to be closed in the
State of New
York.
"Closing" shall have the meaning set forth in Section 6.
"Closing Date" shall have the meaning set forth in Section 6.
"Commission" shall mean the United States Securities and Exchange
Commission, or any successor agency thereto.
"Common Stock" shall have the meaning set forth in the recitals
hereof.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Stockholders Agreement" shall have the meaning set forth
in the
Merger Agreement.
"Effective Time" shall have the meaning set forth in the Merger
Agreement.
"Escrow Agreement" shall have the meaning set forth in the Merger
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended,
and the rules and regulations promulgated by the Commission
thereunder.
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"Fursa" shall have the meaning set forth in the preamble hereof.
"Fursa Guarantor Warrants" shall have the meaning set forth in
Section
3(a).
"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 and are parties hereto
or such funds
and accounts to which proper assignments have been made pursuant to
Section 16
herein.
"Losses" shall have the meaning set forth in Section 11(a).
"Merger" shall have the meaning set forth in the recitals hereof.
"Merger Agreement" shall have the meaning set forth in the recitals
hereof.
"Merger Closing" shall have the meaning set forth in Section 2(d).
"Merger Shares" shall have the meaning set forth in the recitals
hereof.
"Person" shall mean an individual, corporation, partnership,
association,
joint stock company, limited liability company, joint venture,
trust,
governmental entity, unincorporated organization or other legal
entity.
"Preferred Stock Conversion Shares" shall have the meaning set
forth in
the recitals hereof.
"Preferred Stock Shares" shall have the meaning set forth in the
recitals
hereof.
"Prospectus" shall mean a prospectus, as defined in Section 2(10)
of the
Securities Act, that meets the requirements of Section 10 of the
Securities Act
and is current with respect to the securities covered thereby.
"Proxy Statement" shall mean a definitive proxy statement filed
with the
Commission relating to the Merger, the Rights Offering and the
transactions
contemplated thereunder, together with all amendments, supplements
and exhibits
thereto.
"Purchase Notice" shall have the meaning set forth in Section 2(c).
"Purchase Price" shall have the meaning set forth in Section 2(c).
"Record Date" shall be the date which is two (2) Business Days
prior to
the date of mailing of the Proxy Statement.
"Registration Rights Agreement" shall have the meaning set forth in
the
recitals hereof.
"Rights" shall have the meaning set forth in the recitals hereof.
"Rights Agent" shall have the meaning set forth in Section 8(a).
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"Rights Offering" shall have the meaning set forth in the recitals
hereof.
"Rights Offering Effective Date" shall mean the date on which the
subscription under the Rights Offering commences.
"Rights Offering Expiration Date" shall mean the date on which the
subscription period under the Rights Offering expires.
"Rights Offering Registration Statement" shall mean the Company's
Registration Statement on Form S-1 under the Securities Act or such
other
appropriate form under the Securities Act, pursuant to which the
Rights and
underlying shares of Common Stock will be registered pursuant to
the Securities
Act.
"Rights Shares" shall have the meaning set forth in the recitals
hereof.
"Satisfaction Notice" shall have the meaning set forth in Section
2(c).
"Securities" shall mean (i) the Merger Shares, the Guarantor
Warrants, the
Warrant Shares, the Preferred Stock Shares and the Preferred Stock
Conversion
Shares and (ii) those of the Unsubscribed Shares that are acquired
by the
Standby Purchasers in accordance with Section 2 as the case may be.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and
the rules and regulations promulgated by the Commission thereunder.
"Shareholders Agreement" shall have the meaning set forth in the
Merger
Agreement.
"Standby Purchaser" shall have the meaning set forth in the
preamble
hereof.
"Subscription Price" shall have the meaning set forth in the
recitals
hereof.
"Term Sheet" shall have the meaning set forth in the recitals
hereof.
"TTG" shall have the meaning set forth in the preamble hereof.
"TTG Guarantor Warrants" shall have the meaning set forth in
Section 3(b).
"Unsubscribed Shares" shall have the meaning set forth in Section
2(b).
"Unsubscribed Shares Backstop" shall have the meaning set forth in
Section
2(b).
"Warrant Shares" shall have the meaning set forth in the recitals
hereof.
Section 2.
Standby Purchase Commitment.
(a)
TTG hereby agrees that it shall not, and shall cause its
Affiliates not to purchase from the Company any of the Rights
Shares that will
be available for purchase by TTG and/or any of its Affiliates
pursuant to its
Basic Subscription Privilege.
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(b)
If and to the extent that Rights Shares are not purchased by
the Company's stockholders pursuant to the exercise of Rights (such
shares that
are not purchased, the "Unsubscribed Shares"), the Standby
Purchasers hereby
agree to purchase from the Company, and the Company hereby agrees
to sell to the
Standby Purchasers, at the Subscription Price, the Unsubscribed
Shares,
provided, however, that in no event shall the Standby Purchasers be
obligated to
purchase a number of Unsubscribed Shares which exceeds a number
equal to the
quotient of Twenty Million and No/100 Dollars ($20,000,000) divided
by the
Subscription Price (such aggregate maximum number of shares, the
"Unsubscribed
Shares Backstop"). It is acknowledged and agreed that, if and to
the extent the
Standby Purchasers are required to purchase Unsubscribed Shares
pursuant to this
subsection (b), TTG shall purchase fifty percent (50%) of the
Unsubscribed
Shares and the Fursa Managed Accounts shall, on a several but not
on a joint and
several basis purchase the other fifty percent (50%) of the
Unsubscribed Shares,
pro rata based on the ownership of the Company Common Stock (as
defined in the
Merger Agreement) owned by each such Fursa Managed Account as of
the Record
Date, up to an amount which in the aggregate shall not exceed the
Unsubscribed
Shares Backstop.
(c)
The next Business Day after the Rights Offering Expiration
Date, the Company shall deliver to each of the Standby Purchasers a
written
certification by an executive officer of the Company of either (i)
the number of
Unsubscribed Shares and the aggregate purchase price (the "Purchase
Price")
thereof (a "Purchase Notice") or (ii) in the absence of any
Unsubscribed Shares,
of the fact that there are no Unsubscribed Shares and that the
commitment to
subscribe for Unsubscribed Shares is terminated (a "Satisfaction
Notice").
(d)
Provided that a Purchase Notice has been delivered to each of
the Standby Purchasers, on the day of the consummation of the
transactions
contemplated by the Merger Agreement (the "Merger Closing"), each
Standby
Purchaser shall deliver to the Company by wire transfer of
immediately available
funds, the Purchase Price for the applicable number of Unsubscribed
Shares that
such Standby Purchaser is obligated to purchase pursuant to Section
2(b).
(e)
Notwithstanding anything else contained in this Agreement, and
except as it may be required in connection with the execution,
delivery and
performance of this Agreement, the Shareholders Agreement, the
Merger Agreement
and the transactions contemplated thereby, Fursa, the Fursa Managed
Accounts and
TTG shall not take any action that would require them to
collectively file a
Schedule 13D as a result of forming a "group" pursuant to Rule
13d-5(b)(l) of
the Exchange Act).
Section 3.
Guarantor Warrants.
(a)
Fursa. Upon the Closing of the transactions contemplated
hereby, the Company shall issue Guarantor Warrants to the Fursa
Managed Accounts
representing collectively, the right to purchase a number of
additional shares
of Common Stock equal to 5.25% of the number of shares of Common
Stock to be
offered in the Rights Offering pro rata based on their ownership on
the Record
Date or as the Fursa Managed Accounts may otherwise direct the
Company in
writing, which Guarantor Warrants shall be substantially in the
form attached
hereto as Exhibit B (the "Fursa Guarantor Warrants").
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(b)
TTG. Upon the Closing of the transactions contemplated hereby,
the Company shall issue to TTG Guarantor Warrants representing the
right to
purchase a number of additional shares of Common Stock equal to
5.25% of the
number of shares of Common Stock to be offered in the Rights
Offering, which
Guarantor Warrants shall be substantially in the form attached
hereto as Exhibit
B (the "TTG Guarantor Warrants").
Section 4.
Representations and Warranties of the Company.
The Company
represents and warrants to the Standby Purchasers as follows:
(a)
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York and
has all
requisite corporate power and authority to carry on its business as
now
conducted and as proposed to be conducted.
(b)
This Agreement has been duly and validly authorized, executed
and delivered by the Company and, subject to approval by the
Company's
stockholders, constitutes a binding obligation of the Company
enforceable
against it in accordance with its terms, subject to applicable
bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws
affecting creditors' rights and remedies generally, and subject, as
to
enforceability, to general principles of equity, including
principles of
commercial reasonableness, good faith and fair dealing (regardless
of whether
enforcement is sought in a proceeding at law or in equity).
(c)
The authorized capital of the Company consists of (A)
30,000,000 shares of Common Stock, of which, (B) 15,792,787 shares
were issued
and outstanding, as of the date hereof. All of the outstanding
shares of Common
Stock have been duly authorized, are validly issued, fully paid and
nonassessable and were offered, sold and issued in compliance with
all
applicable federal and state securities laws and without violating
any
contractual obligation or any other preemptive or similar rights.
(d)
Subject to the approval of the Company's stockholders, all of
the Securities and Rights Shares will have been duly authorized for
issuance
prior to the Closing, and, when issued and distributed as set forth
in the
Prospectus, will be validly issued, fully paid and non-assessable;
and none of
the Securities or Rights Shares will have been issued in violation
of the
preemptive rights of any security holders of the Company arising as
a matter of
law or under or pursuant to the Company's Certificate of
Incorporation, as
amended, the Company's bylaws, as amended, or any agreement or
instrument to
which the Company is a party or by which it is bound.
Section 5.
Representations and Warranties of Fursa and the Standby
Purchasers. Except for the representations and warranties set forth
in Section
5(g), which shall be given by Fursa and the Fursa Managed Accounts,
only, Fursa
and each Standby Purchaser, severally and not jointly, represents
and warrants
to the Company, as to itself only, as follows:
(a)
Such Person is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing under
the laws of
its state of organization and has all requisite corporate power and
authority to
carry on its business as now conducted and as proposed to be
conducted.
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(b)
This Agreement has been duly and validly authorized, executed
and delivered by such Person and constitutes a binding obligation
of such Person
enforceable against it in accordance with its terms, subject to
applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and
similar laws affecting creditors' rights and remedies generally,
and subject, as
to enforceability, to general principles of equity, including
principles of
commercial reasonableness, good faith and fair dealing (regardless
of whether
enforcement is sought in a proceeding at law or in equity).
(c)
Such Standby Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and is acquiring
the Securities
for investment for its own account, with no present intention of
dividing its
participation with others (other than in accordance with Section
2(b) and
Section 16) or reselling or otherwise distributing the same in
violation of the
Securities Act or any applicable state securities laws, and such
Standby
Purchaser has sufficient knowledge and experience in financial and
business
matters so as to be capable of evaluating the merits and risks of
its investment
in the Securities, and is capable of bearing the economic risks of
such
investment.
(d)
The Standby Purchasers are not "affiliates" (within the
meaning of Rule 405 of the Securities Act) of one another, are not
acting in
concert and are not members of a "group" (within the meaning of
Section 13(d)(3)
of the Exchange Act) and except as set forth in, as applicable,
this Agreement,
the Shareholders Agreement, the Merger Agreement and the agreements
executed and
delivered in connection therewith, have no current intention to act
in the
future in a manner that would make them members of such a group.
(e)
Such Person understands that: (i) other than pursuant to the
Registration Rights Agreement, the resale of the Securities has not
been and is
not being registered under the Securities Act or any applicable
state securities
laws, and the Securities may not be sold or otherwise transferred
unless (a) the
Securities are sold or transferred pursuant to an effective
registration
statement under the Securities Act, (b) at the Company's request,
the Standby
Purchasers, as the case may be, shall have delivered to the Company
an opinion
of counsel (which opinion shall be in form, substance and scope
reasonably
satisfactory to the Company's counsel) to the effect that the
Securities to be
sold or transferred may be sold or transferred pursuant to an
exemption from
such registration, or (c) the Securities are sold pursuant to Rule
144
promulgated under the Securities Act; (ii) any sale of such
Securities made in
reliance on Rule 144 under the Securities Act may be made only in
accordance
with the terms of such Rule; and (iii) except as set forth in the
Registration
Rights Agreement, neither the Company nor any other Person is under
any
obligation to register such Securities under the Securities Act or
any state
securities laws or to comply with the terms and conditions of any
exemption
thereunder.
(f)
Each Standby Purchaser has and will have prior to the Merger
Closing sufficient cash, available lines of credit or other sources
of
immediately available funds to enable it to deliver to the Company
the Purchase
Price for the applicable number of Unsubscribed Shares that such
Standby
Purchaser is obligated to purchase pursuant to Section 2(b) of this
Agreement.
(g)
Fursa is, and during the effectiveness of the agreements set
forth in this Section 5(g)
