Document:

Exhibit 4.26

 

GOLDMAN, SACHS &
CO.

 

PRIVATE &
CONFIDENTIAL

 

February 13, 2008

 

FOAMEX INTERNATIONAL INC.

1000 Columbia Avenue

Linwood, Pennsylvania 19061

 

Ladies and Gentlemen:

 

Reference is hereby made to the
First Lien Term Credit Agreement, dated as of February 12, 2007, by and
among Foamex L.P., as Borrower (the “Borrower”), Foamex International Inc., as
Parent Guarantor (“Holdings”), Bank of America, N.A., as Administrative Agent
and Collateral Agent (the “Administrative Agent”), and the lenders and other
parties named therein, and the Second Lien Term Credit Agreement, dated as of February 12,
2007, by and among the Borrower, Holdings, the Administrative Agent and the
lenders and other parties named therein (together, the “Credit Agreements”) and
the Revolving Credit Agreement, dated as of February 12, 2007, by and
among the Borrower, Holdings and the other Guarantors named thereto, the
Administrative Agent and the lenders and other parties named thereto (the “Revolver”).  Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Credit Agreements or
Revolver.

 

In connection with the Borrower’s compliance with its
obligations under Section 7.12 of the Credit Agreements and Section 7.25
of the Revolver with respect to each of its fiscal quarters in its 2008 fiscal
year and with respect to its first fiscal quarter in its 2009 fiscal year and
upon the basis of the representations and warranties contained in Annex A
hereto, we hereby agree, subject to the terms and conditions of this Letter
Agreement, to purchase from time to time upon receipt of a Notice (as defined
below), at the option of Holdings, for cash Securities (as defined below) of
Holdings in an aggregate amount up to 27.940725% of the total amount estimated in
good faith by Holdings to be necessary to facilitate the Borrower’s ability
pursuant to Section 8.02(b) of the Credit Agreements or Section 9.2(d) of
the Revolver, as applicable, to comply with its financial covenants under Section 7.12
of the Credit Agreements or Section 7.25 of the Revolver, as applicable,
with respect to the relevant quarter (each, a “QCS Transaction”).  “Securities” shall mean, at our election,
which election shall be made within two business days of the receipt of the
Notice (as defined below), (1) shares of Series D Preferred Stock of
Holdings (the “Series D Preferred Stock”) having the terms set forth in
the Certificate of Designations attached as Annex B hereto (the “Series D
Certificate of Designations”), (2) shares of Series E Preferred Stock
of Holdings (the “Series E Preferred Stock”) having the terms set forth in
the Certificate of Designations attached as Annex C hereto (the “Series E
Certificate of Designations”) or (3) a combination of Series D
Preferred Stock and Series E Preferred Stock.  The total amount referred to in this Letter
Agreement shall not exceed $5,588,145.00 in the aggregate (the “Maximum 

 

 

Obligation”). 
The purchase price for the Series D Preferred Stock or the Series E
Preferred Stock shall be $1,000 per share. 
The Borrower shall use any contribution from Holdings from
the proceeds from any issuance and sale of Securities under this Letter
Agreement only for the purpose of funding ordinary course expenditures, and not
to prepay any debt (whether revolver, term or other).

 

Certain representations and
warranties made by us and Holdings are set forth in Annex A hereto.

 

We agree to purchase and pay
for the Securities hereunder in cash by wire transfer of immediately available
funds to a bank account designated by Holdings upon a 3 business day prior
written notice from Holdings to us specifying the number of shares of the
Securities to be purchased up to the Maximum Obligation (the “Notice”) and sent
to us at Goldman, Sachs & Co., 85 Broad Street, 29th Floor, New York,
New York 10004, Attention:  Sandip
Khosla, Facsimile:  (212) 428-4769,
Telephone: (212) 357-6979, E-mail: sandip.khosla@gs.com.

 

Our obligation to purchase
shares of Securities under this Letter Agreement is subject to the condition
that at the time a Notice is delivered by Holdings hereunder, (i) the
Borrower be in compliance with its obligation (determined as of the time the
Notice is delivered) to deliver financial statements under Section 6.01(a) and
(b) under the Credit Agreements and Section 5.1(a) and (b) of
the Revolver and (ii) there be no Event of Default under the Credit
Agreements or the Revolver that cannot be cured (as estimated in good faith by
Holdings) pursuant to Section 8.02(b) of the Credit Agreements or Section 9.2(d) of
the Revolver with proceeds from the issuance of Securities pursuant to this
Letter Agreement (together with the other Letter Agreements executed at
approximately the same time as this Letter Agreement).

 

As consideration for the option
granted to Holdings to require Goldman, Sachs & Co. (“Investor”) to
purchase Securities pursuant to this Letter Agreement, Holdings hereby agrees
to pay Investor a premium (the “Premium”) in an amount equal to 5% of the
Maximum Obligation, payable in shares of common stock of Holdings to be issued
to Investor at the time of the earliest of (i) the first issuance of
Securities under this Letter Agreement, (ii) the consummation of the
Rights Offering (as defined in the Series D Certificate of Designations)
and (iii) the termination of this Letter Agreement.  The number of shares of common stock of
Holdings to be issued shall be calculated based upon the Average Trading Price (as defined in the Series D Certificate of
Designations, and subject to the adjustments set forth therein) of the common
stock of Holdings for the thirty-Trading Day (as defined in the Series D
Certificate of Designations) period ending on the fifth Trading Day immediately
preceding the earliest of (i), (ii) and (iii) above.  Holdings and its subsidiaries shall
also pay all reasonable fees and expenses incurred by us in connection with the
consideration and implementation of each QCS Transaction.

 

This Letter Agreement shall
automatically terminate upon the earliest of (a) 11:59 p.m. on May 20,
2009, (b) 11:59 p.m.
on the day that is ten days after the date on which the financial statements of
Borrower as of, and for the fiscal quarter ended March 29, 

 

2

 

2009, are
required to be delivered to the Administrative Agent pursuant to the Credit
Agreements and the Revolver, (c) the date on which Investor has purchased
the Maximum Obligation of Securities under this Letter Agreement and (d) the
date on which a Rights Offering (as defined in the Certificate of Designations)
is consummated.

 

This Letter Agreement is
intended to be binding on the parties and shall be governed by, and construed
in accordance with, the laws of the State of New York.  To the fullest extent permitted by applicable
law, each party hereto (i) agrees that any claim, action or proceeding by
such party seeking any relief whatsoever arising out of, or in connection with,
this Letter Agreement or the transactions contemplated hereby shall be brought
only in the United States District Court for the Southern District of New York
and in any New York State court located in the Borough of Manhattan and not in
any other state or federal court in the United States of America or any court
in any other country, (ii) agrees to submit to the exclusive jurisdiction
of such courts located in the State of New York for purposes of all legal
proceedings arising out of, or in connection with, this Letter Agreement or the
transactions contemplated hereby and (iii) irrevocably waives any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.  The parties hereto hereby irrevocably waive,
to the fullest extent permitted by applicable law, any and all right to trial
by jury in any legal proceeding arising out of or relating to this Letter
Agreement.

 

3

 

This Letter Agreement
constitutes the entire agreement and supersedes all other prior agreements,
both written and oral, among the parties with respect to the subject matter
hereof.  This Letter Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original of this Letter Agreement and all of which, taken together, shall be
deemed to constitute one and the same Letter Agreement.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  GOLDMAN, SACHS &
  CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed to on February 13, 2008 by:

  	
   

  
	
   

  	
   

  
	
  FOAMEX INTERNATIONAL INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
					

 

4

 

ANNEX A

 

I.              Representations and Warranties of
Holdings.

 

Holdings
represents and warrants to, and agrees with, Investor as set forth below.  Each representation, warranty and agreement
set forth in this Annex A is made as of the date hereof and as of any issue
date of the Securities:

 

(a)           Each of
Holdings and its Subsidiaries (as defined below) has been duly organized and is
validly existing as a corporation or other form of entity in good standing
under the laws of its state of organization, with the requisite power and
authority to own its properties and conduct its business as currently
conducted.  Each of Holdings and its
Subsidiaries has been duly qualified as a foreign corporation or other form of
entity for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except to the extent the failure
to be so qualified or be in good standing has not had or could not reasonably
be expected to have, individually or in the aggregate, a material adverse
effect on the business, assets, liabilities, condition (financial or otherwise)
or results of operations of Holdings and its Subsidiaries taken as a whole or
on the ability of Holdings to consummate the transactions contemplated by this
Letter Agreement.  For the purposes of
this Letter Agreement, a “Subsidiary” of any person means, with respect to such
person, any corporation, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests, has the power to elect a majority of the board of directors
or similar governing body, or has the power to direct the business and
policies.

 

(b)           Holdings
has the requisite corporate power and authority to enter into, execute, deliver
and perform its obligations under this Letter Agreement.  Subject to the approval of the Series E
Certificate of Designations by the Board of Directors of Holdings and, subject
to the filing of the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, with the Secretary of State
of Delaware pursuant to Section 103 of the Delaware General Corporation
Law, Holdings and its Subsidiaries have taken all necessary corporate action
required for the due authorization, execution, delivery and performance by each
of them of this Letter Agreement, including having obtained the approval of the
boards of directors of Holdings and, where required, such Subsidiaries and the
approval of the special committee of the board of directors of Holdings formed
in connection with this Letter Agreement and related transactions.

 

(c)           This
Letter Agreement has been duly and validly executed and delivered by Holdings,
and constitutes a valid and binding obligation of Holdings, enforceable against
Holdings in accordance with its terms.

 

(d)           Subject
to filing the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, with the Secretary of State
of Delaware pursuant to Section 103 of the Delaware General Corporation
Law and subject to approval of the Series E Certificate of Designations by
the Board of Directors of 

 

A-1

 

Holdings
under the Delaware General Corporation Law, the issuance of the Securities has
been duly and validly authorized and, if and when issued pursuant to the terms of this Letter
Agreement and the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, will be duly and validly
issued, fully paid and non-assessable, and free and clear of all taxes, liens,
preemptive rights, rights of first refusal, subscription and similar
rights.  The shares of common stock of
Holdings (the “Common Stock”) issuable in satisfaction of the Premium and
initially issuable upon conversion of the Series D Preferred Stock have been duly and validly authorized and, when
issued in satisfaction of the Premium or when issued upon conversion of
the Series D Preferred Stock, will be validly issued, fully paid and
nonassessable, and free and clear of all taxes, liens, preemptive rights,
rights of first refusal, subscription and similar rights; and the Board of
Directors of Holdings has duly and validly adopted resolutions reserving such
shares of Common Stock for issuance in satisfaction of the Premium and upon
conversion of the Series D Preferred Stock.

 

(e)           Except
for the Securities, stock options and restricted stock of Holdings’ employees
and directors and a Rights Offering (as defined in the Series D
Certificate of Designations) to all shareholders of Holdings, there are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever to which Holdings is a
party relating to issued or unissued capital stock of Holdings, or any commitments
of any character whatsoever relating to issued or unissued capital stock of
Holdings or pursuant to which Holdings is or may become bound to issue or grant
additional shares of its capital stock or related subscription rights, options,
warrants, convertible or exchangeable securities or other rights, or to grant
preemptive rights.

 

(f)            All the
outstanding shares of capital stock of each Subsidiary of Holdings have been
duly and validly authorized and issued and are fully paid and nonassessable,
and all outstanding shares of capital stock of Holdings’ Subsidiaries are owned
by Holdings either directly or through wholly owned Subsidiaries free and clear
of any taxes, liens, preemptive rights, rights of first refusal, subscription
and similar rights (except for any liens
that have been or may be granted to lenders in accordance with the Credit
Agreements and the Revolver), and there are no outstanding options,
warrants, convertible or exchangeable securities or other rights of any
character whatsoever to which any Subsidiary is a party relating to issued or
unissued capital stock of such Subsidiary, or any commitments of any character
whatsoever relating to issued or unissued capital stock of such Subsidiary or
pursuant to which such Subsidiary is or may become bound to issue or grant
additional shares of its capital stock or related subscription rights, options,
warrants, convertible or exchangeable securities or other rights, or to grant
preemptive rights.

 

(g)           None of
the execution and delivery by Holdings of this Letter Agreement, the
performance of and compliance by Holdings or any of its Subsidiaries with all
of the provisions hereof and the consummation of the transactions contemplated
herein (including compliance by Investor with its obligations hereunder and
including as a result of any change in
ownership of Holdings) (i) will conflict with, or result in a
breach or violation of, any of the terms or provisions of, or constitute a
default under (with or 

 

A-2

 

without
notice or lapse of time, or both), or result in the acceleration, termination,
modification or cancellation of, or the creation of any lien under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which Holdings or any of its Subsidiaries is a party or by which
Holdings or any of its Subsidiaries is bound or to which any of the property or
assets of Holdings or any of its Subsidiaries is subject, (ii) will result
in any violation of the provisions of the certificate of incorporation or
by-laws of Holdings, or any of the equivalent organizational documents of any
of its Subsidiaries, or (iii) will result in any violation of, or any
termination or material impairment of any rights under, any statute, license,
authorization, injunction, judgment, order, decree, rule or regulation of
any court, governmental agency or body, or arbitration or similar tribunal
having jurisdiction over Holdings or any of its Subsidiaries or any of their
respective properties.

 

(h)           No
consent, approval, authorization, order, registration or qualification of or
with any court or governmental agency or body having jurisdiction over Holdings
or any of its Subsidiaries or any of their respective properties is required
for the execution and delivery by Holdings of this Letter Agreement, the
performance of and compliance by Holdings or any of its Subsidiaries with all
of the provisions hereof and the consummation of the transactions contemplated
herein (including compliance by Investor with its obligations hereunder and
including as a result of any change in
ownership of Holdings), except for the filing of the Series D
Certificate of Designations or Series E Certificate of Designations, if
and as applicable, with the Secretary of State of Delaware pursuant to Section 103
of the Delaware General Corporation Law.

 

(i)            No
registration under the Securities Act of 1933, as amended (the “Securities Act”)
of the Securities or the Common Stock issuable upon conversion of the Series D
Preferred Stock is required for the offer and sale of the Securities to Investor in the manner
contemplated herein.

 

(j)            The
audited consolidated financial statements of Holdings as of and for the year
ended December 31, 2006 and filed on April 2, 2007 with the Securities
and Exchange Commission (the “SEC”) as part of Holdings’ annual report on Form 10-K,
and the unaudited consolidated financial statements of Holdings as of and for
the three months ended April 1, 2007, the six months ended July 1,
2007 and the nine months ended September 30, 2007 and filed with the SEC
on May 14, 2007, August 10, 2007 and November 13, 2007,
respectively, as part of Holdings’ quarterly reports on Form 10-Q present
fairly in all material respects, in each case together with the related notes,
the financial position of Holdings and its consolidated Subsidiaries at the
dates indicated and, to the extent included in such reports, the statements of
operations, stockholders’ equity and cash flows of Holdings and its
consolidated Subsidiaries for the periods specified, except that the unaudited
financial statements are subject to normal and recurring year-end adjustments
that are not expected to be material in amount; such financial statements have
been prepared in conformity with generally accepted accounting principles in
the United States, except as otherwise noted in such financial statements or
related notes, applied on a consistent basis throughout the periods involved
and with past practices, and in conformity with the rules and regulations
of the SEC.

 

A-3

 

(k)           All
written information and other materials concerning Holdings and its
Subsidiaries (the “Information”) which has been, or is hereafter,
prepared by, or on behalf of, Holdings and delivered to Investor is, or when
delivered will be, when considered as a whole, complete and correct in all
material respects as of the date on which such Information was or will be
delivered and does not, or will not when delivered, contain any untrue statement
of material fact or omit to state a material fact necessary in order to make
the statements contained therein not misleading in light of the circumstances
under which such statements have been made.  To the extent that any such Information contains projections, such
projections at the time they were or will be delivered to Investor were or will
be prepared in good faith on the basis of (i) assumptions, methods and
tests which are believed by Holdings and its Subsidiaries to be reasonable and (ii) information
believed by Holdings and its Subsidiaries to have been accurate based upon the
information available to Holdings and its Subsidiaries at the time such
projections were furnished to Investor.

 

(l)            Holdings
is not and, after giving effect to the sale of the Securities and the
application of the proceeds thereof, will not be an “investment company” as
defined in the Investment Company Act of 1940, as amended.

 

(m)          None
of Holdings or any of its Subsidiaries has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any “security” (as defined in the Securities Act) that is or will
be integrated with the sale of the shares of Securities in a manner that would
require registration under the Securities Act of the sale of the shares of
Securities to Investor.

 

 II.           Representations and
Warranties of Investor.

 

Investor
represents and warrants to, and agrees with, Holdings as set forth below.  Each representation, warranty and agreement
set forth in this Annex A is made as of the date hereof and as of any issue
date of the Securities:

 

(a)           Investor
has the requisite power and authority to enter into, execute and deliver this
Letter Agreement and to perform its obligations hereunder and has taken all necessary
action required for the due authorization, execution, delivery and performance
by it of this Letter Agreement.

 

(b)           This
Letter Agreement has been duly and
validly executed and delivered by Investor, and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms.

 

(c)           Any
Securities and the Common Stock issuable upon conversion of the Series D
Preferred Stock that may be acquired by Investor is solely for its own account,
for investment and not with a view toward resale or other distribution within
the meaning of the Securities Act.

 

(d)           Investor
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its investment in any 

 

A-4

 

Securities and the Common Stock issuable upon conversion of the Series D
Preferred Stock that may be acquired by it. 
Investor is an “accredited investor” within the meaning of Rule 501(a) under
the Securities Act or a “qualified institutional buyer” within the meaning of Rule 144A
under the Securities Act.  Investor
understands and is able to bear any economic risks associated with such
investment.

 

(e)           Investor
acknowledges that it has been afforded the opportunity to ask questions and
receive answers concerning Holdings and to obtain additional information that
it has requested to verify the accuracy of the information contained
herein.  Notwithstanding the foregoing,
nothing contained herein will operate to modify or limit in any respect the
representations and warranties of Holdings or to relieve it from any
obligations to Investor for breach thereof or the making of misleading
statements or the omission of material facts in connection with the
transactions contemplated herein.

 

(f)            None of
the execution and delivery by Investor of this Letter Agreement, the
performance of and compliance by Investor with all of the provisions hereof and
the consummation of the transactions contemplated herein (i) will conflict
with, or result in a breach or violation of, any of the terms or provisions of,
or constitute a default under (with or without notice or lapse of time, or
both), or result in the acceleration, termination, modification or cancellation
of, or the creation of any lien under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Investor is a party or
by which Investor is bound or to which any of the property or assets of
Investor is subject, (ii) will result in any violation of the provisions
of the certificate of incorporation or by-laws or equivalent organizational
documents of Investor, or (iii) will result in any violation of, or any
termination or material impairment of any rights under, any statute, license,
authorization, injunction, judgment, order, decree, rule or regulation of
any court, governmental agency or body, or arbitration or similar tribunal
having jurisdiction over Investor or any of its properties.

 

(g)           No
consent, approval, authorization, order, registration or qualification of or
with any court or governmental agency or body having jurisdiction over Investor
or any of its properties is required for the execution and delivery by Investor
of this Letter Agreement, the performance of and compliance by Investor with
all of the provisions hereof and the consummation of the transactions
contemplated herein.

 

(h)           The
Investor is an Equity Investor (as defined in the Credit Agreements and the
Revolver) and meets the beneficial ownership conditions set forth in clause (II) of
Section 8.02(b) of the Credit Agreements and Section 9.02(d) of
the Revolver.

 

A-5Exhibit 4.27

 

SIGMA CAPITAL ASSOCIATES, LLC

 

PRIVATE &
CONFIDENTIAL

 

February 13, 2008

 

FOAMEX INTERNATIONAL INC.

1000 Columbia Avenue Linwood,

Pennsylvania 19061

 

Ladies and Gentlemen:

 

Reference is hereby made to the
First Lien Term Credit Agreement, dated as of February 12, 2007, by and
among Foamex L.P., as Borrower (the “Borrower”), Foamex International Inc., as
Parent Guarantor (“Holdings”), Bank of America, N.A., as Administrative Agent
and Collateral Agent (the “Administrative Agent”), and the lenders and other
parties named therein, and the Second Lien Term Credit Agreement, dated as of February 12,
2007, by and among the Borrower, Holdings, the Administrative Agent and the
lenders and other parties named therein (together, the “Credit Agreements”) and
the Revolving Credit Agreement, dated as of February 12, 2007, by and
among the Borrower, Holdings and the other Guarantors named thereto, the
Administrative Agent and the lenders and other parties named thereto (the “Revolver”).  Capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Credit Agreements or
Revolver.

 

In connection with the Borrower’s compliance with its
obligations under Section 7.12 of the Credit Agreements and Section 7.25
of the Revolver with respect to each of its fiscal quarters in its 2008 fiscal
year and with respect to its first fiscal quarter in its 2009 fiscal year and
upon the basis of the representations and warranties contained in Annex A
hereto, we hereby agree, subject to the terms and conditions of this Letter
Agreement, to purchase from time to time upon receipt of a Notice (as defined
below), at the option of Holdings, for cash Securities (as defined below) of
Holdings in an aggregate amount up to 19.832510% of the total amount estimated
in good faith by Holdings to be necessary to facilitate the Borrower’s ability
pursuant to Section 8.02(b) of the Credit Agreements or Section 9.2(d) of
the Revolver, as applicable, to comply with its financial covenants under Section 7.12
of the Credit Agreements or Section 7.25 of the Revolver, as applicable,
with respect to the relevant quarter (each, a “QCS Transaction”).  “Securities” shall mean, at our election,
which election shall be made within two business days of the receipt of the
Notice (as defined below), (1) shares of Series D Preferred Stock of
Holdings (the “Series D Preferred Stock”) having the terms set forth in
the Certificate of Designations attached as Annex B hereto (the “Series D
Certificate of Designations”), (2) shares of Series E Preferred Stock
of Holdings (the “Series E Preferred Stock”) having the terms set forth in
the Certificate of Designations attached as Annex C hereto (the “Series E
Certificate of Designations”) or (3) a combination of Series D
Preferred Stock and Series E Preferred Stock.  The total amount referred to in this Letter
Agreement shall not exceed $3,966,502.00 in the aggregate (the “Maximum 

 

 

Obligation”). 
The purchase price for the Series D Preferred Stock or the Series E
Preferred Stock shall be $1,000 per share. 
The Borrower shall use any contribution from Holdings from
the proceeds from any issuance and sale of Securities under this Letter
Agreement only for the purpose of funding ordinary course expenditures, and not
to prepay any debt (whether revolver, term or other).

 

Notwithstanding the foregoing, (A) the
shares of the Series D Preferred Stock shall not be convertible by us or
Holdings to the extent (but only to the extent) that, if converted, we,
together with our affiliates, would beneficially own in excess of 9.9% (the “Applicable
Percentage”) of the outstanding shares of common stock of Holdings, and (B) at
no point in time may the shares of Series D Preferred Stock be converted
into any number of shares of common stock of Holdings which would (i) result
in the total beneficial ownership by us, together with our affiliates, upon
such conversion, to be in excess of the Applicable Percentage of the total
outstanding shares of common stock of Holdings or (ii) result in the total
beneficial ownership by us, together with our affiliates, upon such conversion,
to be in excess of the Applicable Percentage of the total outstanding amount of
any equity security of Holdings that is registered under Section 12 of the
Securities Exchange Act of 1934, as amended (other than an exempted security
for purposes of Section 16 thereof). 
In addition, the Premium (as defined below) shall not be payable in
shares of common stock of Holdings to the extent (but only to the extent) such
payment would result in the total beneficial ownership by us, together with our
affiliates, to be in excess of the Applicable Percentage of the total
outstanding shares of common stock of Holdings; in such event, such excess
amount of the Premium shall instead be payable to us, at our election, in
shares of Series D Preferred Stock or Series E Preferred Stock
(rounded up to the nearest whole share in order to avoid the Applicable
Percentage being exceeded) and, if applicable, along with all other shares of Series D
Preferred Stock we and our affiliates may hold, be subject to the preceding
sentence.  By written notice to Holdings,
we may from time to time increase or decrease the Applicable Percentage to any
other percentage specified in such notice; provided that any such increase will
not be effective until the sixty-first (61st) day after such notice is
delivered to Holdings.  For purposes of
this paragraph, the terms “beneficial owner” and “equity security” shall be
deemed to have the meanings accorded to such terms pursuant to Section 13
of the United States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.  Series D
Preferred Stock that is not converted by us or Holdings as a result of clauses (A) or
(B) above will continue to be outstanding in accordance with its terms
(including the terms referred to in this paragraph).

 

Certain representations and
warranties made by us and Holdings are set forth in Annex A hereto.

 

We agree to purchase and pay
for the Securities hereunder in cash by wire transfer of immediately available
funds to a bank account designated by Holdings upon a 3 business day prior
written notice from Holdings to us specifying the number of shares of the
Securities to be purchased up to the Maximum Obligation (the “Notice”) and sent
to us at Sigma Capital Associates, LLC, 540 Madison Avenue, New York, New York
10022, Attention:  John Reilly,
Facsimile: (203) 890-6678, Telephone: (212) 756-1568, 

 

2

 

E-mail:
john.reilly@sigmacapny.com, with a copy to Peter Nussbaum at
peter.nussbaum@sac.com, Facsimile: (203) 890-2393.

 

Our obligation to purchase
shares of Securities under this Letter Agreement is subject to the condition
that at the time a Notice is delivered by Holdings hereunder, (i) the
Borrower be in compliance with its obligation (determined as of the time the
Notice is delivered) to deliver financial statements under Section 6.01(a) and
(b) under the Credit Agreements and Section 5.1(a) and (b) of
the Revolver and (ii) there be no Event of Default under the Credit
Agreements or the Revolver that cannot be cured (as estimated in good faith by
Holdings) pursuant to Section 8.02(b) of the Credit Agreements or Section 9.2(d) of
the Revolver with proceeds from the issuance of Securities pursuant to this
Letter Agreement (together with the other Letter Agreements executed at
approximately the same time as this Letter Agreement).

 

As consideration for the option
granted to Holdings to require Sigma Capital Associates, LLC (“Investor”) to
purchase Securities pursuant to this Letter Agreement, Holdings hereby agrees
to pay Investor a premium (the “Premium”) in an amount equal to 5% of the
Maximum Obligation, payable in shares of common stock of Holdings (subject to
the exception set forth above) to be issued to Investor at the time of the
earliest of (i) the first issuance of Securities under this Letter
Agreement, (ii) the consummation of the Rights Offering (as defined in the
Series D Certificate of Designations) and (iii) the termination of
this Letter Agreement.  The number of
shares of common stock of Holdings to be issued shall be calculated based upon
the Average Trading Price (as defined in the Series D
Certificate of Designations, and subject to the adjustments set forth therein)
of the common stock of Holdings for the thirty-Trading Day (as defined in the Series D
Certificate of Designations) period ending on the fifth Trading Day immediately
preceding the earliest of (i), (ii) and (iii) above.  Holdings and its subsidiaries shall
also pay all reasonable fees and expenses incurred by us in connection with the
consideration and implementation of each QCS Transaction.

 

This Letter Agreement shall
automatically terminate upon the earliest of (a) 11:59 p.m. on May 20,
2009, (b) 11:59 p.m.
on the day that is ten days after the date on which the financial statements of
Borrower as of, and for the fiscal quarter ended March 29, 2009, are
required to be delivered to the Administrative Agent pursuant to the Credit
Agreements and the Revolver, (c) the date on which Investor has purchased
the Maximum Obligation of Securities under this Letter Agreement and (d) the
date on which a Rights Offering (as defined in the Certificate of Designations)
is consummated.

 

This Letter Agreement is intended
to be binding on the parties and shall be governed by, and construed in
accordance with, the laws of the State of New York.  To the fullest extent permitted by applicable
law, each party hereto (i) agrees that any claim, action or proceeding by
such party seeking any relief whatsoever arising out of, or in connection with,
this Letter Agreement or the transactions contemplated hereby shall be brought
only in the United States District Court for the Southern District of New York
and in any New York State court located in the Borough of Manhattan and not in
any other state or federal court in the United States of America or any court
in any other 

 

3

 

country, (ii) agrees
to submit to the exclusive jurisdiction of such courts located in the State of
New York for purposes of all legal proceedings arising out of, or in connection
with, this Letter Agreement or the transactions contemplated hereby and (iii) irrevocably
waives any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.  The parties hereto hereby
irrevocably waive, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating
to this Letter Agreement.

 

4

 

This Letter Agreement
constitutes the entire agreement and supersedes all other prior agreements,
both written and oral, among the parties with respect to the subject matter
hereof.  This Letter Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original of this Letter Agreement and all of which, taken together, shall be
deemed to constitute one and the same Letter Agreement.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  SIGMA CAPITAL ASSOCIATES,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed to on February 13, 2008 by:

  	
   

  
	
   

  	
   

  
	
  FOAMEX INTERNATIONAL INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
					

 

5

 

ANNEX A

 

I.              Representations and Warranties of
Holdings.

 

 Holdings represents and warrants to, and
agrees with, Investor as set forth below. 
Each representation, warranty and agreement set forth in this Annex A is
made as of the date hereof and as of any issue date of the Securities:

 

(a)           Each of
Holdings and its Subsidiaries (as defined below) has been duly organized and is
validly existing as a corporation or other form of entity in good standing
under the laws of its state of organization, with the requisite power and
authority to own its properties and conduct its business as currently
conducted.  Each of Holdings and its
Subsidiaries has been duly qualified as a foreign corporation or other form of
entity for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except to the extent the
failure to be so qualified or be in good standing has not had or could not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise) or results of operations of Holdings and its Subsidiaries taken as a
whole or on the ability of Holdings to consummate the transactions contemplated
by this Letter Agreement.  For the
purposes of this Letter Agreement, a “Subsidiary” of any person means, with
respect to such person, any corporation, partnership, joint venture or other
legal entity of which such person (either alone or through or together with any
other subsidiary) owns, directly or indirectly, more than 50% of the stock or
other equity interests, has the power to elect a majority of the board of
directors or similar governing body, or has the power to direct the business
and policies.

 

(b)           Holdings
has the requisite corporate power and authority to enter into, execute, deliver
and perform its obligations under this Letter Agreement.  Subject to the approval of the Series E
Certificate of Designations by the Board of Directors of Holdings and, subject
to the filing of the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, with the Secretary of State
of Delaware pursuant to Section 103 of the Delaware General Corporation
Law, Holdings and its Subsidiaries have taken all necessary corporate action
required for the due authorization, execution, delivery and performance by each
of them of this Letter Agreement, including having obtained the approval of the
boards of directors of Holdings and, where required, such Subsidiaries and the
approval of the special committee of the board of directors of Holdings formed
in connection with this Letter Agreement and related transactions.

 

(c)           This
Letter Agreement has been duly and validly executed and delivered by Holdings,
and constitutes a valid and binding obligation of Holdings, enforceable against
Holdings in accordance with its terms.

 

(d)           Subject
to filing the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, with the Secretary of State
of Delaware pursuant to Section 103 of the Delaware General Corporation Law
and subject to approval of the Series E Certificate of Designations by the
Board of Directors of 

 

A-1

 

Holdings
under the Delaware General Corporation Law, the issuance of the Securities has
been duly and validly authorized and, if and when issued pursuant to the terms of this Letter
Agreement and the Series D Certificate of Designations or Series E
Certificate of Designations, if and as applicable, will be duly and validly
issued, fully paid and non-assessable, and free and clear of all taxes, liens,
preemptive rights, rights of first refusal, subscription and similar
rights.  The shares of common stock of
Holdings (the “Common Stock”) issuable in satisfaction of the Premium and
initially issuable upon conversion of the Series D Preferred Stock have been duly and validly authorized and, when
issued in satisfaction of the Premium or when issued upon conversion of
the Series D Preferred Stock, will be validly issued, fully paid and
nonassessable, and free and clear of all taxes, liens, preemptive rights,
rights of first refusal, subscription and similar rights; and the Board of
Directors of Holdings has duly and validly adopted resolutions reserving such
shares of Common Stock for issuance in satisfaction of the Premium and upon
conversion of the Series D Preferred Stock.

 

(e)           Except
for the Securities, stock options and restricted stock of Holdings’ employees
and directors and a Rights Offering (as defined in the Series D
Certificate of Designations) to all shareholders of Holdings, there are no
outstanding subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever to which Holdings is a
party relating to issued or unissued capital stock of Holdings, or any
commitments of any character whatsoever relating to issued or unissued capital
stock of Holdings or pursuant to which Holdings is or may become bound to issue
or grant additional shares of its capital stock or related subscription rights,
options, warrants, convertible or exchangeable securities or other rights, or
to grant preemptive rights.

 

(f)            All the
outstanding shares of capital stock of each Subsidiary of Holdings have been
duly and validly authorized and issued and are fully paid and nonassessable,
and all outstanding shares of capital stock of Holdings’ Subsidiaries are owned
by Holdings either directly or through wholly owned Subsidiaries free and clear
of any taxes, liens, preemptive rights, rights of first refusal, subscription
and similar rights (except for any liens
that have been or may be granted to lenders in accordance with the Credit
Agreements and the Revolver), and there are no outstanding options,
warrants, convertible or exchangeable securities or other rights of any character
whatsoever to which any Subsidiary is a party relating to issued or unissued
capital stock of such Subsidiary, or any commitments of any character
whatsoever relating to issued or unissued capital stock of such Subsidiary or
pursuant to which such Subsidiary is or may become bound to issue or grant
additional shares of its capital stock or related subscription rights, options,
warrants, convertible or exchangeable securities or other rights, or to grant
preemptive rights.

 

(g)           None of
the execution and delivery by Holdings of this Letter Agreement, the
performance of and compliance by Holdings or any of its Subsidiaries with all
of the provisions hereof and the consummation of the transactions contemplated
herein (including compliance by Investor with its obligations hereunder and
including as a result of any change in
ownership of Holdings) (i) will conflict with, or result in a
breach or violation of, any of the terms or provisions of, or constitute a
default under (with or 

 

A-2

 

without
notice or lapse of time, or both), or result in the acceleration, termination,
modification or cancellation of, or the creation of any lien under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which Holdings or any of its Subsidiaries is a party or by which
Holdings or any of its Subsidiaries is bound or to which any of the property or
assets of Holdings or any of its Subsidiaries is subject, (ii) will result
in any violation of the provisions of the certificate of incorporation or
by-laws of Holdings, or any of the equivalent organizational documents of any
of its Subsidiaries, or (iii) will result in any violation of, or any
termination or material impairment of any rights under, any statute, license,
authorization, injunction, judgment, order, decree, rule or regulation of
any court, governmental agency or body, or arbitration or similar tribunal
having jurisdiction over Holdings or any of its Subsidiaries or any of their
respective properties.

 

(h)           No
consent, approval, authorization, order, registration or qualification of or
with any court or governmental agency or body having jurisdiction over Holdings
or any of its Subsidiaries or any of their respective properties is required
for the execution and delivery by Holdings of this Letter Agreement, the
performance of and compliance by Holdings or any of its Subsidiaries with all
of the provisions hereof and the consummation of the transactions contemplated
herein (including compliance by Investor with its obligations hereunder and
including as a result of any change in
ownership of Holdings), except for the filing of the Series D
Certificate of Designations or Series E Certificate of Designations, if
and as applicable, with the Secretary of State of Delaware pursuant to Section 103
of the Delaware General Corporation Law.

 

(i)            No
registration under the Securities Act of 1933, as amended (the “Securities Act”)
of the Securities or the Common Stock issuable upon conversion of the Series D
Preferred Stock is required for the offer and sale of the Securities to Investor in the manner
contemplated herein.

 

(j)            The
audited consolidated financial statements of Holdings as of and for the year
ended December 31, 2006 and filed on April 2, 2007 with the
Securities and Exchange Commission (the “SEC”) as part of Holdings’ annual
report on Form 10-K, and the unaudited consolidated financial statements
of Holdings as of and for the three months ended April 1, 2007, the six
months ended July 1, 2007 and the nine months ended September 30,
2007 and filed with the SEC on May 14, 2007, August 10, 2007 and November 13,
2007, respectively, as part of Holdings’ quarterly reports on Form 10-Q
present fairly in all material respects, in each case together with the related
notes, the financial position of Holdings and its consolidated Subsidiaries at
the dates indicated and, to the extent included in such reports, the statements
of operations, stockholders’ equity and cash flows of Holdings and its
consolidated Subsidiaries for the periods specified, except that the unaudited
financial statements are subject to normal and recurring year-end adjustments
that are not expected to be material in amount; such financial statements have
been prepared in conformity with generally accepted accounting principles in
the United States, except as otherwise noted in such financial statements or
related notes, applied on a consistent basis throughout the periods involved
and with past practices, and in conformity with the rules and regulations
of the SEC.

 

A-3

 

(k)           All
written information and other materials concerning Holdings and its
Subsidiaries (the “Information”) which has been, or is hereafter,
prepared by, or on behalf of, Holdings and delivered to Investor is, or when
delivered will be, when considered as a whole, complete and correct in all
material respects as of the date on which such Information was or will be
delivered and does not, or will not when delivered, contain any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances under which such statements have been made.  To the extent that any such Information
contains projections, such projections at the time they were or will be
delivered to Investor were or will be prepared in good faith on the basis of (i) assumptions,
methods and tests which are believed by Holdings and its Subsidiaries to be
reasonable and (ii) information believed by Holdings and its Subsidiaries
to have been accurate based upon the information available to Holdings and its
Subsidiaries at the time such projections were furnished to Investor.

 

(l)            Holdings
is not and, after giving effect to the sale of the Securities and the
application of the proceeds thereof, will not be an “investment company” as
defined in the Investment Company Act of 1940, as amended.

 

(m)          None
of Holdings or any of its Subsidiaries has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any “security” (as defined in the Securities Act) that is or will
be integrated with the sale of the shares of Securities in a manner that would
require registration under the Securities Act of the sale of the shares of
Securities to Investor.

 

 II.           Representations and
Warranties of Investor.

 

 Investor represents and warrants to, and
agrees with, Holdings as set forth below. 
Each representation, warranty and agreement set forth in this Annex A is
made as of the date hereof and as of any issue date of the Securities:

 

(a)           Investor
has the requisite power and authority to enter into, execute and deliver this
Letter Agreement and to perform its obligations hereunder and has taken all
necessary action required for the due authorization, execution, delivery and
performance by it of this Letter Agreement.

 

(b)           This
Letter Agreement has been duly and
validly executed and delivered by Investor, and constitutes its valid and
binding obligation, enforceable against it in accordance with its terms.

 

(c)           Any
Securities and the Common Stock issuable upon conversion of the Series D
Preferred Stock that may be acquired by Investor is solely for its own account,
for investment and not with a view toward resale or other distribution within
the meaning of the Securities Act.

 

(d)           Investor
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its investment in any 

 

A-4

 

Securities and the Common Stock issuable upon conversion of the Series D
Preferred Stock that may be acquired by it. 
Investor is an “accredited investor” within the meaning of Rule 501(a) under
the Securities Act or a “qualified institutional buyer” within the meaning of Rule 144A
under the Securities Act.  Investor
understands and is able to bear any economic risks associated with such
investment.

 

(e)           Investor
acknowledges that it has been afforded the opportunity to ask questions and
receive answers concerning Holdings and to obtain additional information that
it has requested to verify the accuracy of the information contained
herein.  Notwithstanding the foregoing,
nothing contained herein will operate to modify or limit in any respect the
representations and warranties of Holdings or to relieve it from any
obligations to Investor for breach thereof or the making of misleading
statements or the omission of material facts in connection with the transactions
contemplated herein.

 

(f)            None of
the execution and delivery by Investor of this Letter Agreement, the
performance of and compliance by Investor with all of the provisions hereof and
the consummation of the transactions contemplated herein (i) will conflict
with, or result in a breach or violation of, any of the terms or provisions of,
or constitute a default under (with or without notice or lapse of time, or
both), or result in the acceleration, termination, modification or cancellation
of, or the creation of any lien under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which Investor is a party or
by which Investor is bound or to which any of the property or assets of
Investor is subject, (ii) will result in any violation of the provisions
of the certificate of incorporation or by-laws or equivalent organizational
documents of Investor, or (iii) will result in any violation of, or any
termination or material impairment of any rights under, any statute, license,
authorization, injunction, judgment, order, decree, rule or regulation of
any court, governmental agency or body, or arbitration or similar tribunal
having jurisdiction over Investor or any of its properties.

 

(g)           No consent, approval,
authorization, order, registration or qualification of or with any court or
governmental agency or body having jurisdiction over Investor or any of its
properties is required for the execution and delivery by Investor of this
Letter Agreement, the performance of and compliance by Investor with all of the
provisions hereof and the consummation of the transactions contemplated herein.

 

(h)           The Investor is an
Equity Investor (as defined in the Credit Agreements and the Revolver) and
meets the beneficial ownership conditions set forth in clause (II) of Section 8.02(b) of
the Credit Agreements and Section 9.02(d) of the Revolver.

 

A-5

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