Document:

Unassociated Document

    Exhibit
10.3

     

    REGISTRATION
RIGHTS AGREEMENT

     

    REGISTRATION
RIGHTS AGREEMENT (“Agreement”) is entered
into as of the ____ day of August, 2005, by and among WestPoint International,
Inc. (f/k/a WS Textile Co., Inc.), a Delaware corporation (the “Company”), and
the undersigned parties listed under Investor on the signature page hereto
(each, an “Investor” and collectively, the “Investors”) that have executed and
delivered this Agreement.

     

    WITNESSETH:

     

    WHEREAS,
the Investors currently hold all of the issued and outstanding securities of the
Company; and

     

    WHEREAS,
the Investors and the Company desire to enter into this Agreement to provide the
Investors with certain rights relating to the registration of shares of Common
Stock (as defined below) held by them and/or issuable upon exercise of the
Subscription Rights (as defined below) held by them, and the registration of the
Subscription Rights held by them, as applicable.

     

    NOW,
THEREFORE, in consideration of 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 agree as
follows:

     

    1.  DEFINITIONS.  The
following capitalized terms used herein have the following
meanings:

     

    “Affiliate” means,
with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person, and the term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting securities, by
contract or otherwise.

     

    “Agreement” means this
Agreement, as amended, restated, supplemented, or otherwise modified from time
to time.

     

    “Aretex” means Aretex
LLC.

     

    “Asset
Purchase Agreement” means
the Asset Purchase Agreement, dated June 23, 2005, among the
Company, New Textile One, Inc., New Textile Two, Inc., WestPoint Home, Inc.
(f/k/a Textile Co., Inc.),
WestPoint Stevens, Inc., WestPoint Stevens Inc. I, WestPoint
Stevens Stores Inc., and J.P. Stevens Enterprises Inc.

     

    “Commission” means the
Securities and Exchange Commission, or any other federal agency then
administering the Securities Act or the Exchange Act.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Common Stock” means
the Class A Common Stock, par value $0.01 per share, of the
Company.

     

    “Company” is defined
in the preamble to this Agreement.

     

    “Demand Registration”
is defined in Section 2.2.1.

     

    “Demanding Holder” is
defined in Section 2.2.1.

     

    “Distribution Date”
means the date that all of the Common Stock and Subscription Rights are
delivered in accordance with Section 3.3(c) of the Asset Purchase
Agreement.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in effect at
the time.

     

    “Governmental Body”
means any government or governmental or regulatory body thereof, or political
subdivision thereof, whether foreign, federal, state, or local, or any agency,
instrumentality or authority thereof, or any court or arbitrator (public or
private).

     

    “Initial Holder” is
defined in Section 2.1.1.

     

    “Initial Registration”
is defined in Section 2.1.1.

     

    “Indemnified Party” is
defined in Section 4.3.

     

    “Indemnifying Party”
is defined in Section 4.3.

     

    “Investor” is defined
in the preamble to this Agreement.

     

    “Investor Indemnified
Party” is defined in Section 4.1.

     

    “Maximum Number of
Shares” is defined in Section 2.2.4.

     

    “Non-Related Initial
Holder” means any Initial Holder that is not a Related Initial
Holder.

     

    “Notices” is defined
in Section 5.3.

     

    “Person” means any
individual, corporation, limited liability company, partnership, firm, joint
venture, association, joint-stock company, trust, unincorporated organization,
Governmental Body or other entity.

     

    “Piggy-Back
Registration” is defined in Section 2.3.1.

     

    “Register,” “registered” and
“registration”
mean a registration effected by preparing and filing a Registration Statement or
similar document in compliance with the requirements of the Securities Act, and
the applicable rules and regulations promulgated thereunder, and such
registration statement becoming effective.

     

    
      
        
        

      

      
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    “Registrable
Securities” means all of the shares of Common Stock owned or held by the
Investors, all of the Subscription Rights owned or held by the Investors and all
of the shares of Common Stock issuable upon the exercise of all of the
Subscription Rights owned or held by the Investors.  Registrable
Securities include any warrants, shares of capital stock or other securities of
the Company issued as a dividend or other distribution with respect to or in
exchange for or in replacement of such shares of Common Stock and/or
Subscription Rights, as applicable.  As to any particular Registrable
Securities, such securities shall cease to be Registrable Securities
when:  (a) a Registration Statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been sold, transferred, disposed of or exchanged in
accordance with such Registration Statement; (b) such securities are no
longer owned or held by the Investor; (c) such securities shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not require registration under the
Securities Act; (d) such securities shall have ceased to be outstanding, or
(e) all of the Registrable Securities owned or held by the Investor are
immediately salable under Rule 144.

     

    “Registration
Statement” means a registration statement filed by the Company with the
Commission in compliance with the Securities Act and the rules and regulations
promulgated thereunder for a public offering and sale of Common Stock (other
than a registration statement on Form S-4 or Form S-8, or its successor, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another entity).

     

    “Related Initial
Holder” means Textile Holding, LLC and any of its
Affiliates.

     

    “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.

     

    “Subscription Rights”
shall have the meaning set forth in the Asset
Purchase Agreement.

     

    “Underwriter” means a
securities dealer who purchases any Registrable Securities as principal in an
underwritten offering and not as part of such dealer’s market-making
activities.

     

    2.  REGISTRATION
RIGHTS.

     

    2.1  Initial
Registration.

     

    2.1.1.  Registration.  As
soon as reasonably practicable after the Distribution Date, the Company shall
prepare a Registration Statement for registration under the Securities Act of
all or part of the Registrable Securities and all of the shares of Common Stock
issuable upon exercise of all of the Subscription Rights that may be owned or
held by persons other than the Investors (the “Initial
Registration”). The Company will notify all holders of Registrable
Securities of the Initial Registration, and each holder of Registrable
Securities who wishes to include all or a portion of such holder’s Registrable
Securities in the Initial Registration (each such holder including shares of
Registrable Securities in such registration, an “Initial Holder”)
shall so notify the Company within fifteen (15) days after the receipt by the
holder of the notice from the Company. Each Initial Holder shall specify the
number of Registrable Securities proposed to be sold and the intended method(s)
of distribution thereof. The Company shall not be obligated to effect more than
one (1) Initial Registration under this Section 2.1.1 in respect of
Registrable Securities.

     

    
      
        
        

      

      
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    2.1.2.  Effective
Registration.  A registration will not count as an Initial
Registration until the Registration Statement filed with the Commission with
respect to such Initial Registration has been declared effective and the Company
has complied with all of its obligations under this Agreement with respect
thereto; provided, however, that if,
after such Registration Statement has been declared effective, the offering of
Registrable Securities pursuant to an Initial Registration is interfered with by
any stop order or injunction of the Commission or any other governmental agency
or court, the Registration Statement with respect to such Initial Registration
will be deemed not to have been declared effective, unless and until, such stop
order or injunction is removed, rescinded or otherwise terminated.

     

    2.1.3.  Underwritten
Offering.  If a majority-in-interest of the Non-Related Initial
Holders so elect and such holders so advise the Company within fifteen (15) days
after the receipt by the holder of the notice from the Company, the offering of
such Registrable Securities pursuant to such Initial Registration shall be in
the form of an underwritten offering. In such event, the right of any holder to
include its Registrable Securities in such registration shall be conditioned
upon such holder’s participation in such underwriting and the inclusion of such
holder’s Registrable Securities in the underwriting to the extent provided
herein. All Initial Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the Underwriter or Underwriters selected for such underwriting by a
majority-in-interest of the Non-Related Initial Holders initiating the Initial
Registration, which Underwriter or Underwriters shall be satisfactory to the
Company.

     

    2.2  Demand
Registration.

     

    2.2.1.  Request for
Registration.  At any time and from time to time on or after
the Company is eligible to utilize a registration statement on Form S-3 for
transactions involving secondary offerings under the Securities Act, the holders
of a majority-in-interest of the Registrable Securities held by the Investors,
may make a written demand for registration under the Securities Act of all or
part of their Registrable Securities (a “Demand
Registration”).  Any demand for a Demand Registration shall
specify the number of Registrable Securities proposed to be sold and the
intended method(s) of distribution thereof.  The Company will notify
all holders of Registrable Securities of the demand, and each holder of
Registrable Securities who wishes to include all or a portion of such holder’s
Registrable Securities in the Demand Registration (each such holder including
shares of Registrable Securities in such registration, a “Demanding Holder”)
shall so notify the Company within fifteen (15) days after the receipt by the
holder of the notice from the Company.  Upon any such request, the
Demanding Holders shall be entitled to have their Registrable Securities
included in the Demand Registration, subject to Section 2.2.4 and the
provisos set forth in Section 3.1.1.  The Company shall not be
obligated to effect more than one (1) Demand Registration under this
Section 2.2.1 in respect of Registrable Securities.

     

    
      
        
        

      

      
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    2.2.2.  Effective
Registration.  A registration will not count as a Demand
Registration until the Registration Statement filed with the Commission with
respect to such Demand Registration has been declared effective and the Company
has complied with all of its obligations under this Agreement with respect
thereto; provided, however, that if,
after such Registration Statement has been declared effective, the offering of
Registrable Securities pursuant to a Demand Registration is interfered with by
any stop order or injunction of the Commission or any other governmental agency
or court, the Registration Statement with respect to such Demand Registration
will be deemed not to have been declared effective, unless and until, (i) such
stop order or injunction is removed, rescinded or otherwise terminated, and (ii)
a majority-in-interest of the Demanding Holders thereafter elect to continue the
offering.

     

    2.2.3.  Underwritten
Offering.  If a majority-in-interest of the Demanding Holders
so elect and such holders so advise the Company as part of their written demand
for a Demand Registration, the offering of such Registrable Securities pursuant
to such Demand Registration shall be in the form of an underwritten offering. In
such event, the right of any holder to include its Registrable Securities in
such registration shall be conditioned upon such holder’s participation in such
underwriting and the inclusion of such holder’s Registrable Securities in the
underwriting to the extent provided herein.  All Demanding Holders
proposing to distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the Underwriter or
Underwriters selected for such underwriting by a majority-in-interest of the
holders initiating the Demand Registration, which Underwriter or Underwriters
shall be satisfactory to the Company.

     

    2.2.4.  Reduction of
Offering.  If the managing Underwriter or Underwriters for a
Demand Registration that is to be an underwritten offering advises the Company
and the Demanding Holders in writing that the dollar amount or number of
Registrable Securities which the Demanding Holders desire to sell, taken
together with all other shares of Common Stock or other securities which the
Company desires to sell and the shares of Common Stock, if any, as to which
registration has been requested pursuant to written contractual piggy-back
registration rights held by other shareholders of the Company who desire to
sell, exceeds the maximum dollar amount or maximum number of shares that can be
sold in such offering without adversely affecting the proposed offering price,
the timing, the distribution method, or the probability of success of such
offering (such maximum dollar amount or maximum number of shares, as applicable,
the “Maximum Number of
Shares”), then the Company shall include in such
registration:  (i) first, the Registrable Securities as to which
Demand Registration has been requested by the Demanding Holders (pro rata in accordance
with the number of Registrable Securities which such Demanding Holder has
requested be included in such registration, regardless of the number of
Registrable Securities held by each Demanding Holder) that can be sold without
exceeding the Maximum Number of Shares; (ii) second, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clause (i),
the shares of Common Stock or other securities that the Company desires to sell
that can be sold without exceeding the Maximum Number of Shares; (iii) third, to
the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares of Common Stock for the account of
other persons that the Company is obligated to register pursuant to written
contractual arrangements with such persons and that can be sold without
exceeding the Maximum Number of Shares; and (v) fourth, to the extent that the
Maximum Number of Shares have not been reached under the foregoing clauses (i),
(ii), and (iii), the shares of Common Stock that other shareholders desire to
sell that can be sold without exceeding the Maximum Number of
Shares.

     

    
      
        
        

      

      
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    2.3  Piggy-Back
Registration.

     

    2.3.1.  Piggy-Back
Rights.  If within two (2) years after the Distribution Date,
the Company proposes to file a Registration Statement under the Securities Act
with respect to an offering of equity securities, or securities or other
obligations exercisable or exchangeable for, or convertible into, equity
securities, by the Company for its own account or for shareholders of the
Company for their account (or by the Company and by shareholders of the Company
including, without limitation, pursuant to Section 2.1), other than a
Registration Statement (i) filed in connection with any employee stock option or
other benefit plan, (ii) for an exchange offer or offering of securities solely
to the Company’s existing shareholders, (iii) for an offering of debt that is
convertible into equity securities of the Company, (iv) for a dividend
reinvestment plan or (v) filed in connection with the Company’s initial public
offering (other than the Initial Registration) for equity to be issued by the
Company, then the Company shall (x) give written notice of such proposed filing
to the holders of Registrable Securities as soon as practicable but in no event
less than ten (10) days before the anticipated filing date, which notice shall
describe the amount and type of securities to be included in such offering, the
intended method(s) of distribution, and the name of the proposed managing
Underwriter or Underwriters, if any, of the offering, and (y) offer to the
holders of Registrable Securities in such notice the opportunity to register the
sale of such number of Registrable Securities as such holders may request in
writing within five (5) days following receipt of such notice (a “Piggy-Back
Registration”).  The Company shall cause such Registrable
Securities to be included in such registration and will request the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included on the same terms and conditions as any similar securities of the
Company and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method(s) of distribution
thereof.  All holders of Registrable Securities proposing to
distribute their securities through a Piggy-Back Registration that involves an
Underwriter or Underwriters shall enter into an underwriting agreement in
customary form with the Underwriter or Underwriters selected for such Piggy-Back
Registration.

     

    2.3.2.  Reduction of
Offering.  If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the
Company and the holders of Registrable Securities in writing that the dollar
amount or number of shares of Common Stock which the Company desires to sell,
taken together with shares of Common Stock, if any, as to which registration has
been demanded pursuant to written contractual arrangements with persons other
than the holders of Registrable Securities hereunder, the Registrable Securities
as to which registration has been requested under this Section 2.3, and the
shares of Common Stock, if any, as to which registration has been requested
pursuant to the written contractual piggy-back registration rights of other
shareholders of the Company, exceeds the Maximum Number of Shares, then the
Company shall include in any such registration:

     

    
      
        
        

      

      
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    (i)  If the
registration is undertaken for the Company’s account: (A) first, the shares of
Common Stock or other securities that the Company desires to sell that can be
sold without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing
clause (A), the shares of Common Stock, if any, including the Registrable
Securities, as to which registration has been requested pursuant to written
contractual piggy-back registration rights of security holders (pro rata in
accordance with the number of shares of Common Stock which each such person has
actually requested to be included in such registration, regardless of the number
of shares of Common Stock with respect to which such persons have the right to
request such inclusion) that can be sold without exceeding the Maximum Number of
Shares; and

     

    (ii)  If the
registration is a “demand” registration undertaken at the demand of persons
other than the holders of Registrable Securities pursuant to written contractual
arrangements with such persons, (A) first, the shares of Common Stock for the
account of the demanding persons that can be sold without exceeding the Maximum
Number of Shares; (B) second, to the extent that the Maximum Number of Shares
has not been reached under the foregoing clause (A), the shares of Common Stock
or other securities that the Company desires to sell that can be sold without
exceeding the Maximum Number of Shares; and (C) third, to the extent that the
Maximum Number of Shares has not been reached under the foregoing clauses (A)
and (B), the Registrable Securities as to which registration has been requested
under this Section 2.3 (pro rata in accordance
with the number of Registrable Securities held by each such holder); and
(D) fourth, to the extent that the Maximum Number of Shares has not been
reached under the foregoing clauses (A), (B) and (C), the shares of Common
Stock, if any, as to which registration has been requested pursuant to written
contractual piggy-back registration rights which such other shareholders desire
to sell that can be sold without exceeding the Maximum Number of
Shares.

     

    2.3.3.  Withdrawal.  Any
holder of Registrable Securities may elect to withdraw such holder’s request for
inclusion of Registrable Securities in any Piggy-Back Registration by giving
written notice to the Company of such request to withdraw prior to the
effectiveness of the Registration Statement.  The Company may also
elect to withdraw a registration statement at any time prior to the
effectiveness of the Registration Statement.  Notwithstanding any such
withdrawal, the Company shall pay all expenses incurred by the holders of
Registrable Securities in connection with such Piggy-Back Registration as
provided in Section 3.3.

     

    3.  REGISTRATION
PROCEDURES.

     

    3.1  Filings;
Information.  Whenever the Company is required to effect the
registration of any Registrable Securities pursuant to Section 2, the
Company shall seek to effect the registration and sale of such Registrable
Securities in accordance with the intended method(s) of distribution thereof as
expeditiously as practicable, and in connection with any such
request:

     

    3.1.1.  Filing Registration
Statement.  The Company shall in an expeditious manner prepare
and file with the Commission a Registration Statement on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
and which form shall be available for the sale of all Registrable Securities to
be registered thereunder in accordance with the intended method(s) of
distribution thereof, and shall seek to cause such Registration Statement to
become and remain effective for the period required by Section 3.1.3; provided, however, that the
Company shall only be obligated to file the Demand Registration on a Form S-3 in
accordance with the provisions of Rule 415 of the Securities Act, and provided further, however,  that
the Company shall have the right to defer the Demand Registration for up to
ninety (90) days, and any Piggy-Back Registration for such period as may be
applicable to deferment of any demand registration to which such Piggy-Back
Registration relates, in each case if the Company shall furnish to the holders a
certificate signed by the Chief Executive Officer of the Company stating that,
in the good faith judgment of the Board of Directors of the Company, it would be
materially detrimental to the Company and its shareholders for such Registration
Statement to be effected at such time.

     

    
      
        
        

      

      
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    3.1.2.  Copies.  The
Company shall, prior to filing a Registration Statement or prospectus, or any
amendment or supplement thereto, furnish without charge to the holders of
Registrable Securities included in such registration copies of such Registration
Statement as proposed to be filed, each amendment and supplement to such
Registration Statement (in each case including all exhibits thereto and
documents incorporated by reference therein), the prospectus included in such
Registration Statement (including each preliminary prospectus), and such other
documents as the holders of Registrable Securities included in such registration
may request in order to facilitate the disposition of the Registrable Securities
owned by such holders.

     

    3.1.3.  Amendments and
Supplements.  As to the Initial Registration, the Company shall
prepare and file with the Commission such amendments, including post-effective
amendments, and supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective and in compliance with the provisions of the Securities Act
for a period of ninety (90) days from the date the Registration Statement is
first declared effective by the Commission (the “90-Day Period”) or such shorter
period that will terminate when all Registrable Securities covered by the
Registration Statement (a) have been (i) sold pursuant thereto in accordance
with the intended method(s) of distribution set forth in the Registration
Statement, (ii) transferred pursuant to Rule 144 under the Securities Act or
(iii) otherwise transferred in a manner that results in the delivery of new
securities not subject to the transfer restrictions under the Securities Act or
(b) become salable under Rule 144. Immediately after the 90-Day Period, the
Company will file a post-effective amendment to the Initial Registration for the
deregistration of any unsold Registrable Shares. As to the Demand Registration,
the Company shall prepare and file with the Commission such amendments,
including post-effective amendments, and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective and in compliance with the provisions
of the Securities Act for a period of two (2) years from the date the
Registration Statement is first declared effective by the Commission or such
shorter period (a) that is determined by the holders of a majority-in-interest
of the Registrable Securities held by the Investors or (b) that will terminate
when all Registrable Securities covered by the Registration Statement have been
(i) sold pursuant thereto in accordance with the intended method(s) of
distribution set forth in the Registration Statement or (ii) transferred
pursuant to Rule 144 under the Securities Act.  As to a Piggy-Back
Registration, the Company shall prepare and file with the Commission such
amendments, including post-effective amendments, and supplements to such
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep such Registration Statement effective and in compliance with
the provisions of the Securities Act for a period that will be determined by the
Company.

     

    
      
        
        

      

      
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    3.1.4.  Notification.  After
the filing of a Registration Statement, the Company shall promptly, and in no
event more than two (2) business days after such filing, notify the holders of
Registrable Securities included in such Registration Statement of such filing,
and shall further notify such holders promptly and confirm such advice in
writing in all events within two (2) business days of the occurrence of any of
the following:  (i) when such Registration Statement becomes
effective; (ii) when any post-effective amendment to such Registration
Statement becomes effective; (iii) the issuance or threatened issuance by
the Commission of any stop order (and the Company shall take all actions
required to prevent the entry of such stop order or to remove it if entered);
and (iv) any request by the Commission for any amendment or supplement to
such Registration Statement or any prospectus relating thereto or for additional
information or of the occurrence of an event requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of the securities covered by such Registration Statement, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly make available to the holders of
Registrable Securities included in such Registration Statement any such
supplement or amendment; except that before filing with the Commission a
Registration Statement or prospectus or any amendment or supplement thereto,
including documents incorporated by reference, the Company shall furnish to the
holders of Registrable Securities included in such Registration Statement copies
of all such documents proposed to be filed sufficiently in advance of filing to
provide such holders with a reasonable opportunity to review such documents and
comment thereon, and the Company shall not file any Registration Statement or
prospectus or amendment or supplement thereto, including documents incorporated
by reference, to which such holders shall object.

     

    3.1.5.  State Securities Laws
Compliance.  The Company shall seek to (i) register or
qualify the Registrable Securities covered by the Registration Statement under
such securities or “blue sky” laws of such jurisdictions in the United States as
the holders of Registrable Securities included in such Registration Statement
(in light of their intended plan of distribution) may reasonably request and
(ii) take such action necessary to cause such Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
necessary or advisable to enable the holders of Registrable Securities included
in such Registration Statement to consummate the disposition of such Registrable
Securities in such jurisdictions; provided, however, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (e) or subject itself to taxation in any such
jurisdiction.

     

    3.1.6.  Records.  The
Company shall make available for inspection by the holders of Registrable
Securities included in such Registration Statement, any Underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained by any holder of Registrable
Securities included in such Registration Statement or any Underwriter, all
financial and other records, pertinent corporate documents and properties of the
Company, as shall be necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to
supply all information requested by any of them in connection with such
Registration Statement.

     

    
      
        
        

      

      
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    3.1.7.  Earnings
Statement.  The Company shall comply with all applicable rules
and regulations of the Commission and the Securities Act, and make available to
its shareholders, as soon as practicable, an earnings statement covering a
period of twelve (12) months, beginning within three (3) months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.

     

    3.2  Obligation to Suspend
Distribution.  Upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3.1.4(iv), each
holder of Registrable Securities included in any registration shall immediately
discontinue disposition of such Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such holder
receives the supplemented or amended prospectus contemplated by
Section 3.1.4(iv) and, if so directed by the Company, each such holder will
deliver to the Company all copies, other than permanent file copies then in such
holder’s possession, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice.

     

    3.3  Registration
Expenses.  The Company shall bear all of its costs and expenses
incurred in connection with the Initial Registration pursuant to
Section 2.1, the Demand Registration pursuant to Section 2.2 and any
Piggy-Back Registration pursuant to Section 2.3, and all expenses incurred
in performing or complying with its other obligations under this Agreement,
whether or not the Registration Statement becomes effective, including, without
limitation: (i) all registration and filing fees; (ii) fees and
expenses of compliance with securities or “blue sky” laws (including fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities); (iii) printing expenses; (iv) the Company’s
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees); and (v)  fees and disbursements of
counsel for the Company and fees and expenses for independent certified public
accountants retained by the Company. The Company shall have no obligation to pay
any costs and expenses of the holders of the Registrable Securities, including,
without limitation, fees for counsel and other parties representing such holders
and any underwriting discounts or selling commissions attributable to the
Registrable Securities being sold by the holders thereof, which fees and
underwriting discounts or selling commissions shall be borne by such
holders.  Additionally, in an underwritten offering, all selling
shareholders and the Company shall bear the expenses of the underwriter pro rata
in proportion to the respective amount of shares each is selling in such
offering.

     

    3.4  Information.  The
holders of Registrable Securities shall provide such information as may
reasonably be requested by the Company, or the managing Underwriter, if any, in
connection with the preparation of any Registration Statement, including
amendments and supplements thereto, in order to effect the registration of any
Registrable Securities under the Securities Act pursuant to Section 2 and
in connection with the Company’s obligation to comply with federal and
applicable state securities laws.

     

    
      
        
        

      

      
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    4.  INDEMNIFICATION
AND CONTRIBUTION.

     

    4.1  Indemnification by the
Company.  The Company agrees to indemnify and hold harmless
each Investor identified in the Registration Statement as a selling security
holder of Registrable Securities and each person, if any, who controls such
Investor (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act), from and against any expenses, losses,
judgments, claims, damages or liabilities, whether joint or several, arising out
of or based upon any untrue statement (or allegedly untrue statement) of a
material fact contained in any Registration Statement under which the sale of
such Registrable Securities was registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration
Statement, or arising out of or based upon any omission (or alleged omission) to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that the
Company will not be liable in any such case to the extent that any such expense,
loss, claim, damage or liability arises out of or is based upon any untrue
statement or allegedly untrue statement or omission or alleged omission made in
such Registration Statement, preliminary prospectus, final prospectus, or
summary prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by such
Investor expressly for use therein.

     

    4.2  Indemnification by the
Investors.  Each Investor agrees, as a consequence of the
inclusion of any of its Registrable Securities in a Registration Statement to
indemnify and hold harmless the Company, its directors and officers and each
person, if any, who controls the Company (within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act), against any losses,
claims, judgments, damages or liabilities, whether joint or several, insofar as
such losses, claims, judgments, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or allegedly untrue
statement of a material fact contained in any Registration Statement under which
the sale of such Registrable Securities was registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or the alleged
omission to state a material fact required to be stated therein or necessary to
make the statement therein not misleading, if the statement or omission was made
in reliance upon and in conformity with information furnished in writing to the
Company by such Investor expressly for use therein, and shall reimburse the
Company, its directors and officers, and each such controlling person for any
legal or other expenses reasonably incurred by any of them in connection with
investigation or defending any such loss, claim, damage, liability or
action.  Each Investor’s indemnification obligations hereunder shall
be several and not joint and shall be limited to the amount of any net proceeds
actually received by such Investor.

     

    4.3  Conduct of Indemnification
Proceedings.  Promptly after receipt by any person of any
notice of any loss, claim, damage or liability or any action in respect of which
indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the
“Indemnified
Party”) shall, if a claim in respect thereof is to be made against any
other person for indemnification hereunder, notify such other person (the “Indemnifying Party”)
in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the
failure by the Indemnified Party to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability which the Indemnifying Party
may have to such Indemnified Party hereunder, except and solely to the extent
the Indemnifying Party is actually prejudiced by such failure.  If the
Indemnified Party is seeking indemnification with respect to any claim or action
brought against the Indemnified Party, then the Indemnifying Party shall be
entitled to participate in such claim or action, and, to the extent that it
wishes, jointly with all other Indemnifying Parties, to assume control of the
defense thereof with counsel satisfactory to the Indemnified
Party.  After notice from the Indemnifying Party to the Indemnified
Party of its election to assume control of the defense of such claim or action,
the Indemnifying Party shall not be liable to the Indemnified Party for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided, however, that in any
action in which both the Indemnified Party and the Indemnifying Party are named
as defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the
Indemnified Party and its controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Indemnified Party against the Indemnifying Party, with the fees and expenses of
such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, consent to entry of judgment or
effect any settlement of any claim or pending or threatened proceeding in
respect of which the Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such judgment or settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such claim or
proceeding.

     

    
      
        
        

      

      
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    4.4  Contribution.

     

    4.4.1.  If the
indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is
unavailable to any Indemnified Party in respect of any loss, claim, damage,
liability or action referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the relative
fault of the Indemnified Parties and the Indemnifying Parties in connection with
the actions or omissions which resulted in such loss, claim, damage, liability
or action, as well as any other relevant equitable
considerations.  The relative fault of any Indemnified Party and any
Indemnifying Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such Indemnified Party or such Indemnifying Party and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.

     

    4.4.2.  The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding Section
4.4.1.  The amount paid or payable by an Indemnified Party as a result
of any loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim.  Notwithstanding the provisions of this Section 4.4, no
holder of Registrable Securities shall be required to contribute any amount in
excess of the dollar amount of the net proceeds (after payment of any
underwriting fees, discounts, commissions or taxes) actually received by such
holder from the sale of Registrable Securities which gave rise to such
contribution obligation.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.

     

    
      
        
        

      

      
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    5.  MISCELLANEOUS.

     

    5.1  Other Registration
Rights.  The Company represents and warrants that no person,
other than a holder of the Registrable Securities, has any right to require the
Company to register any shares of the Company’s capital stock for sale or to
include shares of the Company’s capital stock in any registration filed by the
Company for the sale of shares of capital stock for its own account or for the
account of any other person (a “Registration Right”).  Notwithstanding
anything to the contrary, the Company may grant anytime after the date hereof
one or more Registration Rights.

     

    5.2  Assignment; No Third Party
Beneficiaries.  This Agreement and the rights, duties and
obligations of the Company hereunder may not be assigned or delegated by the
Company in whole or in part. This Agreement and the rights, duties and
obligations of the holders of Registrable Securities hereunder may not be
assigned or delegated by such holder of Registrable Securities in whole or in
part without the consent of the Company which consent may be withheld in the
Company’s sole discretion. Any such permitted assignee shall be deemed an
Investor for purposes of the rights, duties and obligations set forth in this
Agreement. In the event Aretex transfers any Registrable Securities to any of
its Affiliates, such Affiliate shall be deemed to be an Investor for all
purposes under this Agreement and  any shares of Common Stock acquired
by such Affiliate upon exercise of Subscription Rights shall be deemed to be
Registrable Securities.  This Agreement is not intended to confer any
rights or benefits on any persons that are not party hereto other than as
expressly set forth in Article 4.

     

    5.3  Notices. All notices,
demands, requests, consents, approvals or other communications (collectively,
“Notices”)
required or permitted to be given hereunder or which are given with respect to
this Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to such
other address as such party shall have specified most recently by written
notice.  Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile; provided, that if
such service or transmission is not on a business day or is after normal
business hours, then such notice shall be deemed given on the next business
day.  Notice otherwise sent as provided herein shall be deemed given
on the next business day following timely delivery of such notice to a reputable
air courier service with an order for next-day delivery.

     

    

    
      
        
        

      

      
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    To the
Company:

    

    WestPoint
International, Inc.

    507 West
10th
Street

    WestPoint,
Georgia 31833

    Attention:
President

    Attention:
General Counsel

    

    and

    

    Textile
Holding LLC

    c/o
American Real Estate Holdings Limited Partnership

    100 South
Bedford Road

    Mt.
Kisco, New York 10549

    Attention:
John Weber

    

    with a
copy to:

    

    Sonnenschein
Nath & Rosenthal LLP

    1221
Avenue of the Americas

    New York,
New York 10020

    Attn:
Peter Wolfson

    

    

    To an
individual Investor:

    

    At the
address set forth below the signature line of such investor set forth this
Agreement.

    

    5.4  Severability. This
Agreement shall be deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or enforceability of
this Agreement or of any other term or provision hereof.  Furthermore,
in lieu of any such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this Agreement a provision
as similar in terms to such invalid or unenforceable provision as may be
possible and be valid and enforceable.

     

    5.5  Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.

     

    5.6  Entire
Agreement.  This Agreement (including all agreements entered
into pursuant hereto and all certificates and instruments delivered pursuant
hereto and thereto) constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede all prior and contemporaneous
agreements, representations, understandings, negotiations and discussions
between the parties, whether oral or written.

     

    5.7  Modifications and
Amendments.  No amendment, modification or termination of this
Agreement shall be binding upon any party unless executed in writing by such
party and the Company.  No amendment, modification or termination of
this Agreement shall be binding on all the parties unless executed in writing by
the Company, the Related Initial Holders and a majority-in-interested of the
Non-Related Initial Holders that beneficially own Registrable Securities at the
time of such agreement.

     

    
      
        
        

      

      
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    5.8  Titles and
Headings.  Titles and headings of sections of this Agreement
are for convenience only and shall not affect the construction of any provision
of this Agreement.

     

    5.9  Waivers and
Extensions.  Any party to this Agreement may waive any right,
breach or default which such party has the right to waive, provided that such
waiver will not be effective against the waiving party unless it is in writing,
is signed by such party, and specifically refers to this
Agreement.  Waivers may be made in advance or after the right waived
has arisen or the breach or default waived has occurred.  Any waiver
may be conditional.  No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof nor of any other agreement or provision herein
contained.  No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.

     

    5.10  Remedies
Cumulative.  In the event that the Company fails to observe or
perform any covenant or agreement to be observed or performed under this
Agreement, the Investor or any other holder of Registrable Securities may
proceed to protect and enforce its rights by suit in equity or action at law
upon the posting of a sufficient bond, whether for specific performance of any
term contained in this Agreement or for an injunction against the breach of any
such term or in aid of the exercise of any power granted in this Agreement or to
enforce any other legal or equitable right, or to take any one or more of such
actions, without being required to post a bond.  None of the rights,
powers or remedies conferred under this Agreement shall be mutually exclusive,
and each such right, power or remedy shall be cumulative and in addition to any
other right, power or remedy, whether conferred by this Agreement or now or
hereafter available at law, in equity, by statute or otherwise.

     

    5.11  Governing Law. This
Agreement shall be governed by, interpreted under, and construed in accordance
with the internal laws of the State of New York applicable to agreements made
and to be performed within the State of New York, without giving effect to any
choice-of-law provisions thereof that would compel the application of the
substantive laws of any other jurisdiction.

     

    5.12  Waiver of Trial by
Jury. Each party hereby irrevocably and unconditionally waives the right
to a trial by jury in any action, suit, counterclaim or other proceeding
(whether based on contract, tort or otherwise) arising out of, connected with or
relating to this Agreement, the transactions contemplated hereby, or the actions
of the Investor in the negotiation, administration, performance or enforcement
hereof.

     

    
      
        
        

      

      
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    IN WITNESS WHEREOF, the
parties have caused this Registration Rights Agreement to be executed and
delivered by their duly authorized representatives as of the date first written
above.

     

    WestPoint International,
Inc.

    a
Delaware corporation

    

    

    By: /s/ Jon
Weber__________________________

    Name:  Jon Weber

    Title:   President

    

    

    INVESTORS:

     

    
      16SUBSCRIPTION
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 Holdings 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.

     

    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);

    
      
         

      

      
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2-

        
          

        

      

      
         

      

    

     

    (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.

     

    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.

     

    
      
         

      

      
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    (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.

     

    (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:

     

    
      
         

      

      
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    (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.

     

    (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.

     

    
      
         

      

      
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    (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.

     

    (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.”

    
      
         

      

      
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    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.

     

    (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”).

     

    
      
         

      

      
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    (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.           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: (A)
modify, restrict or prohibit, in whole or in part, (x) the terms of, or
consummation of, the Transactions or the transactions contemplated hereby, or
(y) the Board Reconstitution, or 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 (B) 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”);

     

    
      
         

      

      
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    (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.

     

    (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: (A)
modify, restrict or prohibit, in whole or in part, (x) the terms of, or
consummation of, the Transactions or the transactions contemplated hereby or,
(y) the Board Reconstitution, or 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 (B) 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.

     

    
      
        
        

      

      
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    (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.

     

    (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.

     

    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 (which term as used here and throughout this Agreement, shall
mean 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:

    

    
      
        
        

      

      
        -
10-

        
          

        

      

      
        
        

      

    

     

    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.

    

    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.

     

    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.

     

    
      
         

      

      
        -
11-

        
          

        

      

      
         

      

    

     

    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:

                        
	 
      
	
                          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

                        

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        -
12-

        
          

        

      

      
        
        

      

    

     

    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.

     

    *  *  *  *

     

    
      
         

      

      
        -
13-

        
          

        

      

      
         

      

    

    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/ Joseph Pennacchio

              
	 
      	
                Name:
      Joseph Pennacchio

              
	 
      	
                Title:  Chief
      Executive Officer

              

      

    

    

    
      
        	
                AMERICAN
      REAL ESTATE HOLDINGS LIMITED PARTNERSHIP

              
	
                By:  American
      Property Investors, Inc., its general partner

              
	 
      
	
                By:

              	
                /s/  Keith
  Meister

              
	 
      	
                Name:
      Keith Meister

              
	 
      	
                Title:  Principal
      Executive Officer

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