Document:

Service
      Agreement - Roger Brimblecombe - pSivida 

     

     

    

    DATED 5
      December 2006

    

    

    
      	 	(1)	PSIVIDA LIMITED
	 	 	
               

               

               

                 

               

               

               

            
	 	
              (2)

            	
              ROGER
                BRIMBLECOMBE

            

    

     

    
       

    

    ___________________________

    

    SERVICE
      AGREEMENT

    

    ___________________________

    

    
 

    

    

    

    STEPHENSON
      HARWOOD

    One,
      St. Paul's Churchyard

    London
      EC4M 8SH

    Tel:
      020 7329 4422

    Fax:
      020 7606 0822

    Ref:
      1040

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      CONTENTS

       

      
        	 	 	
                Page

              
	 	 	 
	
                1

              	
                DEFINITIONS
                  AND INTERPRETATION

              	
                3

              
	 	 	 
	
                2

              	
                APPOINTMENT

              	
                4

              
	 	 	 
	
                3

              	
                DURATION
                  OF THE EMPLOYMENT

              	
                4

              
	 	 	 
	
                4

              	
                SCOPE
                  OF THE EMPLOYMENT

              	
                5

              
	 	 	 
	
                5

              	
                PLACE
                  OF WORK

              	
                6

              
	 	 	 
	
                6

              	
                REMUNERATION

              	
                7

              
	 	 	 
	
                7

              	
                EXPENSES

              	
                7

              
	 	 	 
	
                8

              	
                HOLIDAYS

              	
                8

              
	 	 	 
	
                9

              	
                SICKNESS
                  BENEFITS

              	
                8

              
	 	 	 
	
                10

              	
                RESTRICTIONS
                  DURING THE EMPLOYMENT 

              	
                9

              
	 	 	 
	
                11

              	
                CONFIDENTIAL
                  INFORMATION AND COMPANY DOCUMENTS

              	
                10

              
	 	 	 
	
                12

              	
                INVENTIONS
                  AND OTHER INTELLECTUAL PROPERTY

              	
                11

              
	 	 	 
	
                13

              	
                TERMINATION

              	
                13

              
	 	 	 
	
                14

              	
                RESTRICTIVE
                  COVENANTS

              	
                15

              
	 	 	 
	
                15

              	
                DISCIPLINARY
                  AND GRIEVANCE PROCEDURES

              	
                17

              
	 	 	 
	
                16

              	
                NOTICES

              	
                17

              
	 	 	 
	
                17

              	
                FORMER
                  CONTRACTS OF EMPLOYMENT

              	
                18

              
	 	 	 
	
                18

              	
                CHOICE
                  OF LAW AND SUBMISSION TO JURISDICTION

              	
                18

              
	 	 	 
	
                19

              	
                GENERAL

              	
                18

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

      AGREEMENT

      

      Dated: 5
        December 2006

      

      BETWEEN:

      

      
        	
                (1)

              	
                PSIVIDA
                  LIMITED, an
                  Australian Corporation ("the
                  Company");
                  and

              

      

      

      
        	
                (2)

              	
                DR
                  ROGER BRIMBLECOMBE of
                  Apartment 2, Columbus House, Trossachs Drive, Bath, BA2 6RP ("the
                  Executive").

              

      

      

      IT
        IS AGREED as
        follows:

      

      1  DEFINITIONS
        AND INTERPRETATION

       

      
        	 	
                1.1

              	
                In
                  this Agreement unless the context otherwise requires the following
                  expressions have the following
                  meanings:

              

      

      

      "the
        Board"
        means
        the board of directors for the time being of the Company or any committee
        of
        directors for the time being;

      

      "Confidential
        Information"
        means
        information relating to the business, Intellectual Property Rights (as defined
        in clause 12.2), products, affairs and finances of the Company or of any
        Group
        Company for the time being confidential to it or to them or treated by it
        or
        them as such and trade secrets (including, without limitation, technical
        data
        and know-how) relating to the business of the Company or of any Group Company
        or
        of any of its or their suppliers, clients or customers, including in particular
        (by way of example only and without limitation) the use of silicon technology
        in
        medical therapy; 

      

      "the
        Employment"
        means
        the Executive's employment under this Agreement; 

      

      "the
        ERA"
        means
        the Employment Rights Act 1996 as amended;

      

      "the
        Group"
        means
        the Company and the Group Companies;

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      "Group
        Company"
        means
        any company which is for the time being a subsidiary or holding company of
        the
        Company and any subsidiary of any such holding company and for the purposes
        of
        this Agreement the terms "subsidiary"
        and
        "holding
        Company"
        shall
        have the meanings ascribed to them by sections 736 and 736A Companies Act
        1985
        (and "Group
        Companies"
        shall
        be interpreted accordingly);

       

      “the
        Salary”
        means
        the salary referred to in clause 6.1.

      

      
        	 	
                1.2

              	
                References
                  to clauses and schedules are unless otherwise stated to clauses
                  of and
                  schedules to this Agreement.

              

      

      

      
        	 	
                1.3

              	
                The
                  headings to the clauses are for convenience only and shall not
                  affect the
                  construction or interpretation of this
                  Agreement.

              

      

      

      2  APPOINTMENT

       

      
        	 	
                2.1

              	
                The
                  Company appoints the Executive and the Executive agrees to act
                  as
                  Executive Chairman/Acting CEO of the Company on the terms of this
                  Agreement reporting to the Board. 

              

      

      

      
        	 	
                2.2

              	
                With
                  the prior consent of the Executive but not otherwise the Company
                  may
                  appoint any other person or persons to act jointly with the Executive
                  in
                  any position to which he may be assigned from time to time without
                  loss of
                  status by the Executive. 

              

      

      

      3  DURATION
        OF THE EMPLOYMENT

       

      
        	 	
                3.1

              	
                The
                     Employment agreement comes into force on the date hereof. Your
                  continuous
                  employment commenced on 1 November 2003. The Employment is subject
                  to the
                  provisions of this Agreement, shall continue until terminated by
                  either
                  party giving to the other not less than 6 months' notice in writing
                  to
                  expire on or at any time after the commencement date. Notwithstanding
                  the
                  foregoing, subject to the Board’s consent, Executive may terminate his
                  employment by giving less than 6 months’ notice.
                  

              

      

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      
        	 	
                3.2

              	
                The
                  Company reserves the right to terminate the Employment without
                  any notice
                  or on notice less than that required by clause 3.1 provided that
                  if it
                  does so it will pay to the Executive a sum equal to, but no more
                  than, the
                  Salary in respect of that part of the period of notice in clause
                  3.1 which
                  the Company has not given to the Executive less any appropriate
                  tax and
                  other statutory deductions.

              

      

      

      
        	 	
                3.3

              	
                At
                  any time or times during any period of notice of termination served
                  in
                  accordance with this clause 3 (whether given by the Company or
                  the
                  Executive), the Company shall be under no obligation to assign
                  any duties
                  to the Executive and shall be entitled to exclude him from its
                  premises
                  and any other premises to which during the currency of this Agreement
                  the
                  Executive has had access for the purposes of fulfilling his duties
                  under
                  this Agreement, provided that this shall not affect the Executive's
                  entitlement to receive the Salary and other contractual benefits
                  during
                  such period.

              

      

      

      
        	 	
                3.4

              	
                The
                  Executive represents and warrants that he is not bound by or subject
                  to
                  any court order, agreement, arrangement or undertaking which in
                  any way
                  restricts or prohibits him from entering into this Agreement or
                  from
                  performing his duties under it.

              

      

      

      4  SCOPE
        OF THE EMPLOYMENT

       

      
        	 	
                4.1

              	
                During
                  the Employment the Executive shall:

              

      

      

      
        	 	
                4.1.1

              	
                save
                  as provided for in accordance with clause 10.2.2, devote the whole
                  of his
                  time, attention and skill to the business and affairs of the Company
                  both
                  during normal business hours and during such additional hours as
                  are
                  necessary for the proper performance of his duties or as the Board
                  may
                  reasonably require from time to time;

              

      

      

      
        	 	
                4.1.2

              	
                faithfully
                  and diligently perform such duties and exercise such powers consistent
                  with his position as may from time to time be assigned to or vested
                  in him
                  by the Board;

              

      

      

      
        	 	
                4.1.3

              	
                obey
                  the reasonable and lawful directions of the
                  Board;

              

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	 	
                4.1.4

              	
                comply
                  with all the Company's rules, regulations, policies and procedures
                  from
                  time to time in force; and

              

      

      

      
        	 	
                4.1.5

              	
                keep
                  the Board at all times promptly and fully informed (in writing
                  if so
                  requested) of his conduct of the business of the Company and any
                  Group
                  Company and provide such explanations in connection with it as
                  the Board
                  may require.

              

      

      

      
        	 	
                4.2

              	
                The
                  Executive shall if and so long as the Company requires and without
                  any
                  further remuneration carry out his duties on behalf of any Group
                  Company
                  and act as a director or officer of any Group
                  Company.

              

      

      

      
        	 	
                4.3

              	
                The
                  Company may at its sole discretion transfer this Agreement to any
                  Group
                  Company at any time. 

              

      

      

      5  PLACE
        OF WORK

       

      
        	 	
                5.1

              	
                The
                  Executive's place of work will initially be the Company's offices
                  at
                  Malvern
                  Hills Science Park, Geraldine Road, Malvern, Worcestershire, WR14
                  3SZ
                  but the Company may require the Executive to work at any place
                  (whether
                  inside or outside the United Kingdom) for such periods as the Company
                  may
                  from time to time require but not outside the United Kingdom for
                  periods
                  exceeding 2 months in any 12 months.

              

      

      

      
        	 	
                5.2

              	
                If
                  the Executive's principal place of work is changed from the location
                  set
                  out in Clause 5.1 to a location which is outside reasonable commuting
                  distance from his home, the Company may entirely at its discretion
                  reimburse to him reasonable relocation expenses, including removal
                  costs
                  and estate agents' fee and solicitors' fees in accordance with
                  its
                  relocation policy from time to time in force.

              

      

      

      
        	 	
                5.3

              	
                The
                  Company will consult with the Executive on the effects on him of
                  any such
                  requirement to change his place of work on a permanent basis or
                  to move
                  house and will endeavour to take into account any concerns or difficulties
                  raised by the Executive in relation to such requirements.
                  

              

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      6  REMUNERATION

       

      
        	 	
                6.1

              	
                The
                  Company shall pay to the Executive the Salary at the rate of £50,000 per
                  annum, on the last day of each calendar month by credit transfer
                  to his
                  bank account payable by equal monthly instalments in arrears. The
                  rate of
                  Salary will be reviewed annually in
                  December.

              

      

      

      
        	 	
                6.2

              	
                The
                  Salary shall be inclusive of any fees to which the Executive may
                  be
                  entitled if he is appointed as a director of the Company or any
                  Group
                  Company.

              

      

      

      
        	 	
                6.3

              	
                The
                  Executive shall be eligible to participate in such bonus scheme
                  as the
                  Company, at its sole discretion, shall from time to time operate,
                  subject
                  to the rules of such scheme from time to time in
                  force.

              

      

      

      
        	 	
                6.4

              	
                Payment
                  of the Salary and any bonus to the Executive shall be made either
                  by the
                  Company or by a Group Company and, if by more than one company,
                  in such
                  proportions as the Board may from time to time think
                  fit.

              

      

      

      7  EXPENSES

       

      
        	 	
                7.1

              	
                The
                  Company shall reimburse the Executive in respect of all expenses
                  reasonably incurred by him in the proper performance of his duties,
                  subject to him providing such receipts or other appropriate evidence
                  as
                  the Company may require.

              

      

      

      
        	 	
                7.2

              	
                If
                  the Company issues to the Executive a company credit card then
                  such a
                  credit card is issued on condition that
                  he:

              

      

      

      
        	 	
                7.2.1

              	
                takes
                  good care of such card and immediately reports any loss of it to
                  the
                  Company;

              

      

      

      
        	 	
                7.2.2

              	
                uses
                  the card only for the purposes of the Company's business in accordance
                  with any applicable Company policy;
                  and

              

      

      

      
        	
              	7.2.3	
                returns
                  the card immediately to the Company on
                  request.

              

      

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      8  HOLIDAYS

       

      
        	 	
                8.1

              	
                The
                  Executive shall be entitled, in addition to all Bank and Public
                  holidays
                  normally observed in England, to 25 working days’ paid holiday in each
                  holiday year (being the period from 1st January to 31st December).
                  The
                  Executive may take his holiday only at such times as are agreed
                  with the
                  Board.

              

      

      

      
        	 	
                8.2

              	
                In
                  the respective holiday years in which the Employment commences
                  or
                  terminates, the Executive's entitlement to holiday shall accrue
                  on a pro
                  rata basis for each completed calendar month of service during
                  the
                  relevant year.

              

      

      

      
        	 	
                8.3

              	
                If,
                  on the termination of the Employment, the Executive has exceeded
                  his
                  accrued holiday entitlement, the value of such excess, calculated
                  by
                  reference to clause 8.2 and the Salary, may be deducted by the
                  Company
                  from any sums due to him. If the Executive has any unused holiday
                  entitlement, the Company may either require the Executive to take
                  such
                  unused holiday during any notice period or make a payment to him
                  in lieu
                  of it, calculated in accordance with this clause
                  8.3.

              

      

      

      
        	 	
                8.4

              	
                Holiday
                  entitlement for one holiday year cannot be taken in subsequent
                  holiday
                  years unless otherwise agreed by the Board. Failure to take holiday
                  entitlement in the appropriate holiday year will lead to forfeiture
                  of any
                  accrued holiday not taken without any right to payment in lieu
                  of
                  it.

              

      

      

      9  SICKNESS
        BENEFITS

       

      
        	 	
                9.1

              	
                Subject
                  to clause 13, the Company shall continue to pay the Executive's
                  salary for
                  up to a maximum of 20 working days’ absence on medical grounds in any
                  period of 12 calendar months provided
                  that the Executive shall from time to time if
                  required:

              

      

      

      
        	 	
                9.1.1

              	
                supply
                  the Company with medical certificates covering any period of sickness
                  or
                  incapacity exceeding seven days (including weekends);
                  and

              

      

      

      
        	 	
                9.1.2

              	
                undergo
                  at the Company's expense, by a doctor appointed by the Company,
                  any
                  medical examination.

              

      

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      
        	 	
                9.2

              	
                Payment
                  in respect of any other or further period of absence shall be at
                  the
                  Company's discretion.

              

      

      

      
        	 	
                9.3

              	
                Any
                  payment to the Executive pursuant to clause 9.1 shall be subject
                  to set
                  off by the Company in respect of any Statutory Sick Pay and any
                  Social
                  Security Sickness Benefit or other benefits to which the Executive
                  may be
                  entitled.

              

      

      

      
        	 	
                9.4

              	
                Subject
                  to clause 9.3, when all sick pay entitlement in any period of 12
                  calendar
                  months has been exhausted, no further salary will be payable by
                  the
                  Company to the Executive until the Executive has returned to active
                  service of the Company.

              

      

      

      
        	 	
                9.5

              	
                If
                  the Executive's absence shall be occasioned by the actionable negligence
                  of a third party in respect of which damages are recoverable, then
                  the
                  Executive shall:

              

      

      

      
        	 	
                9.5.1

              	
                notify
                  the Company immediately of all the relevant circumstances and of
                  any
                  claim, compromise, settlement or judgment made or awarded in connection
                  with it;

              

      

      

      
        	 	
                9.5.2

              	
                give
                  to the Company such information concerning the above matters as
                  the
                  Company may reasonably require; and

              

      

      

      
        	 	
                9.5.3

              	
                if
                  the Company so requires, refund to the Company any amount received
                  by him
                  from any such third party provided that the refund shall be no
                  more than
                  the amount which he has recovered from the Company under clauses
                  9.1 and
                  9.2. in respect of sick pay for the period he is absent from work
                  due to
                  such actionable negligence of a third party in respect of which
                  damages
                  are recoverable.

              

      

      

      10  RESTRICTIONS
        DURING THE EMPLOYMENT 

       

      
        	 	
                10.1

              	
                Save
                  as provided for in clause 10.2, during the Employment the Executive
                  shall
                  not directly or indirectly:

              

      

       

      
        	 	
                10.1.1

              	
                be
                  employed, engaged, concerned or interested in any other business
                  or
                  undertaking save for those in which he is involved pursuant to
                  clause 4.3;
                  or

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      
        	 	
                10.1.2

              	
                in
                  any activity which the Board reasonably considers may be, or become,
                  harmful to the interests of the Company or of any Group Company
                  or which
                  might reasonably be considered to interfere with the performance
                  of the
                  Executive's duties under this
                  Agreement.

              

      

      

      
        	 	
                10.2

              	
                Clause
                  10.1 shall not apply:

              

      

      

      
        	 	
                10.2.1

              	
                to
                  the Executive holding (directly or through nominees) investments
                  publicly
                  listed on any publicly traded stock exchange as long as he does
                  not hold
                  more than 10 per cent of the issued shares or other securities
                  of any
                  class of any one company unless otherwise approved by the Board;
                  or

              

      

      

      
        	 	
                10.2.2

              	
                to
                  any act undertaken by the Executive with the prior written consent
                  of the
                  Board; or

              

      

      

      
        	
              	10.2.3	
                to
                  any interest permitted by clause
                  4.3.

              

      

      

      
        	 	
                10.3

              	
                The
                  Executive shall comply with every rule of law and every regulation
                  of the
                  Company and any competent authority for the time being in force
                  in
                  relation to dealings in shares or other securities of the Company
                  or any
                  Group Company. 

              

      

      

      
        	 	
                10.4

              	
                The
                  Executive shall acknowledge his position within the Company in
                  any
                  business or scientific papers presented or published by him during
                  the
                  course of the Employment. 

              

      

      

      11  CONFIDENTIAL
        INFORMATION AND COMPANY DOCUMENTS

       

      
        	 	
                11.1

              	
                The
                  Executive shall neither during the Employment (except in the proper
                  performance of his duties or with the express written consent of
                  the
                  Board) nor at any time (without limit) after the termination of
                  the
                  Employment except in compliance with an order of a competent court
                  or as
                  required by law:

              

      

      

      
        	 	
                11.1.1

              	
                divulge
                  or communicate to any person, company, business entity or other
                  organisation;

              

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	 	
                11.1.2

              	
                use
                  for his own purposes or for any purposes other than those of the
                  Company
                  or any Group Company; or

              

      

      

      
        	 	
                11.1.3

              	
                through
                  any failure to exercise due care and diligence, permit or cause
                  any
                  unauthorised disclosure of any Confidential Information. These
                  restrictions shall cease to apply to any information which shall
                  become
                  available to the public generally otherwise than through any breach
                  by the
                  Executive of the provisions of this Agreement or other default
                  of the
                  Executive.

              

      

      

      
        	 	
                11.2

              	
                The
                  Executive acknowledges that all books, notes, memoranda, records,
                  lists of
                  customers and suppliers and employees, correspondence, documents,
                  computer
                  and other discs and tapes, data listings, codes, designs and drawings
                  and
                  other documents and material whatsoever (whether made or created
                  by the
                  Executive or otherwise) relating to the business of the Company
                  or any
                  Group Company (and any copies of the
                  same):

              

      

      

      
        	 	
                11.2.1

              	
                shall
                  be and remain the property of the Company or the relevant Group
                  Company;
                  and

              

      

      

      
        	 	
                11.2.2

              	
                shall
                  be handed over by the Executive to the Company or to the relevant
                  Group
                  Company on demand and in any event on the termination of the Employment
                  and the Executive shall certify that all such property has been
                  handed
                  over on request by the Board.

              

      

      

      12  INVENTIONS
        AND OTHER INTELLECTUAL PROPERTY

       

      
        	 	
                12.1

              	
                The
                  parties foresee that the Executive may make inventions, create
                  ideas, or
                  create other intellectual property in the course of his duties
                  and agree
                  that in this respect the Executive has a special responsibility
                  to further
                  the interests of the Company. 

              

      

      

      
        	 	
                12.2

              	
                Any
                  invention, improvement, idea, design, process, information, know
                  how,
                  copyright work, trade mark or trade name or get-up made, created
                  or
                  discovered by the Executive in the course of the Employment (whether
                  capable of being patented or registered or not and whether or not
                  made or
                  discovered in the course of the Employment) in conjunction with
                  or in any
                  way affecting or relating to the business of the Company or of
                  any Group
                  Company or capable of being used or adapted for use in or in connection
                  with such business ("Intellectual Property Rights") shall be disclosed
                  immediately to the Company and shall (subject to sections 39 to
                  43 Patents
                  Act 1977) belong to, be assigned to (where applicable) and be the
                  absolute
                  property of the Company or such Group Company as the Company may
                  direct.

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	 	
                12.3

              	
                If
                  and whenever required so to do by the Company the Executive shall
                  at the
                  expense of the Company or such Group Company as the Company may
                  direct:

              

      

      

      
        	 	
                12.3.1

              	
                apply
                  or join with the Company or such Group Company in applying for
                  letters
                  patent or other protection or registration in the United Kingdom
                  and in
                  any other part of the world for any Intellectual Property Rights;
                  and

              

      

      

      
        	 	
                12.3.2

              	
                execute
                  all instruments and do all things necessary for vesting such letters
                  patent or other protection or registration when obtained and all
                  right,
                  title and interest to and in them absolutely and as sole beneficial
                  owner
                  in the Company or such Group Company or in such other person as
                  the
                  Company may specify.

              

      

      

      
        	 	
                12.4

              	
                The
                  Executive irrevocably and unconditionally waives all rights under
                  Chapter
                  IV of Part I of the Copyright Designs and Patents Act 1988 in connection
                  with his authorship of any existing or future copyright work in
                  the course
                  of the Employment, in whatever part of the world such rights may
                  be
                  enforceable including, without
                  limitation:

              

      

      

      
        	 	
                12.4.1

              	
                the
                  right conferred by section 77 of that Act to be identified as the
                  author
                  of any such work; and

              

      

      

      
        	 	
                12.4.2

              	
                the
                  right conferred by section 80 of that Act not to have any such
                  work
                  subjected to derogatory treatment.

              

      

      

      
        	 	
                12.5

              	
                The
                  Executive irrevocably appoints the Company to be his Attorney in
                  his name
                  and on his behalf to execute any such instrument or do any such
                  thing and
                  generally to use his name for the purpose of giving to the Company
                  the
                  full benefits of this clause 12. A certificate in writing in favour
                  of any
                  third party signed by any director or by the Secretary of the Company
                  that
                  any instrument or act falls within the authority conferred by this
                  Agreement shall be conclusive evidence that such is the
                  case.

              

      

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        	 	
                12.6

              	
                Nothing
                  in this clause 12 shall be construed as restricting the rights
                  of the
                  Executive or the Company under sections 39 to 43 of the Patents
                  Act 1977.
                  

              

      

      

      13  TERMINATION

       

      
        	 	
                13.1

              	
                Notwithstanding
                  any other provisions of this Agreement, in any of the following
                  circumstances the Company may terminate the Employment immediately
                  by
                  serving written notice on the Executive to that effect. In such
                  event the
                  Executive shall not be entitled to any further payment from the
                  Company
                  except such sums as shall have accrued due at that time. The circumstances
                  are if the Executive:

              

      

      

      
        	 	
                13.1.1

              	
                commits
                  any serious breach of this Agreement or is guilty of any gross
                  misconduct
                  or any wilful neglect in the discharge of his duties
                  ;

              

      

      

      
        	 	
                13.1.2

              	
                repeats
                  or continues (after warning) any breach of this Agreement;
                  

              

      

      

      
        	 	
                13.1.3

              	
                is
                  guilty of any fraud, dishonesty or conduct tending to bring himself
                  the
                  Company or any Group Company into
                  disrepute;

              

      

      

      
        	
              	13.1.4	
                is
                  convicted of any criminal offence (other than minor offences under
                  the
                  Road Traffic Acts or the Road Safety Acts for which a fine or
                  non-custodial penalty is imposed) which might reasonably be thought
                  to
                  affect adversely the performance of his duties;  

              

      

       

      
        	 	
                13.1.5

              	
                refuses
                  (without reasonable cause) to accept the novation by the Company
                  of this
                  Agreement, or an offer of employment on terms no less favourable
                  to him
                  than the terms of this Agreement, by any company which, as a result
                  of a
                  reorganisation, amalgamation or reconstruction of the Company,
                  acquires or
                  agrees to acquire not less than 90 per cent of the issued equity
                  share
                  capital of the Company (as defined by section 744 of the Companies
                  Act
                  1985); 

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      
        	 	
                13.1.6

              	
                is
                  disqualified from holding any office to which he may be appointed
                  in the
                  Company or in any other company by reason of any order made under
                  the
                  Company Directors Disqualification Act 1986 or any other
                  enactment;

              

      

      

      
        	 	
                13.1.7

              	
                is
                  appointed at any time as a director of the Company and subsequently
                  resigns as or otherwise ceases to be or becomes prohibited by law
                  from
                  being a director of the Company, otherwise than at the Company’s
                  request.

              

      

       

      Any
        delay
        by the Company in exercising such right of termination shall not constitute
        a
        waiver of it.

      

      
        	 	
                13.2

              	
                If
                  the Company believes that it may be entitled to terminate the Employment
                  pursuant to clause 13 it shall be entitled (but without prejudice
                  to its
                  right subsequently to terminate the Employment on the same or any
                  other
                  ground) to suspend the Executive either on full pay or without
                  payment of
                  the Salary or other benefits for so long as it may think
                  fit.

              

      

      

      
        	 	
                13.3

              	
                On
                  the termination of the Employment or upon either the Company or
                  the
                  Executive having served notice of such termination, the Executive
                  shall:

              

      

      

      
        	 	
                13.3.1

              	
                at
                  the request of the Company resign from any office he may hold as
                  a
                  director of the Company and all offices held by him in any Group
                  Company
                  and shall transfer without payment to the Company or as the Company
                  may
                  direct any qualifying shares, held by him directly or as nominee,
                  provided
                  by it, provided however that such resignation shall be without
                  prejudice
                  to any claims which the Executive may have against the Company
                  or any
                  Group Company arising out of the termination of the Employment;
                  and

              

      

      

      
        	 	
                13.3.2

              	
                immediately
                  deliver to the Company all materials within the scope of clause
                  11.2 and
                  all keys credit cards motor-cars and other property of or relating
                  to the
                  business of the Company or of any Group Company which may be in
                  his
                  possession or under his power or control, and the Executive irrevocably
                  authorises the Company to appoint any person in his name and on
                  his behalf
                  to sign any documents and do any things necessary or requisite
                  to give
                  effect to his obligations under this clause 13.3.

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      14  RESTRICTIVE
        COVENANTS

       

      
        	
                14.1

              	
                The
                  Executive will not for the period of 6 months immediately
                  after the termination of the Employment whether as principal or
                  agent, and
                  whether alone or jointly with, or as a director, manager, partner,
                  shareholder, employee or consultant of any other person, directly
                  or
                  indirectly:

              

      

      

      
        	 	
                (a)

              	
                carry
                  on, or be engaged, concerned or interested in any business within
                  the
                  field of biomedical application of porous or polycrystalline silicon
                  technology at the termination of the Employment and with which
                  the
                  Executive was involved in a senior capacity at any time during
                  the period
                  of 12 months immediately
                  preceding the termination of the Employment;

              

      

      

      
        	 	
                (b)

              	
                interfere
                  with, tender for, canvass, solicit or endeavour to entice away
                  from the
                  Company, the business of any person, within the field of biomedical
                  application of porous or polycrystalline silicon technology, who
                  at the
                  date of termination of the Employment or during the period of 12
                  months immediately
                  preceding that date (or if earlier, prior to the date on which
                  the
                  Executive last carried out duties assigned to him by the Company)
                  was, to
                  his knowledge, a customer, client or agent of or supplier to or
                  who had
                  dealings with the Company or with any Group Company and with whom
                  he had
                  personal dealings in the normal course of his employment at that
                  date or
                  during that period;

              

      

      

      
        	 	
                (c)

              	
                manufacture,
                  supply, carry out or undertake any product or provide any service
                  within
                  the field of biomedical application of porous or polycrystalline
                  silicon
                  technology to which he was concerned to a material extent during
                  the
                  period of 12 months immediately
                  preceding the termination of the Employment to or for any person
                  who, at
                  the date of termination of the Employment or during the period
                  of 12
                  months immediately
                  preceding that date (or, if earlier, prior to the date on which
                  the
                  Executive last carried out duties assigned to him by the Company)
                  was a
                  customer, client or agent of or supplier to or was in the habit
                  of dealing
                  with the Company or any other Group Company and with whom he had
                  personal
                  dealings in the normal course of his employment during that period
                  of 12
                  months;

              

      

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (d)

              	
                be
                  employed by, or enter into partnership with, interfere with, solicit
                  or
                  endeavour to entice away the employment of, employ or attempt to
                  employ or
                  negotiate or arrange the employment or engagement by any other
                  person, of
                  any person who to his knowledge was, at the date of the termination
                  of the
                  Employment, or within a period of 12 months immediately
                  preceding that date had been, part of the senior management or
                  a senior
                  scientific officer of the Company or of any Group Company and with
                  whom he
                  had personal dealings during that
                  period;

              

      

      

      
        	
              	(e)	
                solicit,
                  interfere with, tender for or endeavour to entice away from the
                  Company or
                  from any Group Company any contract, project or business, or the
                  renewal
                  of any of them, carried on by the Company which is currently in
                  progress
                  at the date of the termination of the Employment or which was in
                  the
                  process of negotiation at that date and in respect of which the
                  Executive
                  had contact with any customer, client or agent of or supplier to
                  the
                  Company or any Group Company at any time during the period of 12
                  months
                  immediately preceding the date of termination of the
                  Employment.

              

      

       

      
        	
                14.2

              	
                Nothing
                  in clause 14.1 shall preclude the Executive from holding such investments
                  as set out in clause 10.2.1 or continuing to undertake acts in
                  respect of
                  which he received prior written consent of the Board during the
                  Employment
                  in accordance with clause 10.2.2

              

      

      

      
        	
                14.3

              	
                At
                  no time after the termination of the Employment shall the Executive
                  directly or indirectly represent himself as being interested in
                  or
                  employed by or in any way connected with the Company or any Group
                  Company,
                  other than as a former employee of the Company. The Executive also
                  undertakes not to make any disparaging comments about the Company
                  and the
                  Company likewise undertakes not to make any disparaging comments
                  about the
                  Executive.

              

      

      

      
        	
                14.4

              	
                The
                  Executive agrees that, having regard to all the circumstances,
                  the
                  restrictions contained in this clause are reasonable and necessary
                  for the
                  protection of the Company or of any Group Company and that they
                  do not
                  bear harshly upon him and the parties agree
                  that:

              

      

      

      
        	 	
                (a)

              	
                each
                  restriction shall be read and construed independently of the other
                  restrictions so that if one or more are found to be void or unenforceable
                  as an unreasonable restraint of trade or for any other reason the
                  remaining restrictions shall not be affected;
                  and

              

      

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      
        	 	
                (b)

              	
                if
                  any restriction is found to be void but would be valid and enforceable
                  if
                  some part of it were deleted, that restriction shall apply with
                  such
                  deletion as may be necessary to make it valid and
                  enforceable.

              

      

      

      15  DISCIPLINARY
        AND GRIEVANCE PROCEDURES

       

      
        	 	
                15.1

              	
                If
                  the Executive wishes to obtain redress of any grievance relating
                  to the
                  Employment, he shall apply in writing to the Board, setting out
                  the nature
                  and details of any such grievance or dissatisfaction. The decision
                  of the
                  Board shall be final.

              

      

      

      
        	 	
                15.2

              	
                The
                  provisions of clause 15.1 shall not apply to any action taken by
                  the
                  Company under clause 13 or clause
                  3.3.

              

      

      

      
        	 	
                15.3

              	
                The
                  Executive shall be subject to the Company’s Disciplinary Procedure from
                  time to time in force. A copy of the current procedure is available
                  from
                  the Company.

              

      

      

      16  NOTICES

       

      
        	 	
                16.1

              	
                Any
                  notice or other document to be given under this Agreement shall
                  be in
                  writing and may be given personally to the Executive or to the
                  Secretary
                  of the Company (as the case may be) or may be sent by first class
                  post or
                  other fast postal service or by facsimile transmission to, in the
                  case of
                  the Company, its registered office for the time being and in the
                  case of
                  the Executive either to his address shown on the face of this Agreement
                  or
                  to his last known place of
                  residence.

              

      

      

      
        	 	
                16.2

              	
                Any
                  such notice shall (unless the contrary is proved) be deemed served
                  when in
                  the ordinary course of the means of transmission it would first
                  be
                  received by the addressee in normal business hours. In proving
                  such
                  service it shall be sufficient to prove, where appropriate, that
                  the
                  notice was addressed properly and posted, or that the facsimile
                  transmission was despatched.

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      17  FORMER
        CONTRACTS OF EMPLOYMENT

       

      
        	 	
                17.1

              	
                This
                  Agreement shall be in substitution for any previous contracts,
                  whether by
                  way of letters of appointment, agreements or arrangements, whether
                  written, oral or implied, relating to the employment of the Executive,
                  which shall be deemed to have been terminated by mutual consent
                  as from
                  the date of this Agreement and the Executive acknowledges that
                  he has no
                  outstanding claims of any kind against the Company or any Group
                  Company in
                  respect of any such contract. 

              

      

      

      18  CHOICE
        OF LAW AND SUBMISSION TO JURISDICTION

       

      
        	 	
                18.1

              	
                This
                  Agreement shall be governed by and interpreted in accordance with
                  English
                  law.

              

      

      

      
        	 	
                18.2

              	
                The
                  parties submit to the exclusive jurisdiction of the English courts
                  but
                  this Agreement may be enforced by the Company in any court of competent
                  jurisdiction.

              

      

      

      19  GENERAL

       

      
        	 	
                19.1

              	
                The
                  Executive acknowledges that the provisions of clauses 10, 11, 12
                  and 14
                  constitute separate undertakings given for the benefit of each
                  Group
                  Company and may be enforced by any of them.

              

      

      

      
        	 	
                19.2

              	
                The
                  expiration or termination of this Agreement shall not prejudice
                  any claim
                  which either party may have against the other in respect of any
                  pre-existing breach of or contravention of or non-compliance with
                  any
                  provision of this Agreement nor shall it prejudice the coming into
                  force
                  or the continuance in force of any provision of this Agreement
                  which is
                  expressly or by implication intended to or has the effect of coming
                  into
                  or continuing in force on or after such expiration or
                  termination.

              

      

      

      
        	 	
                19.3

              	
                This
                  Agreement incorporates the written statement of the terms of employment
                  of
                  the Executive provided in compliance with Part I of the
                  ERA.

              

      

      

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      

      
        	
              	
                PSIVIDA
                  LIMITED

                 

                By:
                  /s/
                  Lori
                  Freedman                                       

                Name:
                  Lori Freedman

                Title:
                  

              

      

       

      
      

      EXECUTIVE

       

      By: 
        /s/
        Roger
        Brimblecombe                               
 

      Name:
        Roger Brimblecombe

      

      
        
          
          

        

        
          19Exhibit
      10.1

     

    
      SUBSCRIPTION
        AND STANDBY COMMITMENT AGREEMENT

       

      This
        Subscription and Standby Commitment Agreement (this “Agreement”),
        dated
        as of December 7, 2006, is entered into by and among WestPoint International,
        Inc. (the “Company”)
        and
        American Real Estate Holding Limited Partnership (the “Purchaser”).
        

       

      PRELIMINARY
        STATEMENTS

       

      A.  Series
        A-1 Preferred Stock Offer.
        The
        Company proposes to sell to the Purchaser, and the Purchaser desires to purchase
        from the Company, 1,000,000 shares of Series A-1 Preferred Stock, par value
        $0.01 per share of the Company (the “Series
        A-1 Preferred Stock”),
        for a
        purchase price of $100 per share (the “Per
        Share Purchase Price”)
        and
        for an aggregate purchase price of $100 million (the “Series
        A-1 Aggregate Purchase Price”),
        subject to the terms of this Agreement. 

       

      B.  Series
        A-2 Preferred Stock Offer.
        In
        addition, as described in the offering memorandum attached hereto as
Exhibit
        A
        (the
“Offering
        Memorandum”),
        the
        Company proposes to offer (the “Offer”)
        to
        each holder of record that is an “accredited investor” (as defined below), as of
        the close of business on December 4, 2006 (the “Record
        Date”),
        of
        shares of its common stock, par value $0.01 per share (“Common
        Stock”),
        other
        than the Purchaser or any of its direct or indirect subsidiaries that are
        holders of record of Common Stock (such holders of record, other than the
        Purchaser and such direct and indirect subsidiaries, being herein referred
        to as
        the “Initial
        Series A-2 Offerees”),
        the
        right to purchase such holder’s Percentage Interest and Overallotment Interest
        (each term as defined in the Offering Memorandum) of 1,000,000 shares of
        Series
        A-2 Preferred Stock, par value $0.01 per share of the Company (the “Series
        A-2 Preferred Stock”
and
        together with the Series A-1 Preferred Stock, the “Preferred
        Stock”)),
        for
        the Per Share Purchase Price and for an aggregate purchase price of $100
        million
        (the “Series
        A-2 Aggregate Purchase Price”
and
        together with the Series A-1 Aggregate Purchase Price, the “Aggregate
        Purchase Price”)).
        As
        acknowledged by the parties hereto and as more fully described in the Offering
        Memorandum, the Initial Series A-2 Offerees may assign their rights to purchase
        Series A-2 Preferred Stock to their wholly-owned subsidiaries so long as
        such
        entity is an accredited investor (collectively with the Series A-2 Initial
        Offerees, the “Series
        A-2 Offerees”)
        and
        the Series A-2 Offerees have the right to subscribe for shares of Series
        A-2
        Preferred Stock in excess of their Percentage Interest if any other Series
        A-2
        Offerees do not subscribe for their full Percentage Interest. The Series
        A-2
        Offerees are being given the opportunity to elect to collectively purchase
        all
        of the Series A-2 Preferred Stock, but are not being given the opportunity
        to,
        and shall not have the right to, purchase some but not all of the Series
        A-2
        Preferred Stock. If the Series A-2 Offerees do not collectively purchase
        all of
        the shares of the Series A-2 Preferred Stock, the Company proposes to sell
        to
        the Purchaser, all such shares for the Per Share Purchase Price and for the
        Series A-2 Aggregate Purchase Price. The Offer and sale of the Series A-2
        Preferred Stock to the Series A-2 Offerees, the sale of the Series A-2 Preferred
        Stock to the Purchaser in the event that not all of the Series A-2 Preferred
        Stock is purchased by the Series A-2 Offerees, and the sale of the Series
        A-1
        Preferred Stock to the Purchaser, are collectively referred to as the
“Transactions”
and,
        December 19, 2006, which is the last day on which the Offer may be accepted
        by
        the Series A-2 Offerees, is referred to as the “Expiration
        Date.”
        

       

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      STATEMENT
        OF AGREEMENT

       

      In
        consideration of the premises and the mutual covenants and agreements set
        forth
        herein, and for other good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, the parties hereto, intending
        to
        be legally bound, agree as follows:

       

      1.  Series
        A-1 Preferred Stock Commitment.Subject
        to the terms and conditions hereof, the Purchaser agrees to purchase from
        the
        Company, and the Company agrees to issue and sell to the Purchaser, 1,000,000
        shares of Series A-1 Preferred Stock at the Per Share Purchase Price per
        share,
        constituting in the aggregate the Series A-1 Aggregate Purchase Price (the
        “Series
        A-1 Commitment”).

       

      2.  Series
        A-2 Preferred Stock Commitment.

       

      (a)  Series
        A-2 Commitment.
        Subject
        to the terms and conditions hereof and in the event that all of the shares
        of
        Series A-2 Preferred Stock are not subscribed for on or prior to the Expiration
        Date and paid for by the Series A-2 Offerees on or prior to 5:00 p.m. on
        the
        first day following the Expiration Date (or if such day is not a business
        day,
        the next succeeding business day) (the “Funding
        Date”),
        the
        Purchaser agrees to purchase from the Company and the Company agrees to issue
        and sell to the Purchaser, all of the shares of Series A-2 Preferred Stock
        at
        the Per Share Purchase Price per share, constituting in the aggregate the
        Series
        A-2 Aggregate Purchase Price (the “Series
        A-2 Commitment”
and
        together with the Series A-1 Commitment, the “Commitment”).

       

      (b)  Expiration
        Date; Funding Date.
        Without
        the prior written consent of the Purchaser, which may be withheld in its
        sole
        and absolute discretion, neither the Expiration Date nor the Funding Date
        will
        be extended. 

       

      (c)  Notification
        of Series A-2 Preferred Stock to be Purchased.
        As soon
        as practicable following the expiration of the exercise period of the Offer
        and
        promptly following its determination of the number of shares of Series A-2
        Preferred Stock validly subscribed for by the Series A-2 Offerees in accordance
        with the terms of the Offer, the Company shall notify the Purchaser in writing
        of the number of shares of Series A-2 Preferred Stock validly subscribed
        for by
        the Series A-2 Offerees. If all of the Series A-2 Preferred Stock has been
        validly subscribed for by the Expiration Date by the Series A-2 Offerees,
        then
        promptly following the Funding Date, the Company shall notify the Purchaser
        in
        writing whether it has received $100 million as payment for the Series A-2
        Preferred Stock by the Series A-2 Offerees and whether the Purchaser is required
        to purchase the Series A-2 Preferred Stock pursuant to the Series A-2
        Commitment. 

       

      (d)  Satisfaction
        of Commitment.
        The
        Purchaser may, in its sole discretion, satisfy the Commitment directly and/or
        indirectly through one or more of its direct or indirect subsidiaries (each,
        a
“Purchaser
        Designee”);
        provided,
        however,
        any
        such Purchaser Designee shall be required to make the representations and
        warranties set forth in Section
        5
        to the
        Company and assume the obligations of the Purchaser hereunder, and the Purchaser
        shall remain liable under this Agreement as set forth herein.

       

      
        
           

        

        
          -1-

          
            

          

        

        
           

        

         

      

      3.  Closing;
        Payment of Purchase Price and Fees.

       

      (a)  Closing;
        Closing Date.
        The
        delivery of and payment for the shares of Preferred Stock shall take place
        at
        the offices of Wolf, Block, Schorr and Solis-Cohen LLP, 250 Park Avenue,
        New
        York, New York 10177 on the business day following the satisfaction and/or
        waiver of all of the conditions set forth herein (other than such conditions
        by
        their nature to be satisfied at consummation) or at such other place and
        time as
        is mutually agreed to in writing by the parties hereto (the “Closing”
and
        such date, the “Closing
        Date”).
        

       

      (b)  Company
        Deliverables.
        On the
        Closing Date the Company shall deliver to the Purchaser the
        following:

       

      (i)  stock
        certificates representing the shares of Preferred Stock purchased by the
        Purchaser and the Purchaser Designees pursuant to the Commitment, in the
        denominations and registered in the names of the Purchaser and, subject to
        the
        restrictions set forth herein, such Purchaser Designees, as designated in
        writing by the Purchaser not later than five (5) business days prior to the
        Closing Date;

       

      (ii)  a
        certificate, dated as of the Closing Date, executed by an officer of the
        Company
        certifying as to the fulfillment of the closing conditions specified in
Sections
        9(a)(i) and 9(a)(ii);
        

       

      (iii)  a
        certificate, dated as of the Closing Date, and signed by a secretary or
        assistant secretary of the Company as to the Company’s organizational documents,
        and the Company’s adoption of resolutions as to the execution, delivery and
        performance of this Agreement and the consummation of the transactions
        contemplated hereby; and

       

      (iv)  such
        other written instruments or documentation as may be reasonably necessary
        or
        appropriate in order to document the satisfaction or waiver of the applicable
        closing conditions set forth in Section
        9,
        as
        reasonably requested by the Purchaser. 

       

      (c)  Purchaser
        Deliverables.
        On the
        Closing Date the Purchaser shall deliver to the Company the
        following:

       

      (i)  the
        Series A-1 Aggregate Purchase Price, and if applicable, the Series A-2 Aggregate
        Purchase Price, by wire transfer of immediately available funds to an account
        designated by the Company; 

       

      (ii)  a
        certificate, dated as of the Closing Date, executed by an officer of the
        Purchaser certifying as to the fulfillment of the closing conditions specified
        in Sections
        9(b)(i) and 9(b)(ii);
        and

       

      (iii)  such
        other written instruments or documentation as may be reasonably necessary
        or
        appropriate in order to document the satisfaction or waiver of the applicable
        closing conditions set forth in Section
        9,
        as
        reasonably requested by the Company.

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

         

      

      4.  Representations
        and Warranties of the Company.
        The
        Company represents and warrants to the Purchaser as of the date hereof and
        as of
        the Closing Date as follows:

       

      (a)  Organization,
        Good Standing and Qualifications.
        The
        Company is a corporation duly incorporated, validly existing, and in good
        standing under the laws of the State of Delaware. The Company is duly licensed
        or qualified to do business as a foreign corporation and is in good standing
        under the laws of any other jurisdiction in which the character of the
        properties owned or leased by it or in which the transaction of its business
        makes such qualification necessary, except where the failure to be so qualified
        or to be in good standing is not, individually or in the aggregate, reasonably
        expected to have a Material Adverse Effect. A “Material Adverse Effect” means
        (i) the effect of any event or circumstance that, taken alone or in conjunction
        with any other events or circumstances, has or could reasonably be expected
        to
        have a material adverse effect on the business, operations, results of
        operations, properties, liabilities or condition (financial or otherwise)
        of the
        Company and its subsidiaries taken as a whole or (ii) the impairment of the
        Company’s ability to perform its obligations under the Transaction Documents (as
        defined below); provided,
        however,
        that
        (A) a material adverse change in (I) the global, United States or regional
        economy generally, (II) home fashion textile manufacturing, distribution
        or
        marketing conditions generally or (III) global or United States securities
        markets, (B) a change in applicable law or (C) a change caused by any
        announcement of any of the transactions contemplated by this Agreement, shall
        not, in and of itself, be deemed to have a Material Adverse Effect. The Company
        has all requisite corporate power and authority to own, operate, and lease
        its
        properties and carry on its businesses as now conducted in all material
        respects.

       

      (b)  Subsidiaries.
        Each of
        the material subsidiaries of the Company is duly organized, validly existing,
        and in good standing under the laws of the jurisdiction of its organization.
        All
        of the outstanding shares of capital stock of each of the Company’s subsidiaries
        is authorized, validly issued, fully paid and nonassessable and all such
        shares
        are owned by the Company or another wholly owned subsidiary of the Company.
        

       

      (c)  Corporate
        Authority; Binding and Enforceable.
        The
        Company has the requisite corporate power and authority to execute and deliver
        this Agreement, the Offering Memorandum and any other documents that are
        executed and delivered in connection with this Agreement, the Transactions
        and
        the transactions contemplated hereby and thereby (the “Transaction
        Documents”)
        and
        all requisite power, authority and financial ability to perform its obligations
        hereunder and thereunder, and to consummate the transactions contemplated
        hereby
        and thereby, subject to the Stockholder Approval (as defined below). The
        Transactions, the Transaction Documents and the consummation and performance
        by
        the Company of the transactions contemplated hereby and thereby have been
        duly
        authorized by all requisite corporate action of the Company, subject to the
        Stockholder Approval. This Agreement has been duly and validly executed and
        delivered by the Company and constitutes the legal, valid and binding obligation
        of the Company, enforceable against it in accordance with its terms, except
        to
        the extent the enforceability of which may otherwise be limited by bankruptcy,
        insolvency, fraudulent conveyance, reorganization, moratorium and other similar
        laws affecting the enforcement of creditors’ rights generally, and general
        equitable principles. 

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

         

      

      (d)  Capital
        Structure.
        The
        authorized capital stock of the Company consists of 200,000,000 shares of
        Common
        Stock and 10,000,000 shares of preferred stock. As of the Record Date 19,498,389
        shares of Common Stock are issued and outstanding and 10,501,611 shares of
        Common Stock are reserved for issuance pursuant to outstanding subscription
        rights to purchase such number of shares of Common Stock. There is current
        litigation relevant to the ownership of the capital stock of the Company
        as more
        fully described in the Offering Memorandum. The Company has issued stock
        appreciation rights, and may issue additional stock appreciation rights,
        to
        certain executives of the Company pursuant to management stock appreciation
        plans approved by the Board of Directors of the Company. Except as set forth
        above, as of the date hereof, no share of capital stock or other equity or
        voting securities of the Company are issued, reserved for issuance or
        outstanding. In addition, except as set forth above, there are no issued,
        outstanding or authorized options, warrants, rights, calls, convertible
        instruments, phantom stock, stock appreciation or similar rights or other
        agreements or commitments or preemptive rights to which the Company is a
        party
        or which is binding upon the Company providing for the issuance, disposition
        or
        acquisition of any of its capital stock or any other debt or equity security,
        or
        voting rights, rights of first refusal, subscription, stock restriction or
        similar rights.

       

      (e)  No
        Organic or Legal Violations.
        The
        execution and delivery of this Agreement by the Company does not and the
        consummation of the transactions contemplated hereby will not conflict with,
        or
        result in any violation of, or default (with or without notice or lapse of
        time,
        or both) under or give rise to a right of termination, cancellation,
        modification or acceleration of any obligation or to a loss of a benefit
        under,
        or result in the creation of any lien upon any of the properties or assets
        of
        the Company or any of its subsidiaries under (A) the certificate of
        incorporation, bylaws or other organizational documents of the Company; or
        (B)
        any law or agreement applicable to the Company or by which any property or
        asset
        of the Company is bound or affected; or (C) any note, bond, mortgage, indenture,
        lease, license, permit or franchise to which the Company is a party except,
        in
        the case of clauses (B) and (C), for any such conflicts, violations, breaches,
        defaults, events, losses, payments, cancellations, encumbrances, or other
        occurrences that are not, individually or in the aggregate, reasonably expected
        to have a Material Adverse Effect.

       

      (f)  Compliance
        with Law.
        The
        Company is in compliance with any law or agreement applicable to the Company
        or
        by which any property or asset of the Company is bound or affected, except
        for
        such noncompliance that is not, individually or in the aggregate, reasonably
        expected to have a Material Adverse Effect.

       

      (g)  Financial
        Information.
        The
        Company has previously provided to the Purchaser the audited consolidated
        balance sheets and statements of operations and changes in stockholders’ equity
        and cash flows of the Company and its subsidiaries as of and for the year
        ended
        December 31, 2005 (the “Audited
        Financial Statements”)
        and
        the unaudited consolidated balance sheet and the unaudited consolidated
        statements of operations and changes in stockholders’ equity and cash flows of
        the Company and its subsidiaries as of and for the ten-month period ended
        November 4, 2006 (the “Unaudited
        Financial Statements,”
and
        together with the Audited Financial Statements, the “Financial
        Statements”).
        The
        Financial Statements have been prepared in accordance with United States
        generally accepted accounting principles (“GAAP”)
        applied on a consistent basis throughout the periods covered thereby (subject,
        in the case of the Unaudited Financial Statements to normal recurring year-end
        adjustments and the absence of all required footnotes thereto); and (C) fairly
        present in all material respects the consolidated financial condition, results
        of operations and cash flows of the Company and its subsidiaries as of the
        respective dates thereof and for the periods referred to therein. Neither
        the
        Company nor any of its subsidiaries has any material liabilities or obligations
        of any nature (whether accrued, absolute, contingent or otherwise), except
        for
        liabilities and obligations reflected on the Unaudited Financial Statements
        or
        that were incurred after November 4, 2006 in the ordinary course of business
        consistent with past practice.

       

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

         

      

      (h)  Ordinary
        Course.
        Since
        November 4, 2006, the Company and its subsidiaries have conducted their business
        only in the ordinary course consistent with past practice, and there has
        not
        been:

       

      (i)  any
        effect, event, change or condition which has had or is reasonably expected
        to
        have a Material Adverse Effect, other than the Company’s continuing operating
        losses;

       

      (ii)  any
        material damage, destruction or loss to any material asset or property owned
        by
        the Company or any of its subsidiaries, whether or not covered by
        insurance;

       

      (iii)  any
        declaration, setting aside or payment of any dividend or other distribution
        (whether in cash, stock or property) with respect to any of the Company’s
        capital stock (other than in accordance with its terms) or any repurchase,
        redemption or other acquisition by the Company or any of its subsidiaries
        of any
        outstanding shares of capital stock or other securities of the Company or
        any of
        its subsidiaries;

       

      (iv)  any
        change in accounting methods, principles or practices by the Company or any
        of
        its subsidiaries, except for changes resulting from changes in GAAP;
        or

       

      (v)  any
        agreement, commitment, arrangement or undertaking by the Company or any of
        its
        subsidiaries to perform any action described in clauses (i) through
        (iv).

       

      (i)  Due
        Authorization; Valid Issuance.
        The
        Company has duly authorized and reserved a sufficient number of shares of
        Common
        Stock for issuance upon conversion of the Preferred Stock. Upon delivery
        of the
        shares of Preferred Stock to the Purchaser and payment therefor as contemplated
        hereunder such shares shall be, and, if and when issued, any shares of Preferred
        Stock issued to pay dividends on the Preferred Stock and any Common Stock
        issued
        upon conversion of the Preferred Stock shall be, duly authorized, validly
        issued, fully paid and nonassessable, and free and clear of all liens,
        preemptive rights, rights of first refusal, subscription and similar rights.
        Based, in part, on the representations and warranties of the Purchaser in
        Section
        5
        and the
        representations and warranties to be provided by any Series A-2 Offerees
        in
        connection with the Offer, the Offer and the sale and issuance of the shares
        of
        Preferred Stock are exempt from the registration and prospectus delivery
        requirements of the Securities Act of 1933, as amended (the “Securities
        Act”)
        and
        the securities or blue sky laws in any applicable state.

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

         

      

      (j)  Fees.
        Except
        for the fee to be paid to Gordian Group LLC pursuant to the Engagement Letter,
        dated as of November 7, 2006 between Gordian Group LLC and the Company (the
        “Gordian
        Engagement Letter”),
        no
        broker, investment banker, financial advisor or other person, is entitled
        to any
        broker’s, finder’s, financial advisor’s or other similar fee or commission in
        connection with the transactions contemplated by this Agreement based upon
        arrangements made by or on behalf of the Company or any of its
        subsidiaries.

       

      5.  Representations
        and Warranties of Purchaser.
        The
        Purchaser, represents and warrants to the Company as of the date hereof and
        as
        of the Closing Date as follows:

       

      (a)  Due
        Organization and Good Standing.
        The
        Purchaser is duly organized, validly existing, and in good standing under
        the
        laws of the state of its organization.

       

      (b)  Corporate
        Authority; Binding and Enforceable.
        The
        Purchaser has all requisite power and authority to execute and deliver this
        Agreement, and all requisite power, authority and financial ability to perform
        its obligations hereunder, and to consummate the transactions contemplated
        hereby. The execution and delivery of this Agreement, and the consummation
        of
        the transactions contemplated hereby, have been duly authorized by all requisite
        action of the Purchaser. This Agreement has been duly executed and delivered
        by
        the Purchaser and constitutes a legal, valid and binding obligation of the
        Purchaser, enforceable against the Purchaser in accordance with its terms,
        except to the extent the enforceability of this Agreement may be limited
        by
        bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
        and
        other similar laws affecting the enforcement of creditors’ rights generally, and
        general equitable principles.

       

      (c)  No
        Organic or Legal Violations.
        The
        execution and delivery of this Agreement by the Purchaser does not and the
        consummation of the transactions contemplated hereby will not conflict with,
        or
        result in any violation of, or default (with or without notice or lapse of
        time,
        or both) under or give rise to a right of termination, cancellation,
        modification or acceleration of any obligation or to a loss of a benefit
        under,
        or result in the creation of any lien upon any of the properties or assets
        of
        the Purchaser or any of its subsidiaries under (A) the certificate of
        incorporation, bylaws or other organizational documents of the Purchaser;
        (B)
        any law or agreement applicable to the Purchaser or by which any property
        or
        asset of the Purchaser is bound or affected; or (C) any note, bond, mortgage,
        indenture, lease, license, permit or franchise to which the Purchaser is
        a party
        except, in the case of clauses (B) and (C), for any such conflicts, violations,
        breaches, defaults, events, losses, payments, cancellations, encumbrances,
        or
        other occurrences that are not, individually or in the aggregate, reasonably
        expected to prevent or materially delay the consummation of any of the
        transactions contemplated by this Agreement. No filing or other action by
        the
        Purchaser is required under the Hart-Scott-Rodino Antitrust Improvement Act
        of
        1976 in connection with the Agreement, the Transactions or the transactions
        contemplated hereby and thereby.

       

      (d)  Compliance
        with Law.
        The
        Purchaser is in compliance with any law or agreement applicable to the Purchaser
        or by which any property or asset of the Purchaser is bound or affected,
        except
        for such noncompliance that is not, individually or in the aggregate, reasonably
        expected to prevent or materially delay the consummation of any of the
        transactions contemplated by this Agreement. 

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

         

      

      (e)  Accredited
        Investor.
        The
        Purchaser is an “accredited investor” within the meaning of Rule 501 of
        Regulation D under the Securities Act.

       

      (f)  Sophistication.
        The
        Purchaser is (A) knowledgeable, sophisticated and experienced in making,
        and is
        qualified to make, decisions with respect to investments in shares representing
        an investment decision like that involved in the purchase of the shares of
        Preferred Stock, including investments in securities issued by the Company
        and
        comparable entities, (B) is able to bear the economic risk associated with
        the
        purchase of the shares of Preferred Stock including a total loss of its
        investment, and (C) has had the opportunity to request, receive, review and
        consider all information it deems relevant in making an informed decision
        to
        purchase the shares of Preferred Stock. The Purchaser acknowledges that the
        Company has not given Purchaser any investment advice, credit information
        or
        opinion on whether the purchase of its portion of the shares of Preferred
        Stock
        is prudent.

       

      (g)  Investment.
        The
        Purchaser is acquiring the shares of Preferred Stock in the ordinary course
        of
        its business and for its own account for investment only and with no present
        intention of distributing any of such shares or entering into any arrangement
        or
        understanding with any other persons regarding the distribution of such
        shares.

       

      (h)  Compliance
        with Securities Act.
        The
        Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
        or
        otherwise dispose of (or solicit any offers to buy, purchase or otherwise
        acquire or take a pledge of) any of the shares of Preferred Stock, or the
        shares
        of Common Stock issuable upon conversion of such shares, except in compliance
        with the Securities Act and the rules and regulations promulgated thereunder
        and
        any applicable state securities laws.

       

      (i)  Exemption
        from Registration.
        The
        Purchaser understands that the shares of Preferred Stock are being offered
        and
        sold to it in reliance upon specific exemptions from the registration
        requirements of the Securities Act and state securities laws and that the
        Company is relying, in part, upon the truth and accuracy of, and the Purchaser’s
        compliance with, the representations, warranties, agreements, acknowledgments
        and understandings of the Purchaser set forth herein in order to determine
        the
        availability of such exemptions and the eligibility of the Purchaser to acquire
        the shares.

       

      (j)  Restricted
        Securities.
        The
        Purchaser understands that, until such time as its shares of Preferred Stock
        are
        sold pursuant to a registration statement that has been declared effective
        under
        the Securities Act or pursuant to Rule 144 under the Securities Act without
        any
        restriction as to the number of securities as of a particular date that can
        then
        be immediately sold, the shares will bear a restrictive legend in substantially
        the following form:

       

      “The
        shares evidenced by this certificate and the shares into which they are
        convertible have not been registered under the Securities Act of 1933, as
        amended (the ‘Securities Act’), or the securities laws of any state or other
        jurisdiction. None of such shares may be offered, sold, pledged or otherwise
        transferred except (1) pursuant to an exemption from registration under the
        Securities Act or (2) pursuant to an effective registration statement under
        the
        Securities Act, in each case in accordance with all applicable securities
        laws
        of the states and other jurisdictions, and in the case of a transaction exempt
        from registration, unless the issuer has received an opinion of counsel
        reasonably satisfactory to it that such transaction does not require
        registration under the Securities Act and such other applicable
        laws.”

      

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

         

      

      Certificates
        representing the shares of Common Stock into which the Preferred Stock is
        convertible shall bear a comparable legend to the legend set forth
        above.

      

      (k)  Regulation
        D.
        The
        Purchaser shall not, and shall not permit any of its directors, officers,
        employees, affiliates and agents to, engage in any activity in connection
        with
        the Transactions that constitutes a “general solicitation” or would otherwise
        cause the Company to fail to satisfy the manner of offering limitations set
        forth in Rule 502(c) of Regulation D under the Securities Act in connection
        with
        the Transactions; provided,
        that
        the Purchaser shall have no responsibility with respect to the actions of
        the
        Company or its subsidiaries.

       

      6.  Covenants
        of the Company.
        The
        Company agrees that:

       

      (a)  Offering
        Memorandum.
        The
        Company shall prepare and circulate (or cause the preparation and circulation
        of) the Offering Memorandum to the Series A-2 Offerees. Except as may be
        required by applicable securities law, the Company will not modify or amend
        the
        Offering Memorandum without the consent of the Purchaser (which consent may
        be
        withheld in its sole and absolute discretion) 

       

      (b)  Transactions.
        The
        Company shall conduct the Transactions in compliance with the Securities
        Act and
        all other applicable local, state or federal securities laws. The Company
        shall
        not modify or amend the terms of the Transactions without the consent of
        the
        Purchaser (which consent may be withheld in its sole and absolute discretion).
        

       

      (c)  Amendment
        to the Bylaws.
        The
        Company shall take any and all actions necessary on its part to make effective,
        as of the Closing, the Amended and Restated By-Laws of the Company attached
        hereto as Exhibit
        B
        (the
“Restated
        By-Laws”).
        The
        Restated By-Laws shall be and remain effective from the Closing and until
        thereafter amended in compliance with the terms thereof and applicable
        law.

       

      (d)  Amendment
        to the Certificate of Incorporation.
        Subject
        to the Stockholder Approval, the Company shall take any and all actions
        necessary on its part to make effective as of the Closing, and subject to
        the
        completion of the Transactions, the Restated Certificate of Incorporation
        of the
        Company in the form attached hereto as Exhibit
        C
        (the
“Restated
        Charter”).
        The
        Restated Charter shall be and remain effective from the Closing and until
        thereafter amended in compliance with the terms thereof and applicable
        law.

       

      (e)  Certificate
        of Designation.
        The
        Company shall take any and all actions necessary on its part to make effective,
        as of the Closing, the Certificate of Designation in the form attached hereto
        as
Exhibit
        D
        (the
“Certificate
        of Designation”).
        The
        Certificate of Designation shall be and remain effective from the Closing
        and
        until thereafter amended in compliance with the terms thereof and applicable
        law.

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

         

      

      (f)  Board
        Reconstitution.
        The
        Company shall take any and all actions necessary on its part (including
        obtaining the resignation of directors) to cause the directors comprising
        the
        full Board of Directors from and after the Closing, (i) to consist of four
        directors elected by the holders of Common Stock in three classes as follows:
        Joseph Pennacchio to serve as a director of the Company for a term starting
        at
        the time that the Restated Charter becomes effective and expiring at the
        annual
        meeting of stockholders to be held in 2007, Keith Meister to serve as a director
        of the Company for a term starting at the time that the Restated Charter
        becomes
        effective and expiring at the annual meeting of stockholders to be held in
        2008
        and Vincent J. Intrieri and Carl C. Icahn to serve as directors of the Company
        for a term starting at the time that the Restated Charter becomes effective
        and
        expiring at the annual meeting of stockholders to be held in 2009, (ii) three
        directors elected by holders of Series A-1 Preferred Stock and (iii) three
        directors elected by holders of Series A-2 Preferred Stock, consistent with
        the
        Restated Charter, the Restated By-Laws and the Certificate of Designation
        (the
“Board Reconstitution”). 

       

      (g)  Stockholder
        Approval.
        The
        Company shall, in accordance with applicable law, its certificate of
        incorporation and by-laws, call for the annual meeting of stockholders to
        be
        scheduled for no later than December 20, 2006 for the purpose of obtaining
        approval of the Restated Charter pursuant to Section 242 of the Delaware
        General
        Corporation Law and electing the directors consistent with the Board
        Reconstitution (the “Stockholder
        Approval”).
        

       

      (h)  Information.
        The
        Company shall furnish the Purchaser with such information regarding itself
        and
        its subsidiaries as the Purchaser may reasonably request.

       

      7.  Covenants
        of the Purchaser.
        The
        Purchaser agrees to cause its affiliates that are record holders of Common
        Stock
        to be present in person or by proxy at the stockholder meeting duly called
        by
        the Company to obtain the Stockholder Approval, and at any adjournment or
        postponement thereof, and to cause such affiliates to vote all shares of
        Common
        Stock held by them in support of the Restated Charter and Restated
        Bylaws

       

      8.  Covenants
        of both the Company and the Purchaser.
        Each of
        the Company and the Purchaser agrees that:

       

      (a)  Cooperation.
        It will
        use reasonable best efforts to take, or cause to be taken, all actions, and
        to
        do, or cause to be done, and to assist and cooperate with the other parties
        in
        doing, all things reasonably necessary, proper or advisable to consummate
        and
        make effective, in the most expeditious manner practicable, the transactions
        contemplated hereby.

       

      (b)  Notice.
        It will
        promptly deliver to the other parties hereto written notice of any matter,
        event
        or development that is or could (A) render any representation or warranty
        made
        by it herein inaccurate or incomplete in any respect or (B) constitute or
        result
        in a breach by it of, or a failure by it to comply with, any covenant herein.
        

       

      (c)  Registration
        Rights Agreement.
        Contemporaneously with or as soon as practicable following the Closing, the
        Company and the Purchaser shall each execute and deliver the Registration
        Rights
        Agreement set forth on Exhibit
        E
        hereto.

       

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

         

      

      9.  Conditions
        to Closing.

       

      (a)  Conditions
        of Purchaser’s Obligations.
        The
        obligation of the Purchaser to purchase the shares of Preferred Stock and
        consummate the transactions contemplated herein shall be subject to the
        satisfaction (or waiver by the Purchaser) of each of the following
        conditions:

       

      (i)  the
        representations and warranties of the Company contained in Section
        4
        that are
        qualified as to materiality shall be true and correct in all respects on
        and as
        of the date hereof and the date of the consummation of the Transactions,
        with
        the same force and effect as though made on and as of such date, except to
        the
        extent that any representation or warranty is made as of a specified date,
        in
        which case such representation or warranty shall be true and correct as of
        such
        specified date, and the representations and warranties that are not so qualified
        shall be true and correct in all material respects on and as of the date
        hereof
        and the date of the consummation of the Transactions, with the same force
        and
        effect as though made on and as of such date, except to the extent that any
        representation or warranty is made as of a specified date, in which case
        such
        representation or warranty shall be true and correct in all material respects
        as
        of such specified date;

       

      (ii)  the
        Company shall have performed or complied, in all material respects, with
        its
        covenants required to be performed or complied with under this Agreement;
        

       

      (iii)  no
        injunction, order or decree of a court of competent jurisdiction shall modify,
        or prohibit, in whole or in part, (x) the consummation of, the Transactions
        or
        the transactions contemplated hereby, (y) the election (to be effective
        simultaneously with the Closing, by written consent of the holders of Series
        A
        Preferred Stock) of the 3 directors to be elected by the holders of the Series
        A-1 Preferred Stock and the Series A-2 Preferred Stock, or otherwise frustrate
        the purpose of the Transactions, including the acquisition of certain bed
        products manufacturing facilities from Manama Textile Mills WLL in Bahrain
        (the
“Bahrain
        Acquisition”);

       

      (iv)  
        the
        Offer shall have expired; 

       

      (v)  the
        Company shall have performed or complied with its obligations under Sections
        6(a) - 6(h)
        and the
        matters stated in Sections
        6(a) - 6(h)
        shall
        have occurred;

       

      (vi)  
        the
        Company and the other parties thereto shall have executed and delivered a
        definitive agreement regarding the Bahrain Acquisition;

       

      (vii)  
        the
        Company is ready willing and able to engage in the Closing and deliver the
        items
        required to be delivered pursuant to Section
        3(b);
        and

       

      (viii)  either
        (a) all of the shares of the Series A-2 Preferred Stock have been subscribed
        for
        on or prior to the Expiration Date and paid for by the Series A-2 Offerees
        on or
        prior to the Funding Date or (b) the Company is ready, willing and able to
        deliver the certificates of Series A-2 Preferred Stock to the Purchaser pursuant
        to Section 3(b) for purchase by the Purchaser hereunder.

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

         

      

      (b)  Conditions
        of the Company’s Obligations.
        The
        obligation of the Company to issue and sell the shares of Preferred Stock
        and
        consummate the transactions contemplated herein shall be subject to the
        satisfaction (or waiver by the Company) of each of the following
        conditions:

       

      (i)  the
        representations and warranties of the Purchaser contained in Section
        5
        that are
        qualified as to materiality shall be true and correct in all respects on
        and as
        of the date hereof and the date of the consummation of the Transactions,
        with
        the same force and effect as though made on and as of such date, except to
        the
        extent that any representation or warranty is made as of a specified date,
        in
        which case such representation or warranty shall be true and correct as of
        such
        specified date, and the representations and warranties that are not so qualified
        shall be true and correct in all material respects on and as of the date
        hereof
        and the date of the consummation of the Transactions, with the same force
        and
        effect as though made on and as of such date, except to the extent that any
        representation or warranty is made as of a specified date, in which case
        such
        representation or warranty shall be true and correct in all material respects
        as
        of such specified date; 

       

      (ii)  the
        Purchaser shall have performed or complied, in all material respects, with
        its
        covenants required to be performed or complied with under this
        Agreement;

       

      (iii)  no
        injunction, order or decree of a court of competent jurisdiction shall modify,
        or prohibit, in whole or in part, (x) the consummation of, the Transactions
        or
        the transactions contemplated hereby, (y) the election (to be effective
        simultaneously with the Closing by written consent of the holders of Series
        A
        Preferred Stock) of the 3 directors to be elected by the holders of the Series
        A-1 Preferred Stock and the Series A-2 Preferred Stock, or otherwise frustrate
        the purpose of the Transactions, including the Bahrain Acquisition;

       

      (iv)  the
        Offer
        shall have expired; 

       

      (v)  the
        matters stated Sections
        6(c) - 6(g)
        shall
        have occurred; and 

       

      (vi)  the
        Company and the other parties thereto shall have executed and delivered a
        definitive agreement regarding the Bahrain Acquisition.

       

      10.  Termination.

       

      (a)  Mutual
        Consent.
        This
        Agreement may be terminated at any time prior to Closing by mutual written
        consent of the Company and the Purchaser.

       

      (b)  By
        the
        Company.
        The
        Company shall be entitled to terminate this Agreement at any time prior to
        Closing by giving written notice thereof to the Purchaser in the event that
        (i)
        the Purchaser materially breaches this Agreement; provided
        that the
        Purchaser has not cured such breach within 10 days following receipt of written
        notice thereof from the Company or such breach is not curable, or (ii) the
        Transactions and the transactions contemplated hereby shall not have been
        consummated on or before December 31, 2006, other than such failure resulting
        from any breach by the Company of its obligations hereunder.

       

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

         

      

      (c)  By
        the
        Purchaser.
        The
        Purchaser shall be entitled to terminate this Agreement at any time prior
        to
        Closing by giving written notice thereof to the Company in the event that
        (i)
        the Company materially breaches this Agreement; provided
        that the
        Company has not cured such breach within 10 days following receipt of notice
        thereof from the Purchasers or such breach is not curable, or (ii) the
        Transactions and the transactions contemplated hereby shall not have been
        consummated on or before December 31, 2006, other than due to the any failure
        resulting from any breach by the Purchaser of its obligations
        hereunder.

       

      (d)  Effect
        of Termination.
        Upon
        termination of this Agreement by the Company pursuant to Section 10(b)
        or by
        the Purchaser pursuant to Section
        10(c),
        this
        Agreement shall terminate upon delivery of such notice as described in
Section 10(b)
        or
Section
        10(c),
        as
        applicable, and no party hereto shall have any liability or obligation
        hereunder; provided however,
        upon
        termination under Section 10(b) or Section 10(c), the covenants and agreements
        made by the parties herein under this Section and Section 20 shall survive
        indefinitely in accordance with their terms; provided,
        also,
        that no
        such termination shall relieve the Purchaser or the Company from liability
        for
        breach or non-performance of any representation, warrant, covenant or agreement
        hereunder prior to the date of such termination. 

       

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

         

      

      11.  Existing
        Rights.
        At the
        time of the sale of assets of WestPoint Stevens, Inc. in August of 2005 in
        connection with its bankruptcy reorganization, it was contemplated that a
        rights
        offering would take place for the issuance of Common Stock at a purchase
        price
        of $8.772 per share (the “Existing
        Rights”).
        In
        connection therewith the Purchaser agreed to purchase and the Company agreed
        to
        sell to the Purchaser, at the same $8.772 price per share (the aggregate
        of the
        actual amount required to be paid by the Purchaser following the completion
        of
        the rights offering being referred to herein as the “Aggregate
        Payment Amount”)
        a
        number of shares of Common Stock equal to that number of shares of Common
        Stock
        with respect to which Existing Rights were not exercised in the rights offering
        (such purchase by the Purchaser being referred to herein as the “Post-Rights
        Offering Purchase”).
        In
        the event that the Purchaser or a Purchaser Designee acquires Series A-2
        Preferred Stock in accordance with this Agreement, and if the Post-Rights
        Offering Purchase is to occur, then in lieu of the Purchaser paying cash
        to
        acquire all or a portion of the Common Stock in the Post-Rights Offering
        Purchase, the Company will, if so requested by the Purchaser (which request
        the
        Purchaser may make or refrain from making in its sole and absolute discretion)
        exchange Common Stock at the rate specified below for up to a number of shares
        of Series A-2 Preferred Stock having an Accrued Preference Amount (as used
        here
        and throughout this Agreement, the sum of (A) Stated Value (as defined in
        the
        Certificate of Designation) and (B) an amount equal to all accrued and unpaid
        dividends on the Series A-2 Preferred Stock to be exchanged through the date
        of
        such exchange) equal to the Aggregate Payment Amount (or any amount thereof
        not
        paid by the Purchaser in cash), thereby satisfying in a cashless transaction
        both the redemption obligation of the Company referred to above and the
        Aggregate Payment Amount obligation (or any amount thereof not paid by Purchaser
        in cash) of the Purchaser in a Post-Rights Offering Purchase. Such exchange
        will
        be at a rate of one share of Common Stock for each $8.772 of Accrued Preference
        Amount of the Series A-2 Preferred Stock so exchanged (subject to any
        adjustments to the $8.772 exercise price of the Existing Rights for stock
        splits, combinations, subdivisions or other similar structural changes to
        the
        Common Stock as set forth in the Existing Rights).

       

      For
        the
        avoidance of doubt, the parties hereto acknowledge and agree that the rights
        under this Section
        11
        may only
        be exercised by, and are for the exclusive benefit of, American Real Estate
        Partnership, L.P., American Real Estate Holdings Limited Partnership and
        their
        subsidiaries.

      

      For
        example: If the amount of Common Stock to be acquired by the Purchaser following
        the rights offering was 5,000 shares and if the Purchaser delivered $10,000
        in
        cash, and the Accrued Preference Amount per share of Series A-2 Preferred
        Stock
        was $100, then the number of shares of Series A Preferred Stock to be delivered
        hereunder would be 338.6 shares, determined as follows:

      

      5,000
        shares minus ($10,000  ̧
        8.772) =
        1,140

      

      =
        3,860
        common shares remaining to be bought at $8.772 per share (an aggregate $33,860
        purchase price) which requires delivery of 338.6 shares of Series A-2 Preferred
        Shares having an Accrued Preference Amount of $100 per share.

      

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

         

      

      12.  Amendments.
        This
        Agreement may not be modified, amended or supplemented except in a writing
        signed by the parties hereto.

       

      13.  Governing
        Law.
        THIS
        AGREEMENT, THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT,
        AND
        ANY CLAIM OR CONTROVERSY DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT
        OF
        THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER
        BASED
        ON CONTRACT, TORT, OR ANY OTHER LEGAL THEORY), INCLUDING ALL MATTERS OF
        CONSTRUCTION, VALIDITY AND PERFORMANCE, SHALL IN ALL RESPECTS BE GOVERNED
        BY AND
        INTERPRETED, CONSTRUED AND DETERMINED IN ACCORDANCE WITH, THE INTERNAL LAWS
        OF
        THE STATE OF DELAWARE (WITHOUT REGARD TO ANY CONFLICTS OF LAW PROVISION THAT
        WOULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER
        JURISDICTION).

       

      14.  Jurisdiction:
        BY ITS
        EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY
        AND UNCONDITIONALLY SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF
        THE
        UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE OR THE COURTS OF
        THE
        STATE OF DELAWARE FOR ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF OR BASED
        UPON THIS AGREEMENT OR ANY MATTER RELATING TO IT, AND WAIVE ANY OBJECTION
        THAT
        SUCH PARTY MAY HAVE TO THE LAYING OF VENUE IN ANY SUCH COURT OR THAT SUCH
        COURT
        IS AN INCONVENIENT FORUM OR DOES NOT HAVE PERSONAL JURISDICTION OVER SUCH
        PARTY.

       

      15.  Specific
        Performance.
        It is
        understood and agreed by the Company and the Purchaser that money damages
        would
        not be a sufficient remedy for any breach of this Agreement by any party
        hereto
        and each non-breaching party shall be entitled, prior to termination of this
        Agreement in accordance with its terms, to specific performance and injunctive
        or other equitable relief as a remedy of any such breach, including, without
        limitation, an order of a court requiring any party to comply promptly with
        any
        of its obligations hereunder.

       

      16.  Headings.
        The
        headings of the Sections, paragraphs and subsections of this Agreement are
        inserted for convenience only and shall not affect the interpretation
        hereof.

       

      17.  Successors
        and Assigns.
        This
        Agreement is intended to bind and inure to the benefit of the parties hereto
        and
        their respective successors, assigns, heirs, executors, administrators and
        representatives. The Company shall not assign its rights, duties or obligations
        under this Agreement without the prior written consent of the Purchaser.
        The
        Purchaser shall have the right to assign its Commitment in the manner
        contemplated by Section
        2(d)
        hereof,
        provided that no such assignment to Purchaser Designees shall effect the
        Purchaser’s obligations under this Agreement. 

       

      18.  No
        Third-Party Beneficiaries.
        This
        Agreement shall be solely for the benefit of the parties hereto and no other
        person or entity shall be a third party beneficiary hereof.

       

      19.  Prior
        Negotiations; Entire Agreement.
        This
        Agreement constitutes the entire agreement of the parties and supersedes
        all
        prior negotiations with respect to the subject matter hereof, except that
        the
        parties hereto acknowledge that any confidentiality agreements heretofore
        executed among the parties shall continue in full force and effect.

       

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

         

      

      20.  Expenses.
        All
        costs and expenses incurred in connection with this Agreement shall be paid
        by
        the party incurring such cost or expense; provided,
        that in
        the event of a termination by the Company pursuant to Section
        10(b)(i),
        the
        Purchaser will reimburse the Company for all fees and expenses paid by the
        Company to Gordian Group LLC, and pay all fees and expenses owed to Gordian
        Group LLC by the Company, in each case pursuant to the terms and conditions
        of
        the Gordian Engagement Letter.

       

      21.  Counterparts.
        This
        Agreement may be executed in any number of counterparts by the parties on
        different counterparts signature pages, all of which taken together shall
        constitute one and the same agreement. Any of the parties may execute this
        Agreement by signing any such counterparts, and each such counterpart, including
        a facsimile counterpart, shall for all purposes be deemed to be an
        original.

       

      22.  Severability.
        The
        illegality, invalidity, or unenforceability of any provision of this Agreement
        under the law of any jurisdiction shall not affect its legality, validity
        or
        enforceability under the law of any other jurisdiction nor the legality,
        validity or enforceability of any other provision.

       

      23.  Notices.
        All
        notices and other communications under this Agreement shall be in writing,
        sent
        contemporaneously to all of the parties hereto, and deemed given when delivered
        by hand or by facsimile during standard business hours (from 8:00 a.m. to
        6:00
        p.m. Eastern time) at the place of receipt at the addresses and facsimile
        numbers set forth below, with a copy to each person identified thereon.

       

      
        	 	
                If
                  to the Company, to:

              
	 	 	 
	 	
                WestPoint
                  International, Inc.

              
	 	
                28
                  East 28th Street, 8th Floor

              
	 	
                New
                  York, NY 10016

              
	 	
                Fax:
                  (212) 679-2931

              
	 	
                Attention:
                  

              	Donna Edbril, 
                Vice
                  President and General Counsel

              
	 	 	 
	 	
                with
                  copy to :

              
	 	 	 
	 	
                Wolf,
                  Block, Schorr and Solis-Cohen LLP 

              
	 	
                250
                  Park Ave.

              
	 	
                New
                  York, NY 10177

              
	 	
                Attention:
                  

              	Robert E. Fischer (Fax: (212)
                672-1101)
                Martha
                  Flanders (Fax: (212) 672-1115)

              
	 	 	 
	 	
                and
                  to:

              

      

       

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

      
        	 	 	 
	 	
                Stroock
                  & Stroock & Lavan LLP 

              
	 	
                180
                  Maiden Lane 

              
	 	
                New
                  York, New York 10038

              
	 	
                Fax:
                  (212) 806-5600

              
	 	
                Attention: 

              	Melvin Epstein
                Patricia
                  Perez

              
	 	 	 
	 	
                If
                  to the Purchaser, to:

              
	 	
                American
                  Real Estate Partners

              
	 	
                445
                  Hamilton Avenue

              
	 	
                Suite
                  1210

              
	 	
                White
                  Plains, New York 10601

              
	 	
                Fax:
                  (914) 614-7001

              
	 	
                Attention:
                  

              	Felicia
                Buebel

      

       

      24.  Survival.
        All
        representations, warranties and covenants and other provisions made by the
        parties hereto shall be considered to have been relied upon by the parties
        and
        shall survive the execution, delivery and performance of this
        Agreement.

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

      IN
        WITNESS WHEREOF, the parties have caused this Subscription and Standby
        Commitment Agreement to be executed as of the date first written
        above.

       

      
        	
                WESTPOINT
                  INTERNATIONAL, INC.

              	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/ 	 	 	 
	 	
                
Name:	 	 	
              
	 	
                Title:

              	 	 	 

      

      
         

        
          	
                  AMERICAN
                    REAL ESTATE HOLDING LIMITED PARTNERSHIP

                	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	By:	/s/ 	 	 	 
	 	
                  
Name:	 	 	
                
	 	
                  Title:

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