Exhibit 4.18
EXECUTION COPY
EQUITY COMMITMENT AGREEMENT
October 13, 2006
Foamex International Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
Xxxxxxx X. Xxxxxxxxx
Re: Equity Funding Commitment
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:
(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");
(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
(iii) 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.
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. xx.xx. 1251 et seq., the Clean Air Act ("CAA"), 42 U.S.C. xx.xx. 7401
et seq., the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7
U.S.C. xx.xx. 136 et seq., the Surface Mining Control and Reclamation Act
("SMCRA"), 30 U.S.C. xx.xx. 1201 et seq., the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. xx.xx. 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"), 42 U. S. C. ss. ss. 11001 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. xx.xx. 6901 et seq., the Occupational Safety
and Health Act as amended ("OSHA"), 29 U.S.C. xx.xx. 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 12
(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.
9. 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, PAR IV MASTER FUND, LTD.
L.L.C.
By: /s/ Xxxxxx Xxxxxx /s/ Xxxxxx X. Xxxxx
---------------------------- -----------------------------
Name: Xxxxxx Xxxxxx Name: Xxxxxx X. Xxxxx
Title: Authorized Signatory Title: Director
SUNRISE PARTNERS LIMITED PARTNERSHIP SIGMA CAPITAL ASSOCIATES, LLC
By: /s/ Xxxxxxx X. Xxxxxx /s/ Xxxxx X. Xxxxxxxx
---------------------------- -----------------------------
Name: Xxxxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxxx
Title: Vice President Title: Authorized Signatory
XXXXXXX, SACHS & CO.
By: /s/ Xxxxxxx Xxxx
----------------------------
Name: Xxxxxxx Xxxx
Title: Managing Director
Agreed and accepted on this 13th day of October, 2006:
FOAMEX INTERNATIONAL INC. (ON
BEHALF OF ITSELF AND THE OTHER
DEBTORS)
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Xxxxx: Executive Vice President
and 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 D. E. Shaw Laminar Portfolios, L.L.C., Par IV
EQUITYHOLDERS: 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 The Significant Equityholders and the Company will
STOCK PUT enter into a put option agreement (the "Put Option
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 A rights offering (the "Rights Offering") shall be
OFFERING: 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
2
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 The Company shall file a registration statement
REGISTRATION: (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 The Reorganized Company shall utilize the proceeds
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
3
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 The Definitive Documents shall contain
AND WARRANTIES: 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 Pursuant to the First Amended Plan, on the
RIGHTS: 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
4
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.
5
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.
CONDITIONS The obligations of the Significant Equityholders
PRECEDENT TO under the Put Option shall be subject to
PUT OPTION satisfaction of each of the following conditions
OBLIGATIONS: precedent (collectively, the "Put Option
Conditions"):
(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;
(b) the Expiration Time of the Rights Offering
shall have passed;
(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;
6
(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.
(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;
(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;
(g) from the date of the Commitment Letter through
the Effective Date, there shall not have been a
Material Adverse Change (as defined below);
(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;
(i) a corporate charter, bylaws and other
governance documents of the Reorganized Company
shall have been adopted as part of the
7
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;
(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;
(k) no Termination Event (as defined below) shall
have occurred (excluding a Termination Event that
has been waived as provided for herein);
(l) to the extent not already paid, the Put Option
Premium shall have been paid;
(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
(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.
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 S
8
ignificant 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.
TERMINATION "Termination Event," wherever used herein, means
EVENTS: 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):
(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;
(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;
(c) the Company has not filed the Offering
Registration Statement with the SEC on or before
November 10, 2006;
(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;
(e) the Company does not obtain Bankruptcy Court
approval of the Disclosure Statement on or before
December 15, 2006;
(f) the Bankruptcy Court does not confirm the
First Amended Plan on or before February 2, 2007;
(g) the Effective Date of the First Amended Plan
does not occur on or before February 28, 2007;
(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. ss. 1106(a)(3)
and (4), shall have been appointed under 11 U.S.C.
xx.xx. 1104 or 105;
(i) the chapter 11 cases shall have been converted
to cases under chapter 7 of the Bankruptcy Code;
(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
9
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;
(k) the failure or non-occurrence by the date
specified of any Put Option Condition or any
condition precedent in the Commitment Letter;
(l) the Bankruptcy Court shall have entered an
order approving a Competing Transaction;
(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
(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.
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.
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
10
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 except upon the occurrence of
a Termination Event set forth in subsection (g),
(h) or (i) of the section captioned "Termination
Events" above.
COMPETING Notwithstanding anything to the contrary herein,
TRANSACTIONS: 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.
DAMAGES: 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
11
set forth in the Commitment Letter.
GOVERNING LAW: All documentation in connection with the
transactions contemplated by this Investment Term
Sheet shall be governed by the laws of the State
of StateplaceNew York.
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.
DEFINITIONS: "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
12
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.
13
"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.
14
Exhibit B
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. xx.xx. 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.
PLAN PROPONENT: The Debtors
PLAN OF The Debtors shall file a plan of reorganization
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.
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.
PLAN FUNDING: 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.
DEFINITIVE The transactions described in this Plan Term Sheet
DOCUMENTS: 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.
TREATMENT OF
CLAIMS AND
INTERESTS:
Administrative The allowed administrative expense claims against
Expense Claims 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
2
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.
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.
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.
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
3
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 Allowed Senior Secured Note claims shall be
Claims 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.
4
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 Allowed Senior Subordinated Note claims shall be
Note Claims 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 Allowed general unsecured claims shall be
Claims 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 The Existing Preferred Stock in Foamex
Stock 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 The Existing Common Stock in Foamex International
Stock 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
5
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 The allowed other common equity interests in
Interests in Foamex International, including options, warrants
Foamex and rights related to the Debtor's equity
International interests, shall be unimpaired and shall remain
outstanding after the Effective Date.
Intercompany Intercompany claims shall be unimpaired and shall
Claims be reinstated upon the Effective Date.
Other Equity Interests Except as otherwise provided for in the First
in Surviving Debtor Amended Plan, all other equity interests in the
Subsidiaries subsidiaries of Foamex International and Foamex
L.P. shall be unimpaired.
SEC The Rights Offering shall be offered pursuant to
REGISTRATION: the Offering Registration Statement, filed with
the SEC, in connection with and pursuant to the
First Amended Plan.
CONDITIONS TO The First Amended Plan shall contain various
CONFIRMATION & conditions precedent to confirmation and to the
EFFECTIVE DATE: 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 The Significant Equityholders shall have the right
6
REPRESENTATION: 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 The officers of the Reorganized Company shall be
DEBTORS' SENIOR substantially the same as the officers of the
MANAGEMENT: 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 The First Amended Plan shall provide for a
INCENTIVE PLAN: 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 The First Amended Plan shall provide that (i) the
DATE Reorganized Debtors shall enter into such
GOVERNANCE: 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
7
terminated.
MINORITY The Amended and Restated Certificate of
SHAREHOLDER Incorporation of the Reorganized Company shall
PROTECTIONS: 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 The First Amended Plan shall contain other
PROVISIONS: 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. ss. 1961 as in effect on the
Petition Date;
8
(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.
ss. 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. ss. 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.
9
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
StateplaceDelaware 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
2
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
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 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.
(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.
4
All notices by facsimile transmission shall be subsequently confirmed by
country-regionplaceU.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.]
a50 Xxxx Blvd. 0xx Xxxxx
Xxxxxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Facsimile No.: _______________
Telephone No.: _______________
E-mail: ____________________
[Sunrise Partners Limited Partnership]
Xxx 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: ____________________
5
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 StateplaceNEW 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
6
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
CityplaceNew York City.
[Remainder of page intentionally left blank]
7
IN WITNESS WHEREOF, the parties hereto have executed this Put Option
Agreement as of the date first above written.
COMPANY:
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:
8
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 Series C Preferred Stock (the "Preferred
Designation 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.
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 Subject to compliance with the Company's
debt, the Preferred
----------------------------
(1) To 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).
9
of the Company 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 100 % + (50% of Dividend Rate)
Fifth 100 % + (33% of Dividend Rate)
Sixth 100 % + (16% of Dividend Rate)
Seventh and thereafter 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 Failure to comply with any covenant
Event 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
10
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.
11
ANNEX B
FORM OF EXERCISE NOTICE
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:
12
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.]
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