EQUITY COMMITMENT AGREEMENT
EXHIBIT
3
October
13, 2006
Foamex
International Inc.
0000
Xxxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxx, Xx.
Xxxxxxx X. Xxxxxxxxx
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Re:
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Equity
Funding Commitment
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Ladies
and Gentlemen:
We
understand that Foamex International Inc. (the “Company,”
and
together with its debtor affiliates, the “Debtors”)
proposes to file an amended plan of reorganization (the “First
Amended Plan”)
with
the United States Bankruptcy Court for the District of Delaware (the
“Bankruptcy
Court”)
incorporating the terms and conditions described in the term sheets annexed
hereto as Exhibit
A
(the
“Investment
Term Sheet”)
and
Exhibit
B
(the
“Plan
Term
Sheet”
and,
together with the Investment Term Sheet, the “Term
Sheets”)
and
the Put Option Agreement annexed hereto as Exhibit
C
(the
“Put
Option Agreement”).
The
Term Sheets and the Put Option Agreement are hereby incorporated herein in
their
entirety as if set forth below in their entirety.
Among
other things, the First Amended Plan will provide for:
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(i)
|
an
offering (the “Rights
Offering”)
to the Company’s existing common stockholders and preferred stockholders
(collectively, the “Equityholders”)
of rights (the “Rights”)
to purchase additional shares of common stock (the “Additional
Common Stock”)
of the Company as reorganized (the “Reorganized
Company”);
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|
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(ii)
|
the
purchase from the Company by the Significant Equityholders (as defined
in
the Investment Term Sheet) of the Call Option (as defined in the
Investment Term Sheet) with respect to the Additional Common Stock;
and
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|
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(iii)
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upon
the exercise by the Significant Equityholders of the Call Option,
or upon
the exercise by the Company of the Put Option (as defined in the
Investment Term Sheet), the sale to the Significant Equityholders
of
shares of Additional Common Stock, or preferred stock in the Reorganized
Company (the “New
Preferred Stock”),
as the case may be, for an aggregate purchase price equal to the
Rights
Offering Amount (as defined in the Investment Term Sheet) less
the aggregate amount received by the Company as a result of the exercise,
if any, of Rights by the Significant Equityholders and the other
Equityholders.
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Foamex
International Inc.
October
13, 2006
Page
2
The
Significant Equityholders are pleased to commit (the “Commitment”),
subject to the terms and conditions set forth in this letter (the “Commitment
Letter”)
and
set forth in the Term Sheets and the Put Option Agreement, and on the basis
of
the representations and warranties set forth herein to (i) sell the Put Option
to the Company on the terms and conditions substantially set forth in the Put
Option Agreement and to fulfill their obligations under the Put Option Agreement
and (ii) fulfill their obligations under the First Amended Plan as confirmed
by
the Bankruptcy Court to the extent such obligations are expressly set forth
or
contemplated in this Commitment Letter.
The
Commitment is subject to, among other things, (i) the negotiation, execution
and
delivery of definitive documentation, including, without limitation, those
documents to be included in the plan supplement to the First Amended Plan
(collectively, the “Definitive
Documents”)
in
form and substance reasonably satisfactory to each of the Significant
Equityholders; (ii) from the date of this Commitment Letter through the
Effective Date (as defined in the Investment Term Sheet), there not having
occurred any Material Adverse Change (as defined in the Investment Term Sheet);
and (iii) the other terms and conditions set forth in the Term Sheets and the
Put Option Agreement. The Definitive Documents and the First Amended Plan shall
be in form and substance consistent with the Term Sheets and the Put Option
Agreement and shall contain representations and warranties customarily found
in
agreements for similar investments or financings and shall be reasonably
satisfactory to the Significant Equityholders in their individual reasonable
discretion.
In
consideration of the foregoing, and the representations and warranties set
forth
herein, and other good and valuable consideration, the value of which is hereby
acknowledged, the Company and the Significant Equityholders agree as
follows:
1. The
Significant Equityholders’ Commitment.
Subject
to Bankruptcy
Court approval and to the terms and conditions set forth in the Put Option
Agreement, and on the basis of the representations and warranties herein
contained, in exchange for the Put Option Premium (as defined in the Investment
Term Sheet) each of the Significant Equityholders agrees to sell to the Company
and the Company agrees to purchase from the Significant Equityholders the Put
Option.
2. Representations
and Warranties of the Company.
The
Company represents and warrants to, and agrees with, the Significant
Equityholders as set forth below. Each representation, warranty and agreement
set forth in this Section 2 is made as of the date hereof and as of the
Effective Date:
(a) Each
of the
Company and its Subsidiaries (as defined below) has been duly organized and
is
validly existing as a corporation or other form of entity in good standing
under
the laws of its state of organization, with the requisite power and authority
to
own its properties and conduct its business as currently conducted, subject
to
the restrictions that result solely from its status as a debtor-in-possession
under chapter 11 of the Bankruptcy Code (including that in certain instances
the
Company’s conduct of its
Foamex
International Inc.
October
13, 2006
Page
3
business
requires Bankruptcy Court approval). Each of the Company and its Subsidiaries
has been duly qualified as a foreign corporation or other form of entity for
the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business
so
as to require such qualification, except to the extent the failure to be so
qualified or be in good standing has not had or could not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise) or results
of
operations of the Company and its Subsidiaries taken as a whole or on the
ability of the Company or any of the other Debtors, as the case may be, to
consummate the transactions contemplated by this Commitment Letter, the Term
Sheets, the Put Option Agreement, the First Amended Plan or the Definitive
Documents contemplated hereby and thereby. For the purposes of this Commitment
Letter, a “Subsidiary”
of
any
person means, with respect to such person, any corporation, partnership, joint
venture or other legal entity of which such person (either alone or through
or
together with any other subsidiary) owns, directly or indirectly, more than
50%
of the stock or other equity interests, has the power to elect a majority of
the
board of directors or similar governing body, or has the power to direct the
business and policies.
(b) Subject
to
Bankruptcy Court approval and the filing with the Secretary of State of Delaware
of an appropriate Certificate of Amendment of the Company’s Restated Certificate
of Incorporation, as amended (or Amended Restated Certificate of Incorporation,
as amended) (the “Certificate
of Amendment”),
the
Company has the requisite corporate power and authority to enter into, execute,
deliver and perform its obligations under this Commitment Letter. Subject to
Bankruptcy Court approval, the Company will take all necessary corporate action
required for the due authorization, execution, delivery and performance by
it of
this Commitment Letter, the Put Option Agreement, the First Amended Plan and
the
Definitive Documents contemplated hereby and thereby, including, without
limitation, the issuance of the Call Option, the New Preferred Stock, the Rights
and the Additional Common Stock.
(c) This
Commitment Letter has been duly and validly executed and delivered by the
Company, and, subject to Bankruptcy Court approval and the filing of the
Certificate of Amendment, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. Subject
to Bankruptcy Court approval and the filing of the Certificate of Amendment
each
of the Definitive Documents will be duly authorized and validly executed and
delivered by the Company and will constitute a valid and binding obligation
of
the Company enforceable against the Company in accordance with its
terms.
(d) If
and when
issued in accordance with the terms of the Put Option Agreement, and subject
to
the filing of the Certificate of Amendment, the issuance of the New Preferred
Stock will be duly and validly authorized and will be duly and validly issued,
fully paid and non-assessable, and free and clear of all taxes, liens,
preemptive rights, rights of first refusal, subscription and similar
rights.
Foamex
International Inc.
October
13, 2006
Page
4
(e) If
and when
issued pursuant to the exercise of the Rights or in accordance with the terms
of
the Call Option, and subject to the filing of the Certificate of Amendment,
the
issuance of the Additional Common Stock will be duly and validly authorized
and
will be duly and validly issued, fully paid and non-assessable, and subject
to
the termination prior to such issuance of the Company’s Shareholder Rights Plan
dated August 5, 2004, as amended, free and clear of all taxes, liens, preemptive
rights, rights of first refusal, subscription and similar rights.
(f) Except
(i)
for the Preferred Equity Interests and Other Common Equity Interests in Foamex
International (each as described in the Plan Term Sheet) and (ii) for the
transactions contemplated by this Commitment Letter, there are no outstanding
subscription rights, options, warrants, convertible or exchangeable securities
or other rights of any character whatsoever to which the Company is a party
relating to issued or unissued capital stock of the Company, or any commitments
of any character whatsoever relating to issued or unissued capital stock of
the
Company or pursuant to which the Company is or may become bound to issue or
grant additional shares of its capital stock or related subscription rights,
options, warrants, convertible or exchangeable securities or other rights,
or to
grant preemptive rights, which, in each instance, will be in effect immediately
following the closing of the transactions contemplated hereby.
(g) Subject
to
obtaining the Required Approvals (as defined herein) and the filing of the
Certificate of Amendment, none of the distribution of the Rights, the sale,
issuance and delivery of Additional Common Stock upon exercise of the Rights
or
the Call Option, the purchase of the Put Option by the Company and the issuance
and delivery of New Preferred Stock upon the exercise of the Put Option, the
execution and delivery by the Company (or, with respect to the First Amended
Plan, the filing by the Debtors) of this Commitment Letter, the Put Option
Agreement and the First Amended Plan, performance of and compliance by the
Company and the other Debtors with all of the provisions hereof and thereof
and
the consummation of the transactions contemplated herein and therein (including
compliance by the Significant Equityholders with their obligations hereunder
and
thereunder) (i) will conflict with, or result in a breach or violation of,
any
of the terms or provisions of, or constitute a default under (with or without
notice or lapse of time, or both), or result in the acceleration, termination,
modification or cancellation of, or the creation of any lien under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound or to which any of the
property or assets of the Company or any of its Subsidiaries is subject, (ii)
will result in any violation of the provisions of the Restated Certificate
of
Incorporation or By-laws of the Company, or any of the equivalent organizational
documents of any of its Subsidiaries, as amended and restated in connection
with
consummation of the transactions contemplated herein and in the First Amended
Plan, or (iii) will result in any violation of, or any termination or material
impairment of any rights under, any statute, license, authorization, injunction,
judgment, order, decree, rule or regulation of any court, governmental agency
or
body, or arbitration
Foamex
International Inc.
October
13, 2006
Page
5
or
similar tribunal having jurisdiction over the Company or any of its Subsidiaries
or any of their respective properties.
(h) No
consent,
approval, authorization, order, registration or qualification of or with any
court or governmental agency or body having jurisdiction over the Company or
any
of its Subsidiaries or any of their respective properties is required for the
distribution of the Rights, the sale, issuance and delivery of Additional Common
Stock upon exercise of the Rights or the Call Option, the purchase of the Put
Option by the Company and the issuance and delivery of New Preferred Stock
upon
the exercise of the Put Option, the execution and delivery by the Company (or,
with respect to the First Amended Plan, the filing by the Debtors) of this
Commitment Letter, the Put Option Agreement and the First Amended Plan,
performance of and compliance by the Company and the other Debtors with all
of
the provisions hereof and thereof and the consummation of the transactions
contemplated herein and therein, except (i) the entry of one or more orders,
including the Confirmation Order by the Bankruptcy Court; (ii) the filing of
any
notifications required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of
1976, as amended (the “HSR
Act”),
and
the expiration or termination of the waiting periods applicable under the HSR
Act to the acquisition of Additional Common Stock by the Significant
Equityholders and (iii) the filing and effectiveness of a registration statement
by the United States Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”)
(collectively, the “Required
Approvals”).
(i) The
audited
consolidated financial statements of the Company as of and for the year ended
January 1, 2006 attached hereto as Schedule
A
and the
unaudited consolidated financial statements of the Company as of and for the
six
months ended July 2, 2006 attached hereto as Schedule
B
present
fairly in all material respects, in each case together with the related notes,
the financial position of the Company and its consolidated Subsidiaries at
the
dates indicated and the statements of operations, stockholders’ equity and cash
flows of the Company and its consolidated Subsidiaries for the periods
specified, except that the unaudited financial statements are subject to normal
and recurring year-end adjustments that are not expected to be material in
amount; such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States, except as
otherwise noted in such financial statements or related notes, applied on a
consistent basis throughout the periods involved and with past practices, and
in
conformity with the rules and regulations of the SEC. The Significant
Equityholders acknowledge that the Company’s financial statements described
above do not reflect the terms of the First Amended Plan and the Term
Sheets.
(j) Each
of the
Company and its Subsidiaries is in compliance in all material respects with
all
laws, statutes, ordinances, rules, regulations, orders, judgments and decrees
of
any court or governmental agency or body having jurisdiction over the Company
or
any of its Subsidiaries or any of their respective properties, and none of
the
Company or any of its Subsidiaries has received written notice of any alleged
material violation of any of the foregoing. Each of the Company and its
Subsidiaries holds all material licenses, franchises, permits, consents,
registrations, certificates and other
Foamex
International Inc.
October
13, 2006
Page
6
governmental
and regulatory permits, authorizations and approvals required for the operation
of the business as presently conducted by it and for the ownership, lease or
operation of its assets, subject to the restrictions that result solely from
its
status as a debtor-in-possession under chapter 11 of the Bankruptcy Code
(including that in certain instances the Company’s conduct of its business
requires Bankruptcy Court approval).
(k) All
written
information and other materials concerning the Debtors, the Reorganized Company
and the First Amended Plan (the “Information”)
which
has been, or is hereafter, prepared by, or on behalf of, the Company and
delivered to the Significant Equityholders is, or when delivered will be, when
considered as a whole, complete and correct in all material respects and does
not, or will not when delivered, contain any untrue statement of material fact
or omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which
such
statements have been made. To the extent that any such Information contains
projections, such projections were prepared in good faith on the basis of (i)
assumptions, methods and tests which are believed by the Company to be
reasonable and (ii) information believed by the Debtors to have been accurate
based upon the information available to the Debtors at the time such projections
were furnished to the Significant Equityholders.
(l) Each
of the
Company and its Subsidiaries has timely filed or caused to be filed all federal
and other material tax returns and reports required to have been filed by it
and
has paid or caused to be paid all material taxes required to have been paid
by
it, except (i) taxes that are being contested in good faith by appropriate
proceedings and for which the Company or the applicable Subsidiary has set
aside
on its books adequate reserves or (ii) taxes the liability for which will be
satisfied pursuant to the First Amended Plan. No material tax liens have been
filed and no material claims have been asserted in writing with respect to
any
such taxes, except for claims that will be satisfied pursuant to the First
Amended Plan. None of the Company nor any of its Subsidiaries has participated
in a “reportable transaction” within the meaning of Section 1.6011-4(b) of the
Treasury Regulations promulgated under the Internal Revenue Code of 1986, as
amended.
(m) Legal
Proceedings.
Except
as set forth on the litigation schedule prepared by the Company and attached
hereto as Schedule
C
(the
“Litigation
Schedule”),
there
is no material suit, action, claim or legal, administrative, arbitration or
other alternative dispute resolution, proceeding or investigation (a
“Proceeding”)
pending or, to the knowledge of the Company, threatened by, against or involving
the Company or any of its Subsidiaries or any of their respective properties,
or, to the knowledge of the Company, no circumstances reasonably likely to
give
rise to such Proceeding. Neither the Company nor any of its subsidiaries is
subject to any material judgment, decree, injunction, rule or order of any
governmental entity.
(n) Environmental.
Except
as set forth on the environmental schedule prepared by the Company and attached
hereto as Schedule
D
(the
“Environmental
Schedule”):
Foamex
International Inc.
October
13, 2006
Page
7
(i) To
the
knowledge of the Company, there are no pending or threatened material
Environmental, Health or Safety Claims against or affecting the Company or
any
of its Subsidiaries, and the Company is not aware of any facts or circumstances,
including without limitation the current or former presence, Release or
threatened Release of or exposure to any Hazardous Materials, which could
reasonably be expected to form the basis for any such material Environmental,
Health or Safety Claim.
(ii) To
the
knowledge of the Company, no Premises is currently or was formerly used for
the
handling, storage, treatment, disposal, manufacture, processing or generation
of
Hazardous Materials and no Hazardous Materials currently are or formerly were
present in, on, about or migrating to or from any Premises, except, in either
case, (A) in material compliance with applicable Environmental, Health or Safety
Laws and (B) as would not reasonably be anticipated to result in material
liabilities or obligations to the Company or its Subsidiaries, including
requirements for notification, investigation or remediation, pursuant to
Environmental, Health or Safety Laws.
(iii) Each
of the
Company and its Subsidiaries holds all material Environmental Permits necessary
to the conduct of its businesses.(iv) Each of the Company and its Subsidiaries
has been and is in material compliance with all applicable Environmental Permits
and Environmental, Health or Safety Laws.(v) No Premises is a current, or to
the
knowledge of the Company, a proposed Environmental Clean-up Site.
(vi) To
the
knowledge of the Company, there are no underground storage tanks (active or
abandoned), asbestos or asbestos-containing materials, or polychlorinated
biphenyls located at any Premises in a condition that would reasonably be
anticipated to result in material liabilities or obligations to the Company
pursuant to Environmental, Health or Safety Laws.
(vii) There
have
been no material environmental, health or safety investigations, studies,
audits, tests, reviews or other analyses conducted by, or on behalf of, and
which are in the possession of, the Company or any of its Subsidiaries with
respect to any Premises that have not been delivered to the Significant
Equityholders.
(viii) As
used
herein:
(A) “Environment”
means
any surface or subsurface water, groundwater, water vapor, surface or subsurface
land, air (including indoor, workplace and ambient air), fish, wildlife,
microorganisms and all other natural resources.
Foamex
International Inc.
October
13, 2006
Page
8
(B) “Environmental,
Health or Safety Claim”
means
any and all administrative or judicial actions, suits, orders, claims, liens,
notices, notices of violations, investigations, complaints, requests for
information, proceedings and other written communications, whether criminal
or
civil, pursuant to or relating to any applicable Environmental, Health or Safety
Law by any person (including, but not limited to, any court, governmental agency
or body, private person and citizens’ group) based upon, alleging, asserting or
claiming any actual or potential (i) violation of or liability under any
Environmental, Health or Safety Law, (ii) violation of any Environmental Permit
or (iii) liability for investigatory costs, cleanup costs, removal costs,
remedial costs, response costs, natural resource damages, damage, property
damage, personal injury, fines or penalties arising out of, based on, resulting
from or related to the presence, Release or threatened Release of or exposure
to
any Hazardous Materials at any location, including, but not limited to, any
Premises or any location other than any Premises to which Hazardous Materials
or
materials containing Hazardous Materials were sent for handling, storage,
treatment or disposal.
(C) “Environmental
Clean-up Site”
means
any location that is listed or proposed for listing on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System or on any similar state list of sites requiring investigation
or cleanup.
(D) “Environmental,
Health or Safety Laws”
means
any and all applicable federal, state, local, municipal and foreign laws, rules,
orders, regulations, statutes, ordinances, codes, common law doctrines, decrees
and enforceable requirements of any court or governmental agency or body
regulating, relating to, or imposing liability or standards of conduct
concerning, any Hazardous Material or protection of the Environment or human
or
worker health and safety, as now or at any time hereafter in effect, including,
without limitation, the Clean Water Act also known as the Federal Water
Pollution Control Act (“FWPCA”),
33
U.S.C. §§ 1251 et seq., the Clean Air Act (“CAA”),
42
U.S.C. §§ 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide Act
(“FIFRA”),
7
U.S.C. §§ 136 et seq., the Surface Mining Control and Reclamation Act
(“SMCRA”),
30
U.S.C. §§ 1201 et seq., the Comprehensive Environmental Response, Compensation
and Liability Act (“CERCLA”),
42
U.S.C. §§ 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986
(“XXXX”),
Public Law 99-499, 100 Stat. 1613, the Emergency Planning and Community Right
to
Know Act (“EPCRA”),
00 X.
X. X. § § 00000 et seq., the Resource Conservation and Recovery Act
(“RCRA”),
42
U.S.C. §§ 6901 et seq., the Occupational Safety and Health Act as amended
(“OSHA”),
29
U.S.C. §§ 655 and 657, together, in each case, with any amendment thereto, and
the regulations adopted and the publications promulgated thereunder and all
substitutions thereof.
(E) “Environmental
Permit”
means
any federal, state, local, provincial, or foreign permits, licenses, approvals,
consents or authorizations required by any court or governmental agency or
body
under or in connection with any Environmental, Health or Safety
Law.
Foamex
International Inc.
October
13, 2006
Page
9
(F) “Hazardous
Materials”
means
any hazardous, toxic or deleterious chemicals, materials, substances or wastes
in any amount or concentration, including without limitation petroleum,
petroleum hydrocarbons or petroleum products, petroleum by-products, radioactive
materials, asbestos or asbestos-containing materials, gasoline, diesel fuel,
pesticides, radon, urea formaldehyde, lead or lead-containing materials,
polychlorinated biphenyls, and any other chemicals, materials, substances or
wastes which are defined as or included in the definition of “hazardous
substances,”
“hazardous
materials,”
“hazardous
wastes,”
“extremely
hazardous wastes,”
“restricted
hazardous wastes,”
“toxic
substances,”
“toxic
pollutants,”
“pollutants,”
“regulated
substances,“
“solid
wastes”
or
“contaminants”
or
words of similar import, under any Environmental, Health or Safety
Law.
(G) “Premises”
means
any real property currently or formerly owned, leased or operated by the Company
or any of its Subsidiaries, including, but not limited to, the Environment,
buildings and structures thereat.
(H) “Release”
means
any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, disposing, or other release of any
Hazardous Materials, including, without limitation, the migration of any
Hazardous Materials, the abandonment or discard of barrels, containers, tanks
or
other receptacles containing or previously containing any Hazardous Materials,
or any “release”, “emission” or “discharge” as those terms are defined in any
applicable Environmental, Health or Safety Laws.
3. Representations
and Warranties of the Significant Equityholders.
Solely
with respect to itself, each of the Significant Equityholders, severally and
not
jointly, represents and warrants to, and agrees with, the Company as set forth
below. Each representation, warranty and agreement made in this Section 3 is
made as of the date hereof and as of the Effective Date:
(a) The
Significant Equityholder has been duly organized and is validly existing and
in
good standing under the laws of its respective jurisdiction of
organization.
(b) The
Significant Equityholder has the requisite power and authority to enter into,
execute and deliver this Commitment Letter and the Put Option Agreement and
to
perform its obligations hereunder and thereunder and has taken all necessary
action required for the due authorization, execution, delivery and performance
by it of this Commitment Letter and the Put Option Agreement.
(c) This
Commitment Letter and the Put Option Agreement have been duly and validly
executed and delivered by the Significant Equityholder, and constitutes its
valid and binding obligation, enforceable against it in accordance with its
terms.
(d) Any
New
Preferred Stock that may be acquired by the Significant Equityholder is solely
for its own account, for investment and not with a view toward
Foamex
International Inc.
October
13, 2006
Page
10
resale
or
other distribution within the meaning of the Securities Act; provided,
however,
that
the disposition of the Significant Equityholder’s respective property will at
all times be under its control. Any New Preferred Stock will not be offered
for
sale, sold or otherwise transferred by the Significant Equityholder except
pursuant to a registration statement or in a transaction exempt from or not
subject to registration under the Securities Act and any applicable state
securities laws.
(e) The
Significant Equityholder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment in any New Preferred Stock that may be acquired by it. The
Significant Equityholder is an “accredited investor” within the meaning of Rule
501(a) under the Securities Act. The Significant Equityholder understands and
is
able to bear any economic risks associated with such investment.
(f) The
Significant Equityholder acknowledges that it has been afforded the opportunity
to ask questions and receive answers concerning the Company and to obtain
additional information that it has requested to verify the accuracy of the
information contained herein. Notwithstanding the foregoing, nothing contained
herein will operate to modify or limit in any respect the representations and
warranties of the Company or to relieve it from any obligations to the
Significant Equityholder for breach thereof or the making of misleading
statements or the omission of material facts in connection with the transactions
contemplated herein.
(g) Subject
to
obtaining the Required Approvals, compliance by the Significant Equityholder
with its obligations hereunder, the Put Option Agreement and any Call Option
will not, other than such conflicts, violations or defaults that would not
have
an adverse effect on the ability of the Significant Equityholder to consummate
the transactions contemplated hereunder, (i) conflict with, or result in a
breach or violation of, any of the terms or provisions of, or constitute a
default under (with or without notice or lapse of time, or both), or result
in
the acceleration, termination, modification or cancellation of, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Significant Equityholder is a party or by which the Significant
Equityholder is bound or to which any of the property or assets of the
Significant Equityholder are subject, (ii) result in any violation of the
provisions of the organizational documents of the Significant Equityholder
or
(iii) result in any violation of any statute, license, authorization,
injunction, judgment, order, decree, rule or regulation of any court or
governmental agency or body having jurisdiction over the Significant
Equityholder or any of its respective properties.
(h) No
consent,
approval, authorization, order, registration or qualification of or with any
court or governmental agency or body having jurisdiction over the Significant
Equityholder or any of its properties is required for the compliance by the
Significant Equityholder with all of the provisions hereof and of the Put Option
Agreement or the consummation of the transactions contemplated herein or
therein, except the Required Approvals or other consent, approval,
authorization, order,
Foamex
International Inc.
October
13, 2006
Page
11
registration
or qualification that would not have an adverse effect on the Significant
Equityholder’s ability to consummate the transactions contemplated
hereunder.
(i)
The
Significant Equityholder has available to it the funds required to fulfill
in
full its obligations hereunder and under the Put Option Agreement.
4. Fees
and Expenses.
Upon
approval of this Commitment Letter by the Bankruptcy Court, and so long as
this
Commitment Letter shall continue to be in full force and effect and has not
been
terminated or otherwise expired by its terms, and the Significant Equityholders
are not otherwise in breach of any material obligation hereunder and under
the
Commitment Letter, the Company shall be obligated to pay the reasonable,
documented, out-of-pocket fees and expenses incurred since June 8, 2006 through
the earlier of such termination or expiration date and the Effective Date,
for
the Professionals (as defined below) in connection with the negotiation,
preparation, execution and delivery of the Commitment Letter and any and all
Definitive Documents, including, without limitation, any such reasonable fees
and expenses incurred in connection with litigation, contested matters,
adversary proceedings, or negotiations necessitated by such proceedings, in
each
case, relating to the Commitment Letter or the First Amended Plan, subject
to
(i) an aggregate monthly cap of $125,000 for reasonable legal fees and expenses
(with the excess in any given month capable of being carried forward and applied
in a subsequent month(s)), and (ii) the terms of the engagement letter to be
executed by the Company, the Significant Equityholders and Imperial Capital,
LLC
(such fees and expenses, the “Expenses”);
provided,
however,
that
any Expenses that remain unpaid as of the earlier of such termination or
expiration date and the Effective Date, as the case may be, shall be paid by
the
Company no later than thirty (30) days after such termination or expiration
date
or the Effective Date, as applicable.
All
invoices
for which reimbursement is sought from the Company shall be sent via email
and
regular mail to the Company, the Company’s counsel, the U.S. Trustee and counsel
for the Official Committee of Unsecured Creditors appointed in the Company’s
chapter 11 cases. The parties shall have ten (10) calendar days from the
delivery of such invoices to object to the reasonableness of the amounts
requested. If no objections are raised during the objection period, the Company
shall make such payments without the need for filing any application with the
Bankruptcy Court. If an objection is raised and cannot be resolved consensually,
the parties shall submit such dispute to the Bankruptcy Court for final
resolution.
5. Indemnification.
The
Company agrees to indemnify and hold harmless the Significant Equityholders
and
their respective affiliates, and each of their respective directors, officers,
partners, members, employees, agents, counsel, financial advisors and assignees
(including affiliates of such assignees), in their capacities as such (each
an
“Indemnified
Party”),
from
and against any and all losses, claims, damages, liabilities or other expenses
to which such Indemnified Party may become subject from third party claims
(including claims by other stockholders), insofar as such losses, claims,
damages, liabilities (or actions or other proceedings commenced or threatened
in
respect thereof) or other expenses arise out of or in any way relate to or
result from this
Foamex
International Inc.
October
13, 2006
Page
12
Commitment
Letter, the First Amended Plan or the Definitive Documents, and the Company
agrees to reimburse (on an as-incurred monthly basis) each Indemnified Party
for
any reasonable legal or other reasonable expenses incurred in connection with
investigating, defending or participating in any such loss, claim, damage,
liability or action or other proceeding (whether or not such Indemnified Party
is a party to any action or proceeding out of which indemnified expenses arise),
but excluding therefrom all expenses, losses, claims, damages and liabilities
of
the Significant Equityholders that are finally judicially determined (not
subject to appeal) to have resulted solely from (i) the gross negligence or
willful misconduct of such Indemnified Party or (ii) statements or omissions
in
a registration statement, disclosure statement or prospectus or any amendment
or
supplement thereto made in reliance upon or in conformity with the information
relating to the Significant Equityholders furnished to the Company in writing
by
or on behalf of the Significant Equityholders expressly for use in a
registration statement, disclosure statement or prospectus or any amendment
or
supplement thereto. In the event of any litigation or dispute involving this
Commitment Letter, the First Amended Plan and/or the Definitive Documents,
subject to the foregoing, the Significant Equityholders shall not be responsible
or liable to the Company for any special, indirect, consequential, incidental
or
punitive damages. The obligations of the Company under this paragraph (the
“Indemnification
Obligations”)
shall
remain effective whether or not any of the transactions contemplated in this
Commitment Letter are consummated, any Definitive Documents are executed and
notwithstanding any termination of this Commitment Letter and shall be binding
upon the Reorganized Company in the event that any plan of reorganization of
the
Company is consummated.
Except
in the
case of fraud, and subject to the foregoing Indemnification Obligations, the
Significant Equityholders’ rights to payment of the Put Option Premium (to the
extent due and payable in accordance with the Investment Term Sheet and the
Put
Option Agreement) and any accrued and unpaid Expenses (subject to the
limitations set forth herein) shall constitute the sole and liquidated damages
available to the Significant Equityholders in the event the transactions
contemplated herein are not consummated.
6. Additional
Covenants of the Company.
The
Company agrees with the Significant Equityholders:
(a) To
file a
motion seeking Bankruptcy Court approval of this Commitment Letter (including
payment of the Expenses and the Put Option Premium and the Indemnification
Obligations) as soon as practicable but in no event more than three (3) business
days after execution of the Commitment Letter by the Significant Equityholders
and the Company. Any motion, pleading, proposed order, press release, public
statement or other document that relates or refers to the Commitment, the
Commitment Letter or the First Amended Plan shall be provided to counsel to
the
Significant Equityholders in draft form for review prior to its being made
public or its being filed with the Bankruptcy Court. No such materials may
be
made public or be filed with the Bankruptcy Court without the consent of each
of
the Significant Equityholders (through their counsel), which consent shall
not
be unreasonably withheld or delayed.
Foamex
International Inc.
October
13, 2006
Page
13
(b) Other
than
with respect to a Competing Transaction, the Company (i) will use reasonable
best efforts to obtain, and to cause the other Debtors to obtain, the entry
of
the Confirmation Order by the Bankruptcy Court, the terms of which shall be
consistent in all material respects with this Commitment Letter and the First
Amended Plan; (ii) will use reasonable best efforts to adopt, and to cause
the
other Debtors to adopt, the First Amended Plan; (iii) will not, and will cause
the other Debtors not to, amend or modify the First Amended Plan in any material
respect that would adversely affect the Significant Equityholders without their
prior written consent. In addition, the Company will provide to the Significant
Equityholders and their counsel with a copy of the Confirmation Order and a
reasonable opportunity to review and comment on such order prior to such order
being filed with the Bankruptcy Court, and the Company will not, and will cause
the other Debtors not to, file the Confirmation Order with the Bankruptcy Court
unless the Significant Equityholders have approved the form of such order,
such
approval not to be unreasonably withheld or delayed.
(c) To
use
reasonable best efforts to effectuate the Rights Offering as provided herein
upon the terms and conditions set forth in the Investment Term
Sheet.
(d) Other
than
after the Company has sent the Significant Equityholders a Competing Transaction
Acceptance Notice in accordance with the Investment Term Sheet, not to file
any
pleading or take any other action in the Bankruptcy Court that is inconsistent
with the terms of this Commitment Letter, the First Amended Plan, the
Confirmation Order or the consummation of the transactions contemplated hereby
or thereby without providing prior written notice to the Significant
Equityholders no later than five (5) business days before filing any such
pleading or taking such action.
(e) To
use
reasonable best efforts to promptly prepare and file all necessary documentation
and to effect all applications that are necessary or advisable under the HSR
Act
so that the applicable waiting period shall have expired or been terminated
thereunder with respect to the purchase, if any, of the Additional Common Stock
by the Significant Equityholders hereunder, and not to take any action that
is
intended or reasonably likely to materially impede or delay the ability of
the
parties to obtain any necessary approvals required for the transactions
contemplated by this Agreement. The Company shall pay the filing fees required
by the HSR Act.
(f) To
file with
the Secretary of State of Delaware the Certificate of Amendment as contemplated
herein on or prior to the Effective Date.
(g) The
Company
shall provide to the Significant Equityholders and their advisors and
representatives reasonable access during normal business hours to all books,
records, documents, properties and personnel of the Company. In addition, the
Company shall promptly provide written notification to counsel to the
Significant Equityholders of any claim or litigation, arbitration or
administrative proceeding that is threatened or filed against the Company from
the date hereof until the earlier of the (i) Effective Date and (ii) termination
or expiration of this Commitment Letter. The
Foamex
International Inc.
October
13, 2006
Page
14
Company
shall promptly provide written notice to counsel to the Significant
Equityholders of any change in any of the information contained in the
representations or warranties, including without limitation related schedules,
made by the Company herein and shall promptly furnish any information that
a
Significant Equityholder may reasonably request in relation to such
changes.
7. Additional
Covenants of the Significant Equityholders.
Solely
with respect to itself, each Significant Equityholder agrees, severally and
not
jointly, with the Company:
(a) To
use
reasonable best efforts, upon confirmation of the First Amended Plan, to fulfill
its obligations under the First Amended Plan (solely to the extent expressly
set
forth or contemplated in this Commitment Letter) and otherwise to consummate
the
transactions contemplated by this Commitment Letter, the Put Option Agreement
and the First Amended Plan.
(b) Not
to file
any pleading or take any other action in the Bankruptcy Court that is
inconsistent with the terms of this Commitment Letter, the Put Option Agreement,
the First Amended Plan, the Confirmation Order or the consummation of the
transactions contemplated hereby or thereby other than with respect to any
pleadings or actions related to the Senior Secured Notes (as defined in the
Plan
Term Sheet) by Xxxxxxx, Xxxxx & Co., in its capacity as a holder of Senior
Secured Notes.
(c) To
use
reasonable best efforts to promptly prepare and file all necessary documentation
and to effect all applications that are necessary or advisable under the HSR
Act
so that the applicable waiting period shall have expired or been terminated
thereunder with respect to the purchase, if any, of the Additional Common Stock
by the Significant Equityholders hereunder, and not to take any action that
is
intended or reasonably likely to materially impede or delay the ability of
the
parties to obtain any necessary approvals required for the transactions
contemplated by this Agreement; the parties understanding that this shall not
require a Significant Equityholder to take any actions under the HSR Act prior
to the Rights Offering Commencement Date (as defined in the Investment Term
Sheet).
8. Acknowledgements
and Agreements of the Debtors.
Notwithstanding anything herein to the contrary, the Debtors acknowledge and
agree that (a) the transactions contemplated hereby are arm’s-length commercial
transactions between the Debtors, on the one hand, and the Significant
Equityholders, on the other, (b) in connection therewith and with the processes
leading to such transactions, each Significant Equityholder is acting solely
as
a principal and not the agent or fiduciary of the Debtors or their estates,
(c)
no Significant Equityholder has assumed an advisory or fiduciary responsibility
in favor of the Debtors or their estates with respect to such transactions
or
the processes leading thereto (irrespective of whether such Significant
Equityholder has advised or is currently advising the Debtors on other matters)
and (d) the Debtors have consulted their own legal and financial advisors to
the
extent they deemed appropriate. The Debtors agree that they will not claim
that
any Significant
Foamex
International Inc.
October
13, 2006
Page
15
Equityholder
has rendered advisory services of any nature or respect, or owes a fiduciary
or
similar duty to the Debtors or their estates, in connection with such
transactions or the processes leading thereto.
. Survival
of Representations and Warranties.
All
representations and warranties made in this Commitment Letter will survive
the
execution and delivery of this Commitment Letter but will terminate and be
of no
further force or effect after the Effective Date.
10. Obligations
of Significant Equityholders.
Notwithstanding anything else to the contrary set forth in this Commitment
Letter (including the Term Sheets), the Put Option Agreement, the Definitive
Documents, or the First Amended Plan, the obligations of the Significant
Equityholders under this Commitment Letter (including the Term Sheets), the
Put
Option Agreement, the Definitive Documents, the First Amended Plan or in respect
of the transactions contemplated by any of the foregoing, shall be several,
not
joint and several.
11. Termination.
This
Commitment Letter shall terminate upon the occurrence of any of the
Termination Events (as defined in the Investment Term Sheet) in accordance
with
the terms set forth in Investment Term Sheet, unless such Termination Event
is
waived as set forth in the Investment Term Sheet.
12. Miscellaneous.
This
Commitment Letter, including the attached Term Sheets and Put Option Agreement,
(a) supersedes, if accepted and approved by the Bankruptcy Court, all prior
discussions, agreements, commitments, arrangements, negotiations or
understandings, whether oral or written, of the Significant Equityholders and
the Debtors with respect hereto and thereto; (b) shall be governed, except
to
the extent that the Bankruptcy Code is applicable, by the laws of the State
of
New York, without giving effect to the conflict of laws provisions thereof;
(c)
shall not be assignable by the Company without the prior written consent of
each
of the Significant Equityholders (and any purported assignment without such
consent shall be null and void); (d) shall not be assignable by the Significant
Equityholders except to their designees as may be reasonably acceptable to
the
Company, (e) is intended to be solely for the benefit of the parties hereto
and
the Indemnified Parties and is not intended to confer any benefits upon, or
create any rights in favor of, any person other than the parties hereto and
the
Indemnified Parties; and (f) may not be amended or waived except by an
instrument in writing signed by the Company and each of the Significant
Equityholders.
13. Effectiveness.
Notwithstanding anything herein to the contrary, the obligations of the Debtors
hereunder, under the Put Option Agreement and under the Term Sheets are subject
to the approval of the Bankruptcy Court. The failure to include any provision
of
the Term Sheets or the Put Option Agreement in this Commitment Letter shall
not
affect the enforceability of such provision. The terms and conditions set forth
in the Term Sheets and the Put Option Agreement are incorporated in their
entirety as if set forth in this Commitment Letter.
Foamex
International Inc.
October
13, 2006
Page
16
14. Counterparts.
This
Commitment Letter may be executed in any number of counterparts, each of which
shall be an original, and all of which, when taken together, shall constitute
one agreement. Delivery of an executed signature page of this Commitment Letter
by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
15. Headings.
The
headings in this Commitment Letter are for reference purposes only and will
not
in any way affect the meaning or interpretation of this Commitment
Letter.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
Foamex
International Inc.
October
13, 2006
Page
17
If
the
foregoing correctly sets forth our agreement, please indicate your acceptance
of
the terms hereof and of the Term Sheets by returning to us executed counterparts
hereof not later than 5:00 p.m., New York City time, on Monday, October 16,
2006.
| Very truly yours, | ||||
|
D.
E. SHAW LAMINAR PORTFOLIOS, L.L.C.
|
PAR
IV MASTER FUND, LTD.
|
|||
|
/s/ Xxxxxx
Xxxxxx
|
/s/ Xxxxxx X. Xxxxx | |||
|
By:
|
|
Name: Xxxxxx X. Xxxxx |
||
|
Title:
Authorized Signatory
|
Title: Director | |||
|
|
||||
|
SUNRISE
PARTNERS LIMITED PARTNERSHIP
|
SIGMA
CAPITAL ASSOCIATES, LLC
Sigma
Capital Managment, LLC
|
|||
| /s/Xxxxxxx X. Xxxxxx |
/s/
Xxxxx X. Xxxxxxxx
|
|||
|
By:
|
Name:
Xxxxxxx X. Xxxxxx
Title:
Vice President
|
Name:
Xxxxx X. Xxxxxxxx
Title:
Authorized Signatory
|
||
|
|
|
|||
|
XXXXXXX,
SACHS & CO.
|
||||
| /s/ Xxxxxxx Xxxx | ||||
|
By:
|
|
|||
|
Title:
Managing Director
|
||||
|
|
||||
|
Agreed
and accepted on this
|
||||
|
13th
day of October, 2006:
|
||||
|
FOAMEX
INTERNATIONAL INC.
|
||||
|
(ON
BEHALF OF ITSELF AND OTHER DEBTORS)
|
||||
|
By:
|
/s/
Xxxxxxx X. Xxxxxxxxx
Name: Xxxxxxx
X. Xxxxxxxxx |
|||
|
Xxxxx:
EVP & General Counsel
|
||||
|
|
||||
EXHIBIT
A
Term
Sheet for Potential Investment
This
Term
Sheet (the “Investment
Term Sheet”)
is
part of a commitment letter, dated October 13, 2006 (the “Commitment
Letter”),
addressed to Foamex International Inc. by the Significant Equityholders (as
defined below) and is subject to the terms and conditions of the Commitment
Letter. Capitalized terms used herein shall have the meanings set forth in
the
Commitment Letter unless otherwise defined herein.
|
ISSUER:
|
Foamex
International Inc. (the “Company”)
|
|
SIGNIFICANT
EQUITYHOLDERS:
|
D.
E. Shaw Laminar Portfolios, L.L.C., Par IV Master Fund, Ltd., Sunrise
Partners Limited Partnership, Sigma Capital Associates, LLC and Xxxxxxx,
Xxxxx & Co., or their respective designees that are reasonably
acceptable to the Company (collectively, the “Significant
Equityholders”).
|
|
PREFERRED
STOCK PUT OPTION:
|
The
Significant Equityholders and the Company will enter into a put option
agreement (the “Put
Option Agreement”)
by which each of the Significant Equityholders will sell, and the
Company
will purchase, a put option (the “Put
Option”)
under which the Company may require the Significant Equityholders
to
purchase New Preferred Stock (as defined below) in the Reorganized
Company
(as defined below) in the event that not all of the shares of Additional
Common Stock (as defined below) are subscribed and paid for in full
by the
Equityholders (as defined below) pursuant to the Rights Offering
(as
described below) (after taking into account the Rights (as defined
below),
if any, exercised by the Significant Equityholders). If the Company
exercises the Put Option, and subject to the satisfaction of the
Put
Option Conditions (as defined below), the Company will sell the New
Preferred Stock to each of the Significant Equityholders under the
Put
Option, on a pro rata basis in accordance with each Significant
Equityholder’s pro rata share of the Significant Equityholders Common
Stock or on such other basis as may be agreed among the Significant
Equityholders, communicated in writing and reasonably acceptable
to the
Company, for an aggregate purchase price equal to the Rights Offering
Amount (as defined below) less
the aggregate amount received by the Company as a result of the exercise,
if any, of Rights by the Significant Equityholders and the other
Equityholders. The terms and conditions of the Put Option shall be
more
fully set out in the Put Option Agreement. If issued, the New Preferred
Stock shall be issued on the Effective Date (as defined
below).
|
|
As
consideration for the Put Option, the Company will pay the Significant
Equityholders an aggregate amount of up to $9.5 million in immediately
available funds (the “Put
Option Premium”),
to be allocated among the Significant Equityholders in accordance
with the
terms of the Put Option Agreement and payable in the following manner:
(i)
$2.0 million shall be paid no later than three (3) business days
after the
Bankruptcy Court (as defined below) enters an order approving the
Approval
Motion (as defined below); (ii) $2.5 million shall be paid on the
date
that the Bankruptcy Court enters an order approving a Competing
Transaction (as defined below); (iii) $5.5 million shall be paid
upon the
occurrence of a Termination Event set forth in subsections (g), (h),
(i),
(j), (m) or (n) of the section captioned “Termination Events” below; and
(iv) $7.5 million shall be paid on the Effective Date if the Commitment
Letter (including this Investment Term Sheet) is not otherwise terminated
earlier and remains in full force and effect.
|
|
|
The
Put Option shall expire on the earlier of (i) the Effective Date
and (ii)
February 28, 2007 (the “Put
Option Expiration Date”),
unless terminated or extended as provided herein.
|
|
EQUITY
RIGHTS OFFERING:
|
A
rights offering (the “Rights
Offering”)
shall be made in conjunction with and pursuant to the First Amended
Plan
(as defined below) to generate gross proceeds equal to the Rights
Offering
Amount (as defined below).Pursuant to the First Amended Plan, (i)
each
Common Equityholder shall be offered the Right (as defined below)
to
purchase up to 2.56 shares of Additional Common Stock for each share
of
Existing Common Stock owned by such holder on the Record Date, in
exchange
for a cash payment equal to $2.25 per share of Additional Common
Stock
(the “Additional
Common Stock Purchase Price”)
and (ii) each Preferred Equityholder shall be offered the Right to
purchase up to 255.78 shares of Additional Common Stock for each
share of
Existing Preferred Stock owned by such holder on the Record Date,
in
exchange for a cash payment equal to the Additional Common Stock
Purchase
Price.Each Equityholder will receive such number of Rights that,
if
exercised by such holder, would allow such holder to maintain its
equity
ownership percentage in the Company as of the Record Date, subject
to
dilution as a result of (a) the issuance of any shares of common
stock or
options to purchase Additional Common Stock under the Management
Incentive
Plan and the issuance of any shares of common stock under the Key
Employee
Retention Plan (each as defined in the Plan Term Sheet), and (b)
the
exercise of any employee stock options outstanding on and as of the
Effective Date.The Rights shall not be independently transferable,
but
shall trade together with the Existing Common Stock or Existing Preferred
Stock, as the case may be, through the Record Date.A rights agent
will be
appointed by the Company to facilitate the Rights Offering following
consultation with the Significant Equityholders.Fractional shares
shall
not be issued and no compensation shall be paid in respect of fractional
shares.Unexercised Rights will expire without compensation at the
Expiration Time.
Shares
of Additional Common Stock issued in connection with the Rights Offering
and as a result of the exercise, if any, by the Significant Equityholders
of the Call Option (as defined below) shall be issued on the Effective
Date and the First Amended Plan shall expressly require that the
Rights
Offering close prior to the Effective Date.
|
|
SEC
REGISTRATION:
|
The
Company shall file a registration statement (the “Offering
Registration Statement”)
with the SEC under the Securities Act of 1933, as amended (the
“Securities
Act”),
registering the offering of the Additional Common Stock underlying
the
Rights.
|
|
USES
OF PROCEEDS:
|
The
Reorganized Company shall utilize the proceeds from the sale of Additional
Common Stock and the New Preferred Stock, if any, (a) first, to pay
the
expenses of the Rights Offering and to pay the balance of the Put
Option
Premium that becomes due and payable on the Effective Date and (b)
second,
the net proceeds remaining will be contributed by the Company to
Foamex,
L.P., its operating subsidiary, to fund required payments under the
First
Amended Plan and to fund Foamex L.P.’s working capital requirements on the
Effective Date.
|
|
COVENANTS:
|
The
definitive documents with respect to the transactions contemplated
by this
Investment Term Sheet, including, without limitation, the documents
to be
included in the plan supplement to be filed in connection with the
First
Amended Plan (the “Definitive
Documents”),
shall be entered into pursuant to the First Amended Plan and shall
provide
for affirmative and negative covenants customarily found in agreements
for
similar investments or financings, as well as other covenants reasonably
satisfactory to the Significant Equityholders, in their individual
reasonable discretion, including, without limitation, a covenant
that the
parties agree to treat the Call Option and the Put Option as options
for
U.S. federal income tax purposes.
The
Amended and Restated Certificate of Incorporation of the Reorganized
Company shall include provisions with respect to any “Business
Combination” (as defined in the Company’s current Restated Certificate of
Incorporation) with or into any “Related Person” (as so defined) requiring
that the consideration received by the other shareholders in connection
with such Business Combination (as so defined) is at “fair value” as
determined by the “independent director(s)” (who shall have authority, but
not the obligation, to engage independent counsel and independent
bankers
at the Company’s expense, subject to a budget which shall be reasonably
acceptable to the Reorganized Company’s board of directors, as a whole for
purposes of such determination).
|
|
REPRESENTATIONS
AND WARRANTIES:
|
The
Definitive Documents shall contain representations and warranties
customarily found in agreements for similar investments or financings
and
shall be reasonably satisfactory to the Significant Equityholders
in their
individual reasonable discretion.
|
|
REGISTRATION
RIGHTS:
|
Pursuant
to the First Amended Plan, on the Effective Date the Reorganized
Company
shall enter into a registration rights agreement with each of the
Significant Equityholders (the “Registration
Rights Participants”)
in form and substance reasonably satisfactory to the parties thereto
which
will provide:
(A)
such Registration Rights Participants with two demand registration
rights
and unlimited piggy-back registration rights (provided that (i) no
demand
shall qualify as such unless made by the holders of at least 25%
of the
aggregate number of outstanding shares of Additional Common Stock,
and
unless at least 25% of such aggregate number of outstanding shares
shall
be included to be sold in each registration statement and (ii) no
such
piggyback registration rights shall be applicable with respect to
any
filing by the Reorganized Company of a registration statement on
Forms S-4
or S-8, or any successor forms thereto) with respect to any Additional
Common Stock held by such Registration Rights Participants (including
Additional Common Stock issuable upon exercise of the Call Option
by such
Registration Rights Participants) on customary and reasonable terms;
and
(B)
that (i) at such time as the Reorganized Company is eligible to effect
a
registration on Form S-3 (or any successor form), within sixty (60)
days
after the request of any Registration Rights Participant or group
thereof
which holds at least 25% of the aggregate number of outstanding shares
of
Additional Common Stock, the Reorganized Company shall prepare and
file,
and shall use its reasonable best efforts to have declared effective
as
soon as practicable thereafter, a registration statement under the
Securities Act for the offering on a continuous basis pursuant to
Rule 415
of the Securities Act, of any shares of Additional Common Stock held
by
the Registration Rights Participants (the “Shelf
Registration”);
and (ii) the Reorganized Company shall keep the Shelf Registration
effective for a period ending on the earlier of (a) the date that
is the
two-year anniversary of the date upon which such registration statement
is
declared effective by the SEC, (b) the date such Additional Common
Stock
has been disposed of pursuant to an effective registration statement,
(c)
the date such Additional Common Stock has been disposed of (1) pursuant
to
and in accordance with SEC Rule 144 (or any similar provision then
in
force) under the Securities Act or (2) pursuant to another exemption
from
the registration requirements of the Securities Act pursuant to which
the
Additional Common Stock is thereafter freely transferable without
restriction under the Securities Act, and (d) the date such Additional
Common Stock ceases to be outstanding.
The
Reorganized Company shall pay all fees and expenses for any demand
registration (including, without limitation, the reasonable fees
and
expenses of one special counsel for the Registration Rights Participants).
The managing underwriter of any public offering effected pursuant
to a
demand registration will be selected by the Reorganized Company.
The
selling stockholders shall pay for their respective internal costs
and
expenses related to any piggyback registration in which they participate.
The Registration Rights Agreement shall be reasonably satisfactory
to the
Significant Equityholders in their sole discretion.
|
|
EXPENSES:
|
Upon
approval of the Commitment Letter by the Bankruptcy Court, and so
long as
such Commitment Letter shall continue to be in full force and effect
and
has not been terminated or otherwise expired by its terms, and the
Significant Equityholders are not otherwise in breach of any material
obligation hereunder and under the Commitment Letter, the Company
shall be
obligated to pay the reasonable, documented, out-of-pocket fees and
expenses incurred since June 8, 2006 through the earlier of such
termination or expiration date and the Effective Date, for the
Professionals (as defined below) in connection with the negotiation,
preparation, execution and delivery of the Commitment Letter and
any and
all Definitive Documents, including, without limitation, any such
reasonable fees and expenses incurred in connection with litigation,
contested matters, adversary proceedings, or negotiations necessitated
by
such proceedings, in each case, relating to the Commitment Letter
or the
First Amended Plan, subject to (i) an aggregate monthly cap of $125,000
for reasonable legal fees and expenses (with the excess in any given
month
capable of being carried forward and applied in a subsequent month(s)),
and (ii) the terms of the engagement letter to be executed by the
Company,
the Significant Equityholders and Imperial Capital, LLC (such fees
and
expenses, the “Expenses”);
provided,
however,
that any Expenses that remain unpaid as of the earlier of such termination
or expiration date and the Effective Date, as the case may be, shall
be
paid by the Company no later than thirty (30) days after such termination
or expiration date or the Effective Date, as applicable.
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All
invoices for which reimbursement is sought from the Company shall
be sent
via email and regular mail to the Company, the Company’s counsel, the U.S.
Trustee and counsel for the Official Committee of Unsecured Creditors
appointed in the Company’s chapter 11 cases. The parties shall have ten
(10) calendar days from the delivery of such invoices to object to
the
reasonableness of the amounts requested. If no objections are raised
during the objection period, the Company shall make such payments
without
the need for filing any application with the Bankruptcy Court. If
an
objection is raised and cannot be resolved consensually, the parties
shall
submit such dispute to the Bankruptcy Court for final
resolution.
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CONDITIONS
PRECEDENT TO
PUT
OPTION OBLIGATIONS:
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The
obligations of the Significant Equityholders under the Put Option
shall be
subject to satisfaction of each of the following conditions precedent
(collectively, the “Put
Option Conditions”):
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(a) the
Offering Registration Statement shall have become effective and no
stop
order suspending its effectiveness or any notice objecting to its
use
shall have been issued and no proceeding for such purpose shall have
been
threatened or instituted by the SEC or any state securities commission
or
authority and all of the Rights shall have been issued;
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(b) the
Expiration Time of the Rights Offering shall have passed;
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(c) the
First Amended Plan shall provide that the Company shall sell, and
each of
the Significant Equityholders shall purchase, on or prior to the
Effective
Date, pursuant to and in connection with the First Amended Plan,
on a pro
rata basis in accordance with each Significant Equityholder’s pro rata
share of the Significant Equityholders Common Stock, or on such other
basis as may be agreed among the Significant Equityholders, communicated
in writing and reasonably acceptable to the Company, for an aggregate
purchase price equal to $2.0 million (the “Call
Option Premium”),
an option (the “Call
Option”)
to purchase on the Effective Date, on a pro rata basis in accordance
with
each Significant Equityholder’s pro rata share of the Significant
Equityholders Common Stock, or on such other basis as may be agreed
among
the Significant Equityholders, communicated in writing and reasonably
acceptable to the Company, shares of the Additional Common Stock
at a per
share price equal to the Additional Common Stock Purchase Price for
each
Right that is not subscribed and paid for in full by the Equityholders
as
of the Expiration Time, up to a maximum aggregate purchase price
equal to
the Rights Offering Amount less the aggregate amount received by
the
Company as a result of the exercise, if any, of the Rights by
Equityholders; provided,
however,
that if a Termination Event occurs or the Company agrees to enter
into a
Competing Transaction, the Call Option Premium shall not be
payable;
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(d) the
Definitive Documents shall provide for the following: (i) the Rights
Offering shall expire at least seven (7) business days prior to the
projected Effective Date of the First Amended Plan (the “Projected
Effective Date,”
which date shall be determined jointly by the Debtors and the Significant
Equityholders); (ii) within two (2) business day after the expiration
of
the Rights Offering the Company shall send the Significant Equityholders
and their counsel a written notice setting forth the total proceeds
received through the Rights Offering and any shortfall between the
Rights
Offering Amount and such proceeds received; (iii) the Significant
Equityholders may exercise the Call Option no later than three (3)
business days after receipt of the notice set forth in (ii) above;
and
(iv) (a) if the Significant Equityholders exercise the Call Option,
settlement of the Call Option shall take place on the Effective Date
and
the Put Option shall expire without any further action by any Party
(unless the Significant Equityholders default in the settlement of
the
Call Option) or (b) if the Significant Equityholders do not exercise
the
Call Option, the Call Option shall expire without any further action
by
any Party, and the Company shall have one (1) business day from the
date
of expiration of the Call Option to exercise the Put Option, which
if
exercised, shall settle on the Effective Date.
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(e) the
First Amended Plan shall be in form and substance materially consistent
with the Plan Term Sheet and shall be reasonably satisfactory to
the
Significant Equityholders in their individual reasonable
discretion;
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(f) an
order confirming the First Amended Plan (the “Confirmation
Order”),
in form and substance reasonably satisfactory to the Significant
Equityholders in their individual reasonable discretion, shall have
been
entered and shall not have been stayed or modified or vacated on
appeal;
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(g) from
the date of the Commitment Letter through the Effective Date, there
shall
not have been a Material Adverse Change (as defined below);
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(h) appropriate
legal documentation in connection with the Rights Offering shall
have been
executed and delivered, in form and substance reasonably satisfactory
to
the Significant Equityholders in their individual reasonable discretion,
and the satisfaction of the conditions precedent contained therein
shall
have been satisfied or waived in accordance therewith;
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(i) a
corporate charter, bylaws and other governance documents of the
Reorganized Company shall have been adopted as part of the First
Amended
Plan, in form and substance consistent with the Plan Term Sheet and
this
Investment Term Sheet and in forms reasonably satisfactory to the
Significant Equityholders in their individual reasonable
discretion;
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(j) all
necessary governmental, regulatory and third-party approvals, waivers
and/or consents in connection with the Rights Offering and the First
Amended Plan shall have been obtained and remain in full force and
effect,
and there shall exist no pending claim, action, suit, investigation,
litigation or proceeding in any court or before any arbitrator or
governmental instrumentality, which would prohibit the consummation
of the
transactions contemplated by this Investment Term Sheet;
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(k) no
Termination Event (as defined below) shall have occurred (excluding
a
Termination Event that has been waived as provided for
herein);
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(l)
to the extent not already paid, the Put Option Premium shall have
been
paid;
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(m) all
of
the Company’s representations and warranties set forth in the Commitment
Letter shall have been true and correct as of the date of execution
of the
Commitment Letter and shall be true and correct as of the Effective
Date
as if then made (in each case, without giving effect to any materiality
or
similar qualifier therein), unless the failure of such representations
and
warranties to be true and correct, individually or in the aggregate,
has
not resulted in there being a Material Adverse Change after the execution
of the Commitment Letter; and
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(n) the
Exit Facility (as defined in the Plan Term Sheet), shall be in full
force
and effect; in addition, the lenders under the Exit Facility shall
be
prepared to fund under the Exit Facility on or after the Effective
Date
immediately following the Reorganized Company’s receipt of the proceeds
from the Rights Offering, including, if applicable, any proceeds
from the
Company’s exercise of the Put Option or the Significant Equityholders’
exercise of the Call Option.
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The
foregoing Put Option Conditions can be waived or modified only upon
the
written consent of each of the Significant Equityholders and the
Company;
provided,
however,
that if one or more of the Significant Equityholders (each a “Waiving
Significant Equityholder”)
so consent in writing, then the agreement set forth herein and in
the
Commitment Letter shall continue to be in full force and effect as
between
the Company and each Waiving Significant Equityholder; provided further
such consent shall state that the Waiving Significant Equityholders
assume
the funding obligation of each Significant Equityholder that is not
a
Waiving Significant Equityholder such that the total amount of proceeds
generated from the exercise of the Put Option or the Call Option,
as
applicable, shall be equal to the Rights Offering Amount less the
amount
of proceeds generated by the exercise of Rights under the Rights
Offering.
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TERMINATION
EVENTS:
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“Termination
Event,”
wherever used herein, means any of the following events (whatever
the
reason for such Termination Event and whether it will be voluntary
or
involuntary; provided,
however,
that such event is not the result of action (or inaction) on the
part of
any of the Significant Equityholders):
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(a)
within
three (3) business days of the Company and the Significant Equityholders
executing the Commitment Letter, the Company has not filed a motion
(the
“Approval
Motion”)
seeking Bankruptcy Court approval of the Commitment Letter and the
Company’s payment of the Expenses and the Put Option Premium;
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(b) the
Company has not filed the First Amended Plan and accompanying disclosure
statement (in form and substance reasonably acceptable to the Significant
Equityholders in their individual reasonable discretion, the “Disclosure
Statement”)
on or before November 10, 2006;
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(c) the
Company has not filed the Offering Registration Statement with the
SEC on
or before November 10, 2006;
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(d) the
Bankruptcy Court has not entered an order granting the relief sought
in
the Approval Motion (including the approval of the Company’s payment of
the Expenses and the Put Option Premium as valid and binding obligations
entitled to administrative expense priority) on or before November
30,
2006;
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(e) the
Company does not obtain Bankruptcy Court approval of the Disclosure
Statement on or before December 15, 2006;
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(f) the
Bankruptcy Court does not confirm the First Amended Plan on or before
February 2, 2007;
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(g) the
Effective Date of the First Amended Plan does not occur on or before
February 28, 2007;
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(h) a
trustee, responsible officer, or an examiner with powers beyond the
duty
to investigate and report, as set forth in 11 U.S.C. § 1106(a)(3) and (4),
shall have been appointed under 11 U.S.C. §§ 1104 or 105;
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(i) the
chapter 11 cases shall have been converted to cases under chapter
7 of the
Bankruptcy Code;
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(j) the
Company shall have breached any material provision of the Commitment
Letter, this Investment Term Sheet or the Definitive Documents, written
notice of such breach shall have been given by the Significant
Equityholders and such breach shall not have been cured within two
(2)
business days of the Company’s receipt of such notice;
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(k) the
failure or non-occurrence by the date specified of any Put Option
Condition or any condition precedent in the Commitment
Letter;
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(l) the
Bankruptcy Court shall have entered an order approving a Competing
Transaction;
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(m) the
First Amended Plan is modified to provide for any terms that are
adverse
to the Significant Equityholders (solely in their capacity as Significant
Equityholders and not as Equityholders) or materially inconsistent
with
the terms set forth in the Commitment Letter, this Investment Term
Sheet
or the Plan Term Sheet; and
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(n) after
filing the First Amended Plan, the Company (i) submits or supports
a plan
of reorganization or liquidation that is adverse to the Significant
Equityholders (solely in their capacity as Significant Equityholders
and
not as Equityholders) or materially inconsistent with the terms and
provisions of the Commitment Letter, this Investment Term Sheet or
the
Plan Term Sheet or (ii) moves to withdraw or withdraws the First
Amended
Plan.
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The
foregoing Termination Events are intended solely for the benefit
of the
Significant Equityholders, and can be waived or modified only upon
the
consent of each of the Significant Equityholders, provided,
however,
that if one or more of the Significant Equityholders shall agree
in
writing to be a Waiving Significant Equityholder with respect to
such
Termination Event then the agreement set forth herein and in the
Commitment Letter shall continue to be in full force and effect as
between
the Company and each Waiving Significant Equityholder; provided further
such consent shall state that the Waiving Significant Equityholders
assume
the funding obligation of each Significant Equityholder that is not
a
Waiving Significant Equityholder such that the total amount of proceeds
generated from the exercise of the Put Option or the Call Option,
as
applicable, shall be equal to the Rights Offering Amount less the
amount
of proceeds generated by the exercise of Rights under the Rights
Offering.
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Other
than with respect to the Waiving Significant Equityholders, all provisions
of the Commitment Letter and this Investment Term Sheet shall terminate
automatically without any act of any Significant Equityholders upon
the
occurrence of any of the Termination Events, provided,
however,
that each Significant Equityholder shall be entitled to receive or
retain
any portion of the Put Option Premium (provided such Significant
Equityholders are not otherwise in breach of any material obligation
hereunder and under the Commitment Letter) paid or payable as of
the date
of termination, unless
such Termination Event is caused by such Significant Equityholder.
Notwithstanding
anything to the contrary herein or in the Commitment Letter, during
the
time period between the Company’s acceptance of a Competing Transaction
and the Bankruptcy Court’s entry of an order approving such Competing
Transaction, the Commitment Letter and this Investment Term Sheet
shall
not terminate exceptupon
the occurrence of a Termination Event set forth in subsection (g),
(h) or
(i) of the section captioned “Termination Events” above.
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COMPETING
TRANSACTIONS:
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Notwithstanding
anything to the contrary herein, within three (3) business days of
the
Company’s receipt of an offer or proposal to enter into a Competing
Transaction, the Company shall deliver a detailed notice setting
forth the
terms and conditions of the Competing Transaction to the legal and
financial advisors to the Significant Equityholders. Prior to the
Company’s acceptance of such Competing Transaction, the Company shall
deliver a second notice to the legal and financial advisors to the
Significant Equityholders setting forth the Company’s intent to accept
such Competing Transaction and the terms and conditions of such Competing
Transaction and the Significant Equityholders shall then have three
(3)
business days from their advisors’ receipt of such notice to make an offer
(the “Significant
Equityholders Revised Offer”)
revising the transactions contemplated herein. Upon receipt of a
Significant Equityholders Revised Offer, the Board of Directors of
the
Company (in consultation with its financial advisors and outside
legal
counsel) shall evaluate the Competing Transaction and the Significant
Equityholders Revised Offer, if any, and choose the one that in its
sole
business judgment constitutes the higher or best offer or is otherwise
more favorable to the Company and its creditors and stockholders.
If after
such evaluation, the board determines to pursue the Competing Transaction
(or if the Significant Equityholders fail to make a Significant
Equityholders Revised Offer), the Company shall send a written notice
(the
“Competing
Transaction Acceptance Notice”)
of its determination to the Significant Equityholders no later than
one
(1) day after making such determination.
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DAMAGES:
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Except
in the case of fraud, the Significant Equityholders’ rights to payment of
the Put Option Premium (to the extent due and payable) and any accrued
and
unpaid Expenses (subject to the limitations set forth herein) shall
constitute the sole and liquidated damages available to the Significant
Equityholders in the event the transactions contemplated herein and
in the
Commitment Letter are not consummated; provided,
however,
that nothing herein shall be construed to limit any indemnity obligations
that the Company has as set forth in the Commitment Letter.
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GOVERNING
LAW:
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All
documentation in connection with the transactions contemplated by
this
Investment Term Sheet shall be governed by the laws of the State
of New
York.
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AMENDMENT:
|
No
material amendment of the Commitment Letter, this Investment Term
Sheet or
the First Amended Plan shall be effective without the prior written
consent of each of the Significant Equityholders.
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DEFINITIONS:
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“Additional
Common Stock”
means the common stock in Reorganized Foamex International to be
issued on
the Effective Date to (i) Equityholders under the First Amended Plan
in
connection with Rights that are exercised as part of the Rights Offering,
and (ii) Significant Equityholders under the First Amended Plan in
connection with the Call Option, if exercised. For the avoidance
of doubt,
the Additional Common Stock that will be outstanding on or after
the
Effective Date will be in addition to, and will be fungible with,
the
Existing Common Stock on the Effective Date (except as limited by
applicable securities law).
“Bankruptcy
Court”
means the United States Bankruptcy Court for the District of Delaware
or
such other court of competent jurisdiction.
“Common
Equityholder”
means a holder of Existing Common Stock as of the Record
Date.
“Competing
Transaction”
means an offer with respect to (i) an equity financing or sale (to
the
extent any such proposal, offer or bid, relates to the acquisition
of 25%
or more of the Reorganized Company’s common stock), (ii) a financing or
refinancing of all or substantially all of the Company’s or its
subsidiaries’ debt (other than the Exit Facility or a similar substitute
exit financing facility), or (iii) a sale of all or substantially
all of
the Company’s business or assets; provided that
the Significant Equityholders are not in breach of any of material
obligation under the Commitment Letter.
“Effective
Date”
means the date that all conditions to the effectiveness of the First
Amended Plan have been satisfied or waived as provided herein, which
conditions shall be reasonably satisfactory to the Significant
Equityholders in their individual reasonable discretion.
“Equityholder”
means a holder, as of the Record Date, of Existing Common Stock or
Existing Preferred Stock.
“Existing
Common Stock”
means the outstanding common stock in the Company immediately prior
to the
Effective Date.
“Existing
Preferred Stock”
means the outstanding preferred stock in the Company immediately
prior to
the Effective Date.
“Expiration
Time”
means 5:00 p.m. on the date that the Rights Offering expires.
“First
Amended Plan”
shall have the meaning ascribed to it in the Plan Term Sheet attached
as
Exhibit B to the Commitment Letter.
“Material
Adverse Change”
means any material adverse change, or any development that could
reasonably be expected to result in a material adverse change,
individually or when taken together with any other such changes or
developments, in the financial condition, business, results of operations,
assets and liabilities of the Company and its subsidiaries, taken
as a
whole, whether or not arising from transactions in the ordinary course
of
business, it being understood that a material adverse change resulting
from a general economic downturn or other event that does not affect
the
Company disproportionately to other companies (or their subsidiaries
or
divisions) in the foam industry shall not be deemed to be a Material
Adverse Change.
“New
Preferred Stock”
means preferred stock in the Reorganized Company on terms and conditions
specified in an exhibit to the Put Option Agreement. Such New Preferred
Stock shall be structured to qualify as “plain vanilla preferred stock”
for U.S. federal income tax purposes under Section 1504(a)(4) of
the
United States Tax Code.
“Preferred
Equityholder”
means a holder of Existing Preferred Stock as of the Record
Date.
“Professionals”
means (i) Xxxxxx Xxxxxxxx Xxxxx & Xxxxxxxx LLP and Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, as legal advisors to the Significant
Equityholders, (ii) Imperial Capital LLC, as the financial advisor
to the
Significant Equityholders, (iii) Morris, Nichols, Arsht & Xxxxxxx LLP,
as local counsel to the Significant Equityholders, and (iv) BDO Xxxxxxx,
LLP and Nexant, Inc., as additional advisors to the Significant
Equityholders.
“Record
Date”
means a date that is three (3) business days prior to the Rights
Offering
Commencement Date, whereby the rights are granted to Equityholders
of
record on such date.
“Reorganized
Company”
means the Company after the Effective Date.
“Right”
means the right to purchase Additional Common Stock pursuant to the
Rights
Offering as contemplated herein.
“Rights
Offering Amount”
means an amount equal to $150.0 million; provided,
however,
that in no event shall the Company’s cash on its consolidated balance
sheet as of the Effective Date (after giving effect to the payments
and
other transactions contemplated by the First Amended Plan) exceed
$7.5
million on and as of the second business day after the Effective
Date.
“Rights
Offering Commencement Date”
means a date, after the SEC declares the Offering Registration Statement
effective on which the Rights Offering shall commence and the Rights
shall
become exercisable, which date shall be selected by the Company and
shall
be reasonably acceptable to the Significant Equityholders in their
individual reasonable discretion.
“SEC”
means the United States Securities and Exchange Commission.
“Significant
Equityholders Common Stock”
means the aggregate amount of Existing Common Stock (assuming the
conversion of the Existing Preferred Stock) owned by each of the
Significant Equityholders, when taken together, on the Record
Date.
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EXHIBIT
B
Plan
Term Sheet
THIS
TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY
SECURITIES
OR SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN.
SUCH
OFFER OR SOLICITATION ONLY WILL BE MADE IN COMPLIANCE
WITH
ALL
APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
FOAMEX
INTERNATIONAL INC.
TERM
SHEET FOR PROPOSED CHAPTER 11 PLAN OF REORGANIZATION
This
term
sheet (the “Plan
Term
Sheet”),
which
is part of a commitment letter, dated October 13, 2006 (the “Commitment
Letter”),
addressed to Foamex International Inc. (“Foamex
International”)
by the
Significant Equityholders (as defined in the Investment Term Sheet) and is
subject to the terms and conditions of the Commitment Letter, describes the
principal terms of a proposed restructuring of Foamex International, together
with its affiliates and subsidiaries that are debtors under chapter 11 of title
11 of the United States Code, 11 U.S.C. §§ 101 et seq.
(the
“Bankruptcy
Code”)
(collectively, the “Debtors,”
or
the
“Company”).
Capitalized terms that are not otherwise defined herein shall have the meanings
ascribed to them in the Investment Term Sheet that is attached as Exhibit A
to
the Commitment Letter.
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PLAN
PROPONENT:
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The
Debtors
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PLAN
OF REORGANIZATION:
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The
Debtors shall file a plan of reorganization (the “First
Amended Plan”)
and related disclosure statement (the “Disclosure
Statement”)
that incorporate, and are consistent with, the terms of the Commitment
Letter, the Investment Term Sheet and this Plan Term Sheet.
The
First Amended Plan and the Disclosure Statement shall be in form
and
substance reasonably acceptable to the Significant Equityholders
in their
individual reasonable discretion and may not be amended to adversely
affect the Significant Equityholders.
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The
First Amended Plan shall address, among other things, the Debtors’ (i)
obligations under the DIP Financing Facilities among Foamex, as borrower,
the lenders party thereto (the “DIP
Lenders”),
including Bank of America, N.A., as agent, and Silver Point Finance,
LLC,
as agent (as amended, collectively, the “DIP
Facility”);
(ii) obligations under the Indenture, dated as of March 25, 2002,
among
Foamex and U.S. Bank National Association, as trustee, relating to
the
issuance of the Series A and Series B 10-3/4% Senior Secured Notes
of
Foamex due 2009 (the “Senior
Secured Notes”);
(iii) obligations under the Indenture, dated as of June 12, 1997,
between
Foamex and the Bank of New York, as trustee, relating to the issuance
of
the 9-7/8% Senior Subordinated Notes due 2007 (the “2007
Senior Subordinated Notes”);
(iv) obligations under the Indenture, dated as of December 23, 1997,
between Foamex and the Bank of New York, as trustee, relating to
the
issuance of the 13-1/2% Senior Subordinated Notes due 2005 (the
“2005
Senior Subordinated Notes,”
and together with the 2007 Senior Subordinated Notes, collectively,
the
“Senior
Subordinated Notes”);
(v) other obligations; and (vi) equity securities including options,
warrants and rights related thereto.
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PLAN
FUNDING:
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Foamex
International shall effectuate a Rights Offering for Additional Common
Stock pursuant to the First Amended Plan as contemplated by the Investment
Term Sheet.
In
addition, the Reorganized Company shall enter into an exit facility(ies)
upon terms substantially similar to those contained in the draft
commitment letter and the fee letter delivered to the Significant
Equityholders (as executed, the “Exit
Facility Commitment Letter”)
and their legal and financial advisors prior to the Significant
Equityholders and Foamex International’s execution of the Commitment
Letter in connection with this Plan Term Sheet (the “Exit
Facility”).
The
First Amended Plan will be funded with cash from operations, borrowings
under the Exit Facility and the proceeds of the Rights Offering for
Additional Common Stock or the exercise of the Put Option or the
Call
Option, as the case may be.
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DEFINITIVE
DOCUMENTS:
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The
transactions described in this Plan Term Sheet are subject in all
respects
to, among other things, definitive documentation, including the First
Amended Plan and the documents to be included in the plan supplement
to
the First Amended Plan and the Disclosure Statement, all of which
shall be
in form and substance reasonably satisfactory to the Significant
Equityholders in their individual reasonable discretion.
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TREATMENT
OF CLAIMS AND INTERESTS:
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Administrative
Expense Claims
|
The
allowed administrative expense claims against Foamex shall be unimpaired.
Except with respect to administrative expense claims that are professional
fee claims, each holder of an allowed administrative expense claim
shall
receive (a) cash in an amount equal to the amount of such allowed
administrative expense claim on the later of the initial distribution
date
under the First Amended Plan and the date such administrative expense
claim becomes an allowed administrative expense claim, or as soon
thereafter as is practicable, or (b) such other treatment as the
Debtors
and such holder shall have agreed upon; provided,
however,
that allowed administrative expense claims that arise in the ordinary
course of the Debtors’ business shall be paid in full in the ordinary
course of business in accordance with the terms and subject to the
conditions of any agreements governing, instruments evidencing, or
other
documents relating to, such transactions.
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Priority
Tax Claims
|
The
allowed priority tax claims shall be unimpaired. Except to the extent
that
a holder of an allowed priority tax claim agrees to a different treatment,
each holder of an allowed priority tax claim shall receive, at the
sole
option of the Reorganized Debtors, (a) cash in an amount equal to
such
allowed priority tax claim plus Post-Petition Interest on the later
of the
initial distribution date under the First Amended Plan and the date
such
priority tax claim becomes an allowed priority tax claim, or as soon
thereafter as is practicable, or (b) over a period through the sixth
anniversary of the date of assessment of such allowed priority tax
claim,
deferred cash payments in an aggregate amount equal to such allowed
priority tax claim (plus Post-Petition Interest) plus interest on
such
aggregate amount over such period at the same rate as such Post-Petition
Interest. All allowed priority tax claims which are not due and payable
on
or before the Effective Date shall be paid in the ordinary course
of
business in accordance with the terms thereof.
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DIP
Financing Claims
|
The
allowed claims under the DIP Facility shall be unimpaired. Except
to the
extent that the holders of claims under the DIP Facility and the
Debtors
agree to a different treatment, which shall be reasonably satisfactory
to
the Substantial Equityholders, the holders of the DIP financing claims,
or
their designees, shall receive payment in full in cash of all DIP
financing claims in full and final satisfaction thereof other than
the
obligations under the indemnity and other provisions of the DIP credit
facilities that by their terms shall survive the termination of the
DIP
credit facilities and confirmation of the First Amended Plan.
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Other
Priority Claims
|
The
allowed other priority claims shall be unimpaired. Except to the
extent
that a holder of an allowed other priority claim and the Debtors
agree to
a different treatment, which shall be reasonably satisfactory to
the
Significant Equityholders, each holder of an allowed other priority
claim
shall receive, in full and final satisfaction of such claim, payment
in
full in cash in an amount equal to such allowed other priority claim
plus
Post-Petition Interest on or as soon as practicable after the later
of the
initial distribution date under the First Amended Plan and the date
when
such other priority claim becomes an allowed other priority claim,
provided,
however,
that other priority claims that arise in the Debtors’ ordinary course of
business and which are not due and payable on or before the Effective
Date
shall be paid in the ordinary course of business in accordance with
the
terms thereof.
|
|
Other
Secured Claims
|
Allowed
other secured claims (including outstanding industrial revenue bonds)
shall be unimpaired. Except to the extent that a holder of an allowed
other secured claim and the Debtors agree to a different treatment,
which
shall be reasonably satisfactory to the Substantial Equityholders,
at the
sole option of the Debtors, in full and final satisfaction of such
claim,
(i) each allowed other secured claim shall be reinstated and rendered
unimpaired in accordance with section 1124(2) of the Bankruptcy Code,
notwithstanding any contractual provision or applicable nonbankruptcy
law
that entitles the holder of an allowed other secured claim to demand
or to
receive payment of such allowed other secured claim prior to the
stated
maturity of such allowed other secured claim from and after the occurrence
of a default, (ii) each holder of an allowed other secured claim
shall
receive cash in an amount equal to such allowed other secured claim
plus
Post-Petition Interest, in full and complete satisfaction of such
allowed
other secured claim on the later of the initial distribution date
under
the First Amended Plan and the date such other secured claim becomes
an
allowed other secured claim, or as soon thereafter as is practicable,
or
(iii) each holder of an allowed other secured claim shall receive
the
collateral securing its allowed other secured claim plus Post-Petition
Interest in full and complete satisfaction of such allowed other
secured
claim on the later of the initial distribution date under the First
Amended Plan and the date such other secured claim becomes an allowed
other secured claim, or as soon thereafter as is practicable.
|
|
Senior
Secured Note Claims
|
Allowed
Senior Secured Note claims shall be unimpaired. With respect to the
Senior
Secured Notes, the Company and the Significant Equityholders (other
than
Xxxxxxx, Xxxxx & Co.) agree that the First Amended Plan shall provide
that the Senior Secured Note claims shall be allowed in the aggregate
amount of $312,452,083.33 plus Post-Petition Interest, but excluding
any
call premiums or any prepayment penalties. Each holder of an allowed
Senior Secured Note claim shall be paid in full in cash on the initial
distribution date under the First Amended Plan, or as soon thereafter
as
is practicable.
|
|
Senior
Subordinated Note Claims
|
Allowed
Senior Subordinated Note claims shall be unimpaired. The Senior
Subordinated Note claims shall be allowed in the aggregate amount
of
$208,150,130.55. Each holder of an allowed Senior Subordinated Note
claim
shall paid in full in cash on the initial distribution date under
the
First Amended Plan, together with Post-Petition Interest, or as soon
thereafter as is practicable.
|
|
General
Unsecured Claims
|
Allowed
general unsecured claims shall be unimpaired. Each holder of an allowed
general unsecured claim (which shall not include Unliquidated Claims)
shall be paid in full in cash on the later of the initial distribution
date, or as soon thereafter as is practicable under the First Amended
Plan
and the date such general unsecured claim is allowed plus Post-Petition
Interest. To the extent insurance is available to satisfy an allowed
general unsecured claim, such allowed general unsecured claim shall
be
paid in the ordinary course of the Reorganized Debtors’ business to the
extent of such insurance, without need for Court approval, at such
time as
such claim becomes liquidated and proceeds of the insurance therefor
become available. The Debtors shall not establish any disputed claims
reserve for payment of general unsecured claims.
|
|
Unliquidated
Claims
|
Holders
of Unliquidated Claims shall not be impaired. All Unliquidated Claims,
solely to the extent and on the basis set forth in a timely and validly
filed proof of claim, shall be liquidated, determined and satisfied
in the
ordinary course of business by the Reorganized Debtors, without need
for
Court approval, including, where applicable, through access to available
insurance. The Debtors shall not establish any disputed claims reserve
for
payment of Unliquidated Claims.
|
|
Existing
Preferred Stock
|
The
Existing Preferred Stock in Foamex International shall be impaired.
Each
share of preferred stock in Foamex International to the extent still
outstanding shall be converted into 100 shares of Additional Common
Stock
on the Effective Date and shall receive the treatment accorded to
the
holders of Existing Common Stock under the First Amended
Plan.
|
|
Existing
Common Stock
|
The
Existing Common Stock in Foamex International shall be
impaired.
Existing
Common Stock in Foamex International shall remain outstanding after
the
Effective Date, subject to dilution as a result of the issuance,
if any,
of additional shares of common stock pursuant to the (a) Rights Offering,
including shares issued to the Significant Equityholders under the
Call
Option, if exercised, (b) the Management Incentive Plan, (c) the
Key
Employee Retention Plan and (d) the exercise of any employee stock
options
outstanding on and as of the Effective Date.
The
Company and the Reorganized Company will use its reasonable best
efforts
to maintain one or more market makers for its common stock, who will
facilitate trading of the common stock on the OTC Bulletin Board
(the
“pink sheets”).
|
|
Other
Common Equity Interests in Foamex International
|
The
allowed other common equity interests in Foamex International, including
options, warrants and rights related to the Debtor’s equity interests,
shall be unimpaired and shall remain outstanding after the Effective
Date.
|
|
Intercompany
Claims
|
Intercompany
claims shall be unimpaired and shall be reinstated upon the Effective
Date.
|
|
Other
Equity Interests in Surviving Debtor Subsidiaries
|
Except
as otherwise provided for in the First Amended Plan, all other equity
interests in the subsidiaries of Foamex International and Foamex
L.P.
shall be unimpaired.
|
|
SEC
REGISTRATION:
|
The
Rights Offering shall be offered pursuant to the Offering Registration
Statement, filed with the SEC, in connection with and pursuant to
the
First Amended Plan.
|
|
CONDITIONS
TO CONFIRMATION
&
EFFECTIVE DATE:
|
The
First Amended Plan shall contain various conditions precedent to
confirmation and to the Effective Date that must be satisfied or
waived,
which conditions shall include and be consistent with the conditions
set
forth in the Investment Term Sheet.
Such
conditions to the Effective Date shall include, without limitation,
the
following:
|
|
(a) the
First Amended Plan shall be in form and substance consistent with
the
Commitment Letter, the Investment Term Sheet and this Plan Term Sheet,
and
shall be reasonably satisfactory to the Significant Equityholders
in their
individual reasonable discretion;
|
|
|
(b) an
order confirming the First Amended Plan, in form and substance reasonably
satisfactory to the Significant Equityholders in their individual
reasonable discretion, shall have been entered and shall not have
been
stayed or modified or vacated on appeal; and
|
|
|
(c) the
Effective Date of the First Amended Plan shall have occurred on or
before
February 28, 2007.
|
|
|
BOARD
REPRESENTATION:
|
The
Significant Equityholders shall have the right to nominate four (4)
members of the Reorganized Company’s board of directors. In addition to
the Significant Equityholders’ four (4) nominees, there shall be one (1)
independent director. The Reorganized Company’s chief executive officer
and its general counsel shall also serve on the board of directors
(the
“Board
of Directors”);
provided that
if
stock in the Reorganized Company is listed on a national securities
exchange, the number of directors and/or composition of the Board
of
Directors may be revised as required under the applicable rules of
the
relevant stock exchange.
Subject
to the Reorganized Company’s by-laws relating to the filling of vacancies,
if any, on the Board of Directors, the members of the Board of Directors
as constituted on the Effective Date will continue to serve at least
until
the first annual meeting of stockholders after the Effective Date,
which
meeting shall not take place until at least 12 months after the Effective
Date.
|
|
REORGANIZED
DEBTORS'
SENIOR
MANAGEMENT:
|
The
officers of the Reorganized Company shall be substantially the same
as the
officers of the Debtors on the date of the Commitment Letter. Xxxxxxx
X.
Xxxxx shall be retained as the Chief Executive Officer and President
of
Reorganized Foamex International.
The
Reorganized Debtors’ officers shall serve in accordance with any
employment agreement with the Reorganized Debtors and applicable
nonbankruptcy law, as the case may be.
|
|
MANAGEMENT
INCENTIVE PLAN:
|
The
First Amended Plan shall provide for a management incentive plan
(the
“Management
Incentive Plan”),
which shall include, among other things, an allocation of up to 10%
of the
fully diluted common stock outstanding on the Effective Date to be
distributed as determined by the Reorganized Company’s board of
directors.
|
|
DEREGISTRATION:
|
Foamex
International and the Reorganized Company shall take all necessary
steps
to qualify to cease filing public reports with the SEC as soon as
legally
practicable following the Effective Date.
|
|
POST-EFFECTIVE
DATE GOVERNANCE:
|
The
First Amended Plan shall provide that (i) the Reorganized Debtors
shall
enter into such agreements and amend their corporate governance documents
to the extent necessary to implement the terms and conditions of
the
Commitment Letter and the First Amended Plan; and (ii) on and as
of the
Effective Date, the Rights Agreement between Foamex International
Inc. and
Mellon Investor Services LLC, dated as of August 5, 2004, and amended
thereafter, shall be terminated.
|
|
MINORITY
SHAREHOLDER PROTECTIONS:
|
The
Amended and Restated Certificate of Incorporation of the Reorganized
Company shall include provisions with respect to any “Business
Combination” (as defined in the Company’s current Restated Certificate of
Incorporation) with or into any “Related Person” (as so defined) requiring
that the consideration received by the other shareholders in connection
with such Business Combination (as so defined) is at “fair value” as
determined by the “unrelated director(s)” (who shall have authority, but
not the obligation, to engage independent counsel and independent
bankers
at the Company’s expense, subject to a budget which shall be reasonably
acceptable to the Reorganized Company’s board of directors, as a whole for
purposes of such determination).
|
|
ADDITIONAL
PROVISIONS:
|
The
First Amended Plan shall contain other provisions customarily found
in
other similar plans of reorganization, as are reasonably acceptable
to the
Significant Equityholders in their individual reasonable
discretion.
|
|
DEFINITIONS:
|
|
|
Post-Petition
Interest
|
“Postpetition
Interest”
means with respect to:
(a)
the Senior Secured Note Claims, accrued and unpaid interest (including
interest on interest that is due and owing and unpaid, compounded
semi-annually on the semi-annual interest payment dates) pursuant
to the
Senior Secured Notes Indenture from the Petition Date through the
Effective Date at the applicable contractual rate;
(b)
the 2005 Senior Subordinated Note Claims, accrued and unpaid interest
pursuant to the 2005 Senior Subordinated Notes Indenture from the
Petition
Date through the Effective Date at the applicable contractual
rate;
(c)
the 2007 Senior Subordinated Note Claims, accrued and unpaid interest
(including interest on interest that is due and owing and unpaid,
compounded semi-annually on the semi-annual interest payment dates)
pursuant to the 2007 Senior Subordinated Notes Indenture from the
Petition
Date through the Effective Date at the applicable contractual
rate;
(d)
other secured claims, interest accruing on such claims from the Petition
Date through the Effective Date at the rate set forth in the contract
or
other applicable document giving rise to such claims (to the extent
lawful) or, if the applicable instrument does not specify a rate
of
interest, at the federal judgment rate as provided for in 28 U.S.C.
§ 1961
as in effect on the Petition Date;
(e)
priority tax claims, (i) with respect to federal taxes, at a fixed
annual
rate equal to the federal statutory rate as provided in 26 U.S.C.
§ 6621;
and (ii) with respect to state and local taxes, at the prime lending
rate
of interest as in effect for the period to which the priority tax
claim
pertains; and
(f)
general unsecured claims, interest, accruing from the Petition Date
through the Effective Date at the federal judgment rate as provided
for in
28 U.S.C. § 1961 as in effect on the Petition Date; provided,
however,
that the First Amended Plan shall provide procedures under which
holders
of allowed unsecured claims may seek payment of interest at an otherwise
legally required rate.
For
the avoidance of doubt, except as required under applicable non-bankruptcy
law, Post-Petition Interest will not be paid on the following allowed
claims: administrative expense claims, cure claims, fee claims or
Unliquidated Claims.
|
|
“Unliquidated
Claim”
means a timely and validly filed proof of claim, disputed by the
Debtors,
asserting an unliquidated or contingent unsecured claim (which claim
numbers shall be set forth in a schedule attached to the First Amended
Plan) against one of the Debtors, solely to the extent and on the
basis
set forth in the proof of claim, and to the extent such claim has
not been
disallowed and remains unliquidated, disputed and/or contingent on
and as
of the Effective Date unless such claim has been disallowed by the
Bankruptcy Court.
|
|
|
“Reorganized
Debtors”
means, collectively, the Debtors after the Effective Date.
|
EXHIBIT
C
Put
Option Agreement
THIS
PUT
OPTION AGREEMENT (this “Agreement”)
is
made and entered into as of the [ ] day of _________, 2006, by and between
Foamex International Inc., a Delaware corporation (the “Company”),
and
each of the parties set forth on the signature page hereto (collectively, the
“Significant
Equityholders”).
WHEREAS,
the
Company and the Significant Equityholders have entered into an equity commitment
agreement, dated October 13, 2006 (the “Commitment
Agreement”),
which
has attached thereto as Exhibit A, the Investment Term Sheet, and as Exhibit
B,
the First Amended Plan Term Sheet;
WHEREAS,
the
Company has filed the First Amended Plan with the Bankruptcy Court (as
defined in the Investment Term Sheet)
incorporating the terms and conditions of the Investment Term Sheet and the
Plan
Term Sheet;
WHEREAS,
as
set forth in the Investment Term Sheet, the Company plans to distribute to
holders of its common stock, par value $0.01 per share (the “Common
Stock”)
and
preferred stock, rights to purchase shares of Common Stock upon its emergence
from chapter 11 of the United States Bankruptcy Code (the “Rights”);
WHEREAS,
in
connection with the consummation of the First Amended Plan, the proceeds of
the
Rights Offering (as defined in the Investment Term Sheet), estimated to be
approximately $150.0 million (the “Rights
Offering Amount”),
will
be used to provide funding for the Company’s required payments under or in
connection with the First Amended Plan;
WHEREAS,
in
the event that the aggregate gross proceeds received by the Company as a result
of the exercise, if any, of Rights does not raise all of the Rights Offering
Amount, the funds comprising the shortfall will be raised by the Company either
pursuant to (i) the Significant Equityholders’ exercise of the Call Option (as
defined in the Investment Term Sheet) to be provided for pursuant to the First
Amended Plan, subject to the terms and conditions of the Call Option, or (ii)
the Company’s exercise of the Put Option (as defined below), subject to the
terms and conditions thereof, as contemplated by the Investment Term Sheet
and
the First Amended Plan; and
WHEREAS,
each
of the Significant Equityholders desires to sell to the Company pursuant to
the
Put Option, and the Company desires to purchase from each of the Significant
Equityholders, its Pro Rata Share (as defined below) of the right to put shares
of Series C Preferred Stock of the Company having the terms set forth in the
term sheet attached hereto as Annex
A
(the
“Preferred
Stock”),
with
an aggregate purchase price and stated value equal to the difference between
the
Rights Offering Amount and the aggregate gross proceeds actually received by
the
Company as a result of the exercise, if any, of Rights (the “Put
Amount”).
NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter
set forth and other good and valuable consideration the receipt and sufficiency
of
which
are
hereby acknowledged, the Company and each Significant Equityholder agrees,
severally and not jointly, as follows:
ARTICLE
I
OPTION
TO REQUIRE PURCHASE
1.1 Grant
of Option.
(a)
Each Significant Equityholder hereby grants to the Company an option (the
“Put
Option”)
to
require such Significant Equityholder to purchase its Pro Rata Share of shares
of the Preferred Stock. The aggregate purchase price and aggregate stated value
of Preferred Stock to be issued pursuant to exercise of the Put Option shall
be
equal to the Put Amount (such shares of the Preferred Stock, the “Shares”).
Such
purchase shall be upon and subject to the terms, covenants and conditions set
forth herein.
(b) Upon
the
exercise of the Put Option by the Company, the Company agrees to sell, and
each
of the Significant Equityholders agrees to purchase, upon and subject to the
terms, covenants and conditions set forth herein, its Pro Rata Share of the
Shares.
(c) As
used
herein, the “Pro
Rata Share”
of
a
Significant Equityholder shall be either (i) the percentage of the number of
Rights to be received by all Significant Equityholders that are to be received
by such Significant Equityholder or (ii) such other percentage as may be agreed
among the Significant Equityholders, which percentage shall be communicated
in
writing to the Company by the Significant Equityholders in accordance with
Section 4.2 hereof and be reasonably acceptable to the Company.
1.2. Term
and Exercise Period.
The
Company may only exercise the Put Option during the time between the expiration
of the Call Option if it has not been exercised and one business day prior
to
the earlier of the Effective Date (as defined in the Investment Term Sheet)
and
February 28, 2007 (the “Exercise
Period”).
If
the Company shall not have exercised the Put Option during the Exercise Period,
the Put Option shall automatically terminate without any further action by
either the Company or the Significant Equityholders, and, subject to Section
3.2(c) hereof, neither the Company nor any of the Significant Equityholders
shall have any further rights, duties or obligations hereunder.
1.3 Procedure
to Exercise Option.
(a) To
exercise the Put Option during the Exercise Period, the Company shall deliver
a
written notice in accordance with Section 4.2 hereof in the form attached hereto
as Annex B (an “Exercise
Notice”)
to
each Significant Equityholder, which Exercise Notice shall state that the
Company is thereby exercising the Put Option and shall state that the date
for
the closing of the exercise of the Put Option (the “Closing
Date”)
shall
be the Effective Date.
(b) Upon
exercise
of the Put Option, this Agreement shall become a contract for the sale of the
Shares upon all of the terms, covenants and conditions as herein set forth,
with
the names to be listed on each certificate evidencing the Shares to be those
set
forth in Annex C hereto, as applicable, unless a Significant Equityholder shall
have transmitted a notice to the Company in accordance with Section 4.2 hereof
specifying different information to be used in respect of the certificates
relating to it.
(c) If
the Put
Option is exercised, on the Closing Date, the Company shall deliver the Shares
to the Significant Equityholders against payment by the respective Significant
Equityholders of the purchase price for their respective Shares by wire transfer
of immediately available funds to the account designated by the Company in
the
Exercise Notice.
ARTICLE
II
PUT
OPTION PREMIUM
2.1 Put
Option Premium.
The
Company will pay, by wire transfer of immediately available funds to the
accounts designated by the Significant Equityholders in accordance with Section
4.2 hereof, the following amounts to the Significant Equityholders (such
amounts, collectively, the “Put
Option Premium”):
|
(a)
|
$2.0
million shall be paid no later than three (3) business days after
the
Bankruptcy Court (as defined in the Investment Term Sheet) enters
an order
approving the Approval Motion (as defined in the Investment Term
Sheet);
|
|
|
(b)
|
$2.5
million shall be paid on the date that the Bankruptcy Court enters
an
order approving a Competing Transaction;
|
|
|
(c)
|
$5.5
million shall be paid upon the occurrence of any of the Termination
Events
set forth in subsections (g), (h), (i), (j), (m) or (n) of the section
captioned “Termination Events” in the Investment Term Sheet;
and
|
|
|
(d)
|
$7.5
million shall be paid on the Effective Date if the Commitment Letter
(including the Investment Term Sheet) is not otherwise terminated
earlier
and remains in full force and effect.
|
Each
payment shall be made to the respective accounts of the Significant
Equityholders in the same proportion as their Pro Rata Shares.
ARTICLE
III
CONDITIONS
PRECEDENT TO THE SIGNIFICANT EQUITYHOLDERS’ OBLIGATIONS
3.1 Conditions
to the Significant Equityholders’ Obligations.
(a) The
Significant Equityholders’ obligations hereunder are subject to satisfaction or
waiver of the Put Option Conditions (as defined in the Investment Term
Sheet).
(a) The
Put
Option Conditions may be waived or modified only upon the written consent of
each of the Significant Equityholders and the Company; provided,
however,
that if
one or more of the Significant Equityholders (each a “Waiving
Significant Equityholder”)
so
consent in writing, then this Agreement shall continue to be in full force
and
effect as between the Company and each Waiving Significant Equityholder;
provided further
such
consent shall state that the Waiving Significant Equityholders assume the
funding obligation of each Significant Equityholder that is not a Waiving
Significant Equityholder such that the total amount of proceeds generated from
the exercise of the Put Option or the Call Option, as applicable, shall be
equal
to the Rights Offering Amount less the amount of proceeds generated by the
exercise of Rights under the Rights Offering.
3.2 Termination.
(a)
This Agreement shall terminate automatically without any act of any Significant
Equityholders upon the occurrence of any of the Termination Events (as defined
in the Rights Offering Term Sheet).
(b) The
Termination Events are intended solely for the benefit of the Significant
Equityholders, and can be waived or modified only upon the consent of each
of
the Significant Equityholders, provided,
however,
that if
one or more of the Significant Equityholders shall agree in writing to be a
Waiving Significant Equityholder with respect to such Termination Event then
this Agreement shall continue to be in full force and effect as between the
Company and each Waiving Significant Equityholder; provided furthersuch
consent shall state that the Waiving Significant Equityholders assume the
funding obligation of each Significant Equityholder that is not a Waiving
Significant Equityholder such that the total amount of proceeds generated from
the exercise of the Put Option or the Call Option, as applicable, shall be
equal
to the Rights Offering Amount less the amount of proceeds generated by the
exercise of Rights under the Rights Offering.
(c) Notwithstanding
any
other provision of this Agreement to the contrary, each Significant Equityholder
shall be entitled to retain or receive any portion of the Put Option Premium
(provided such Significant Equityholder is not otherwise in breach of any of
its
material obligations under the Commitment Letter) paid or payable as of the
date
of termination, unless such Termination Event is caused by such Significant
Equityholder.
(d) Notwithstanding
any
other provision of this Agreement to the contrary, upon the Significant
Equityholders’ exercise of the Call Option and purchase of Additional Common
Stock pursuant to the Call Option, this Agreement shall terminate automatically,
and any exercise of the Put Option shall be cancelled automatically, without
any
further action by either the Company or any Significant Equityholder, and,
subject to Section 3.2(c) hereof, neither the Company nor any of the Significant
Equityholders shall have any further rights, duties or obligations hereunder,
including, for the avoidance of doubt, any obligation on the part of the Company
to issue, or the Significant Equityholders to acquire, New Preferred
Stock.
ARTICLE
IV
MISCELLANEOUS
4.1 Captions.
The
captions, headings and arrangements used in this Agreement are for convenience
only and do not in any way affect, limit, amplify or modify the terms and
provisions hereof.
4.2 Notices.
Any
notice, request, demand, instruction or other document to be given or served
hereunder or under any document or instrument executed pursuant thereto shall
be
in writing and shall be delivered personally by a receipt requested therefor,
by
electronic mail (with a return receipt obtained), by facsimile transmission
(with a delivery confirmation obtained) or sent by a recognized overnight
courier service or by the United States registered or certified mail, return
receipt requested, postage prepaid and addressed to the parties at their
respective addresses set forth below, and the same shall be effective (a) upon
receipt or refusal if delivered personally or by facsimile transmission; (b)
one
(1) business day after depositing with such an overnight courier service or
(c)
two (2) business days after deposit in the mails if mailed. A party may
change
its address for receipt of notices by service of a notice of change in
accordance herewith. All notices by facsimile transmission shall be subsequently
confirmed by U.S. certified or registered mail.
|
If
to each Significant Equityholder:
|
[X.
X. Xxxx & Co., L.P. ]
000
Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxx Xxxxxxx
Facsimile
No.: _______________
Telephone
No.:______________
E-mail:
____________________
|
|
[Xxxxxxx,
Xxxxx & Co.]
Xxx
Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxx
Xxxx, XX 00000
Attention:
Xxxxxxx Xxxx
Facsimile
No.: _______________
Telephone
No.:______________
E-mail:
____________________
|
|
|
[Par
IV Master Fund, Ltd.]
00
Xxxx Xxxx. 0xx Xxxxx
Xxxxxxxxx
Xxxx, XX 00000
Attention:
Xxxxxx X. Xxxxx
Facsimile
No.: _______________
Telephone
No.:______________
E-mail:
____________________
|
|
|
[Sunrise
Partners Limited Partnership]Two
Xxxxxxxx Xxxx
Xxxxxxxxx,
XX 00000-0000
Attention:
Xxxx Xxxxxxx
Facsimile
No.: _______________
Telephone
No.:______________
E-mail:
____________________
|
|
|
[Sigma
Capital Management, LLC]
000
Xxxxxxx Xxxxxx
Xxx
Xxxx, XX 00000
Attention:
Xxxx Xxxxxx
Facsimile
No.: _______________
Telephone
No.:______________
E-mail:
____________________
|
|
With
a copy to:
|
______________________________
|
|
______________________________
|
|
|
______________________________
|
|
|
Attention:
_____________________
Facsimile
No.: __________________
Telephone
No.: _________________
E-mail:
____________________
|
|
|
If
to the Company:
|
Foamex
International Inc.
0000
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxxx Xxxxxxxxx, Executive Vice President
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
E-mail:
____________________
|
|
With
a copy to:
|
Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
Facsimile
No.: (000) 000-0000
Telephone
No.: (000) 000-0000
E-mail:
xxxxxxx@xxxxxxxxx.xxx
|
4.4 GOVERNING
LAW.
THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES,
SHALL GOVERN THE INTERPRETATION OF THIS AGREEMENT.
4.5 Entirety
and Amendments.
This
Agreement embodies the entire agreement between the parties and supersedes
all
prior agreements and understandings, if any, relating to the transactions
contemplated herein, and may be amended or supplemented only by an instrument
in
writing executed by the party against whom enforcement is sought.
4.6 Multiple
Counterparts.
This
Agreement may be executed in counterparts, each of which shall be an original
but all of which together shall constitute one agreement, binding on all of
the
parties hereto notwithstanding that all of the parties hereto are not
signatories to the same counterpart. For purposes of this Agreement, each of
the
parties hereto agrees that a facsimile copy of the signature of the person
executing this Agreement on either party’s behalf shall be effective as an
original signature and legally binding and effective as an execution counterpart
hereof.
4.7 Parties
Bound.
The
Company shall not have the right to assign this Agreement, without the prior
written consent of the Significant Equityholders. None of the Significant
Equityholders shall have the right to assign this Agreement without the prior
written consent of the Company, except the Significant Equityholders may assign
this agreement to such designees as may be reasonably acceptable to the Company.
This Agreement will be binding upon and inure to the benefit of the Company
and
the Significant Equityholders and their respective
successors
(including, with respect to the Company, the Reorganized Company (as defined
in
the Investment Term Sheet)) and permitted assigns, and no other party will
be
conferred any rights by virtue of this Agreement or be entitled to enforce
any
of the provisions hereof.
4.8 Further
Acts.
In
addition to the acts and deeds recited herein and contemplated to be performed,
executed and/or delivered by the Company and the Significant Equityholders,
the
Company and the Significant Equityholders agree to perform, execute and/or
deliver or cause to be performed, executed and/or delivered at the Closing
or
after the Closing any and all such further acts, deeds and assurances as may
be
necessary to consummate the transactions contemplated hereby.
4.9 Business
Days.
All
references to “business days” contained herein are references to days on which
banks are not required or authorized to close in New York City.
[Remainder
of page intentionally left blank]
IN
WITNESS
WHEREOF, the parties hereto have executed this Put Option Agreement as of the
date first above written.
| FOAMEX INTERNATIONAL, INC. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
SIGNIFICANT
EQUITYHOLDERS:
|
D.
E. SHAW LAMINAR PORTFOLIOS, L.L.C
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
PAR
IV MASTER FUND, LTD.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
SUNRISE PARTNERS LIMITED PARTNERSHIP |
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
SIGMA CAPITAL ASSOCIATES, LLC |
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
XXXXXXX
SACHS & CO.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
ANNEX
A
SERIES
C
PREFERRED STOCK TERM SHEET
The
following sets forth the terms of the Preferred Stock; terms not defined herein
shall have the meanings ascribed to them in the Put Option
Agreement:
| Terms of the Investment | |
|
The
Company
|
The
Reorganized Company (the “Company”).
|
|
Significant
Equityholders
|
D.
E. Shaw Laminar Portfolios, L.L.C., Par IV Master Fund Ltd., Sunrise
Partners Limited Partnership, Sigma Capital Associates, LLC and Xxxxxxx,
Sachs & Co., or their respective designees that are reasonably
acceptable to the Company.
|
|
Price
Per Share
|
The
price per share will be the Put Amount divided by the aggregate number
of
Preferred Shares to be issued (the “Purchase Price”).
|
|
Preferred
Shares Designation
|
Series
C Preferred Stock (the “Preferred Shares”).
|
|
Ranking
|
The
Preferred Shares will rank senior to all equity capital of the Company,
whether now or hereafter outstanding.
|
|
Dividends
|
The
holders of Preferred Shares will be entitled to receive, when, as
and if
declared by the Board of Directors, as described below, quarterly
dividends in respect of each Preferred Share equal to the rate per
annum
of __%1
(the “Dividend Rate”) of the Liquidation Preference (as defined below).
Dividends on Preferred Shares will be cumulative from the date of
issuance
and accrued and unpaid dividends will compound quarterly.
|
_________________________
1
be
determined according to the following formula: LIBOR Swap as of the “Effective
Date,” as defined in Exhibit A to the Equity Commitment Agreement + 2nd Lien
Spread + 200bps. "LIBOR Swap" shall be equal to the rate on the seven-year
interest rate swap quoted [10] business days prior to the Effective Date by
three nationally recognized fixed income derivative broker-dealers acceptable
to
the Company for 3-month LIBOR. “2nd Lien Spread” means the interest margin for
the second lien term loan that is part of the Exit Facility (as defined in
the
Plan Term Sheet).
|
Liquidation
Preference
|
Upon
a liquidation (but excluding mergers or similar transactions) with
respect
to the Company, the holders of Preferred Shares will be entitled
to
receive, in cash, in preference to payment on Junior Securities,
an amount
with respect to each Preferred Share equal to the sum of (i) the
Purchase
Price (as appropriately adjusted for stock splits, recapitalizations
and
similar events) plus (ii) all accrued and unpaid dividends (as
appropriately adjusted for stock splits, recapitalizations and similar
events, the “Liquidation Preference”).
|
|
|
Redemption
at the Option of the Company
|
Subject
to compliance with the Company’s debt, the Preferred Shares will be
redeemable at the option of the Company, in whole or in part, at
the
redemption prices set forth below (expressed as percentages of the
Dividend Rate), if redeemed during the twelve-month period beginning
on
the dates indicated below:
Anniversary
of Issuance
|
|
|
Fourth Fifth
Sixth
Seventh
and thereafter
|
100 % + (50% of Dividend Rate) 100
% + (33% of Dividend Rate)
100
% + (16% of Dividend Rate)
100%
|
|
|
Redeemed
Preferred Shares will be cancelled and will cease to be
outstanding.
|
||
|
Mandatory
Redemption
|
None.
|
|
|
Change
of Control
|
Upon
a Change of Control (to be defined), each holder of Preferred Shares
shall
have the right to require the Company to purchase each outstanding
share
of its Preferred Stock at a price equal to 101% of the Liquidation
Preference thereof on the date of such purchase; provided that the
Company
shall not so repurchase such shares if prohibited by any provision
of any
of the Company’s debt. Failure to repurchase shares will result in a
Voting Rights Triggering Event.
|
|
|
Voting
Rights
|
None,
unless a Voting Rights Triggering Event exists.
|
|
|
Voting
Rights Triggering Event
|
Failure
to comply with any covenant contained in any instrument governing
the
Preferred Shares or any agreement pursuant to which the Preferred
Shares
was issued (including the certificate of designation and the Definitive
Documents) shall result in the holders of a majority of the outstanding
Preferred Shares being entitled to elect 2 directors to the Board
of
Directors. In order to effectuate the foregoing, at the request of
the
holders of a majority of the outstanding Preferred Shares, the size
of the
Board of Directors will be increased by 2 and the Company and the
Board of
Directors shall take such other actions to cause such election to
occur.
Upon the Company coming into compliance with all such covenants,
the size
of t he Board of Directors shall be decreased by 2 and the directors
elected pursuant to this clause shall cease to be directors. For
the
avoidance of doubt, (i) the total number of directors who may be
elected
pursuant to this provision and in office at any time shall not exceed
2
and (ii) the voting right described in this paragraph shall be the
sole
remedy for breaches of any covenant in any instrument governing the
Preferred Shares or any agreement pursuant to which the Preferred
Shares
was issued (including the certificate of designation and the Definitive
Documents).
|
|
|
Registration
Rights
|
None.
|
|
Holder
Approval
|
Without
the consent or affirmative vote of the holders of at least 67% of
the
outstanding Preferred Shares voting separately as a class, the Company
shall not (a) authorize, create or issue or increase the authorized
amount
of any (i) equity securities of the Company ranking senior or pari
passu
to
the Preferred Shares or (ii) any class or series of capital stock
or any
security convertible or exercisable for any class or series of capital
stock that is redeemable mandatorily or at the option of the holder
thereof; (b) amend, alter or repeal any provision of the certificate
of
incorporation or bylaws of the Company if such amendment or alteration
alters or changes the powers, preferences or rights of the Preferred
Shares so as to affect them adversely; (c) declare, pay or set aside
for
payment, any dividend on any Junior Securities (as defined below)
without
the prior consent of the holders of the Preferred Shares or redeem,
repurchase or otherwise acquire any Junior Securities (other than
the
repurchase of common stock held by employees, officers or directors
of the
Company or any of its subsidiaries in accordance with arrangements
approved by the Board of Directors up to an amount to be agreed);
or (d)
authorize or take any other action if such action alters or changes
any of
the rights of the Preferred Shares in any respect or otherwise would
be
inconsistent with the certificate of designation for the Preferred
Shares.
|
|
Junior
Securities
|
“Junior
Securities” shall mean the Series A Preferred Stock of the Company, if
issued at a future date, and the common stock of the Company and
any other
securities ranking junior to the Preferred Shares or securities
convertible into, or exchangeable for, any such securities.
|
ANNEX
B
FORM
OF EXERCISE NOTICE
|
(i)
|
Form
of Put Option Exercise Notice
[Date]
TO:
D.
E.
Shaw Laminar Portfolios, L.L.C.
[___________]
Par
IV
Master Fund, Ltd.
[___________]
Sunrise
Partners Limited Partnership
[___________]
Sigma
Capital Associates, LLC
[___________]
Xxxxxxx,
Sachs & Co.
[___________]
[___________]
Reference
is
made to the Put Option Agreement, dated as of _____, 2006 (the “Put
Option Agreement”),
by
and among the aforementioned parties (collectively, the “Significant
Equityholders”)
and
Foamex International Inc. (the “Company”).
Capitalized terms used but not otherwise defined herein have the meanings
specified in the Put Option Agreement.
The
Company
hereby notifies the Significant Equityholders that it is exercising the Put
Option with respect to the New Preferred Stock pursuant to Section 1.3 of the
Put Option Agreement. The Closing Date shall be the Effective Date.
Payment
of
the purchase price for the Shares shall be made to the following
account:
[account details].
Very
truly
yours,
FOAMEX
INTERNATIONAL
INC.
By:
_______________________
Name:
Title:
ANNEX
C
DETAILS
FOR PREFERRED SHARE CERTIFICATES
[D.
E.
Shaw Laminar Portfolios, L.L.C.]
[Par
IV
Master Fund, Ltd.]
[Sunrise
Partners Limited Partnership]
[Sigma
Capital Associates, LLC]
[Xxxxxxx,
Sachs & Co.]
SCHEDULE
A
Financial
Statements for Year Ended January 1, 2006
SCHEDULE
B
Financial
Statements for Six Months Ended July 2, 2006
SCHEDULE
C
Litigation
Schedule
SCHEDULE
D
Environmental
Schedule
