Document:

Exhibit
4.23

 

Execution Copy

 

PUT OPTION AGREEMENT

 

THIS PUT OPTION
AGREEMENT (this “Agreement”) is made and entered into as of the first
day of April 2008, by and among Foamex International Inc., a Delaware
corporation (the “Company”), CGDO, LLC (as agent and on behalf of
Chilton Global Distressed Opportunities Master Fund, L.P.) (“CGDO”) and Q Funding III, L.P. (“Q Funding
III” and, together with CGDO, the “Investor”).

 

WHEREAS, the Company and
D. E. Shaw Laminar Portfolios, L.L.C., Sigma Capital Associates, LLC, CGDO, LLC
(as agent and on behalf of Chilton Global Distressed Opportunities Master Fund,
L.P.) and Q Funding III, L.P. (together, the “Significant Equityholders”), severally and not
jointly, have entered into an equity commitment agreement, dated the date
hereof (the “Equity Commitment Agreement”), which has attached thereto
as Exhibit A the Term Sheet (the “Term Sheet”);

 

WHEREAS, as set forth in
the Term Sheet, the Company plans to carry out the Rights Offering;

 

WHEREAS, as set forth in
the Term Sheet, the Company plans to carry out the Second Lien Term Loan
Offering; and

 

WHEREAS, the
Investor desires to sell to the Company, and the Company desires to purchase
from the Investor, the right to put to the Investor shares of Additional Common
Stock on the Closing Date (each, as defined in the Term Sheet) (the “Put
Option Shares”) at a per share price equal to the Additional Common Stock
Purchase Price (as defined in the Term Sheet) up to a maximum aggregate
purchase price of $7,500,000, comprised of $5,500,000 from CGDO and $2,000,000
from Q Funding III (the “Firm Commitment Amount”), to the extent the
Investor did not exercise its Rights in the Rights Offering (as defined in the
Term Sheet) or participate in the Second Lien Term Loan Offering (as defined in
the Term Sheet), subject to the terms and conditions hereof.

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Company and the Investor agree as follows:

 

ARTICLE I

OPTION TO REQUIRE
PURCHASE

 

1.1           Grant of Option.  (a) The
Investor hereby grants to the Company an option (the “Put Option”) to
require the Investor to purchase the Put Option Shares  to the extent the Investor did not exercise its Rights in the Rights
Offering or participate in the Second Lien Term Loan Offering, whether or not
such offerings are consummated.  The
aggregate purchase price of the Put Option Shares issuable pursuant to exercise
of the Put Option, together with the aggregate purchase price of the shares of
Additional Common Stock purchased by the Investor by virtue of its exercise of
the Rights in the Rights Offering, and the aggregate principal amount of the
Second Lien Term Loans (as defined in the Term Sheet) assigned to the Company
by the Investor in the Second Lien Term Loan Offering, shall be equal to the
Firm Commitment 

 

 

Amount and the price per
share of the Put Option Shares shall be equal to the Additional Common Stock
Purchase Price.  Such purchase shall be
upon and subject to the terms, covenants and conditions set forth herein and in the Term Sheet.

 

(b) 
Upon the exercise of the Put Option by the Company, the Company agrees to sell,
and the Investor agrees to purchase, upon and subject to the terms, covenants
and conditions set forth herein, all of its Put
Option Shares.

 

1.2           Term and Exercise Period. 
Subject to the satisfaction or waiver of the Put Option Conditions and Section 3.2
hereof, the Company may exercise the Put Option at any time prior to the Put
Option Expiration Date (the “Exercise Period”).  If the Company shall not have exercised the
Put Option during the Exercise Period, the Put Option shall automatically
terminate without any further action by either the Company or the Investor,
and, subject to Section 3.2(c) hereof, neither the Company nor the
Investor shall have any further rights, duties or obligations hereunder
relating to the Put Option.

 

1.3           Procedure to Exercise Option.  (a) 
To exercise the Put Option during the Exercise Period, the Company shall
deliver a written notice in accordance with Section 4.2 hereof in the form
attached hereto as Annex A (an “Exercise Notice”) to the Investor, which
Exercise Notice shall state that the Company is thereby exercising the Put
Option and shall set forth the number of Put Option Shares to be sold to the
Investor pursuant to such exercise and the purchase price therefor.  The date for the closing of the exercise of
the Put Option shall be the Closing Date.

 

(b) 
Upon exercise of the Put Option, this Agreement, as applicable, shall become a
contract for the sale of the Put Option Shares from the Company to the Investor
upon all of the terms, covenants and conditions as herein set forth, with the
name in which the Put Option Shares shall be registered or certificated to be
CGDO, LLC (as agent and on behalf of Chilton Global Distressed Opportunities
Master Fund, L.P.) and Q Funding III, L.P., as applicable, unless the Investor
shall have transmitted a notice to the Company in accordance with Section 4.2
hereof specifying different information to be used in respect of the Put Option
Shares relating to it prior to the
Closing Date.

 

(c) 
If the Put Option is exercised, on the Closing Date the Company shall deliver
the Put Option Shares to the Investor against payment by the Investor of the
purchase price for its Put Option Shares by wire transfer of immediately
available funds to the account designated by the Company in the Exercise Notice
or, in lieu thereof, delivery of Second Lien Term Loans (to the extent
permitted pursuant to the terms and conditions set forth in the Term Sheet).

 

ARTICLE II

PUT OPTION PREMIUM

 

2.1          Put Option Premium. 
The Company will pay an aggregate amount of $646,875, comprised of $474,375
to CGDO and $172,500 to Q Funding III (the “Put Option Premium”), in the
form of shares of Common Stock (based on the Additional Common Stock Purchase
Price) to the accounts designated by the Investor in accordance with Section 4.2
hereof, on the earliest of 

 

2

 

(i) the occurrence of a Termination Event (as defined in the Term
Sheet); (ii) the Closing Date; and (iii) March 31, 2009.

 

ARTICLE III

CONDITIONS, TERMINATION
AND LIMITATIONS

 

3.1           Conditions to the Investor’s Obligations.  (a) 
The Investor’s obligations to purchase the Put Option Shares are subject to
satisfaction or waiver of the Put Option Conditions.

 

(b)           The Put Option Conditions are intended solely for the benefit of
the Investor, and can be waived or modified only upon the written consent of
the Investor.

 

3.2           Termination.  (a) The
Investor’s obligations to purchase the Put Option Shares shall terminate
automatically without any act of the Investor upon the occurrence of any of the
Termination Events, as provided in the Term Sheet.

 

(b)           The Termination Events are intended solely for the
benefit of the Investor, and can be waived or modified only upon the written
consent of the Investor.

 

(c)           Notwithstanding any other
provision of this Agreement to the contrary, the Investor shall be entitled to retain or receive any portion of the Put Option
Premium (provided the Investor is not otherwise in material breach of any of
its material obligations under the Equity Commitment Agreement) paid or payable
as of the date of termination.

 

3.3           NOL Limitations.  (a) 
Notwithstanding any other provision herein to the contrary, the Put Option
shall not be exercisable by the Company if the Investor is, or is part of a
group of persons that is, not a Five Percent Stockholder (as defined in the
Term Sheet) as of the date hereof, to the extent (but only to the extent) such
exercise, after taking into account the shares of Additional Common Stock
acquired by the Investor pursuant to the Rights Offering and the Second Lien
Term Loan Offering and in connection with the payment of the Put Option
Premium, would result in the percentage stock ownership of such person or group
of persons exceeding 4.9% of the outstanding Common Stock, for purposes of Section 382
of the Internal Revenue Code of 1986, as amended (the “Code”).

 

(b)           To the extent the issuance of shares of Additional
Common Stock is reduced pursuant to foregoing provision or pursuant to the
provisions set forth in the Term Sheet under “NOL Limitations,” the Firm
Commitment Amount shall be reduced accordingly.

 

3.4           Limitations on Beneficial Ownership.  (a) 
Notwithstanding any other provision of this Agreement to the contrary
(except as otherwise provided in this Section 3.4(a)), to the extent that the Investor (or its assignee, if such
assignee is an affiliate) is entitled to shares of Additional Common Stock
pursuant to the exercise of Rights or exercise by the Company of the Put Option
or participation by
the Investor (or its
assignee, if such assignee is an affiliate) in the Second Lien Term Loan Offering or
in connection with the payment of
Put Option Premium, such shares of Common Stock issuable pursuant to the exercise of Rights or the
Put Option or participation 

 

3

 

in the Second Lien Term
Loan Offering shall not
be issued to the Investor (or its assignee, if such assignee is an affiliate)
to the extent (but only to the extent) such issuance would result in the total
beneficial ownership by the Investor, together with its affiliates, being equal
to or in excess of 5.0% (the “Applicable Percentage”) of the total
outstanding shares of Common Stock; in such event, the Firm Commitment Amount of the
Investor (or its assignee, if such
assignee is an affiliate) shall be reduced so that such exercise of Rights or the Put Option or
participation in the Second Lien Term Loan Offering, after first taking into
account the shares of Additional Common Stock received or to be received in
connection with the payment of the Put Option Premium, would not result in the
beneficial ownership of the Investor (together
with its affiliates) exceeding
the Applicable Percentage; provided that to the extent any such reduction is
required, it shall be carried out in the manner set forth in the Term Sheet.

 

(b)           By
written notice to the Company, the Investor may from time to time increase 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 the Company.

 

(d)           For
purposes of this Section 3.4, the term “beneficial ownership” shall be
deemed to have the meaning accorded to such term pursuant to Section 13 of
the United States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

ARTICLE V

MISCELLANEOUS

 

4.1           Captions.  The captions,
headings and arrangements used in this Agreement are for convenience only and
do not in any way affect, limit, amplify or modify the terms and provisions
hereof.  Terms used but not defined
herein shall have the meanings ascribed to such terms in the Term Sheet.

 

4.2           Notices.  Any notice,
request, demand, instruction or other document to be given or served hereunder
or under any document or instrument executed pursuant thereto shall be in
writing and shall be delivered personally by a receipt requested therefor, by
electronic mail (with a return receipt obtained), by facsimile transmission
(with a delivery confirmation obtained) or sent by a recognized overnight
courier service or by the United States registered or certified mail, return
receipt requested, postage prepaid and addressed to the parties at their
respective addresses set forth below, and the same shall be effective (a) upon
receipt or refusal if delivered personally or by facsimile or electronic mail
transmission; (b) one (1) business day after deposit with such an
overnight courier service or (c) two (2) business days after deposit
in the mails if mailed.  A party may change
its address for receipt of notices by service of a notice of change in
accordance herewith.  All notices by
electronic mail and by facsimile transmission shall be subsequently confirmed
by U.S. certified or registered mail.

 

4

 

	
  If to the Investor:

  	
   

  	
  CGDO, LLC (as agent on behalf of Chilton Global

  Distressed Opportunities Master Fund, L.P.) and

  
	
   

  	
   

  	
  Q Funding III, L.P.

  
	
   

  	
   

  	
    c/o Chilton Capital Management, LLC

  
	
   

  	
   

  	
  1266 East Main Street, 7th Floor

  
	
   

  	
   

  	
  Stamford, Connecticut 06902

  
	
   

  	
   

  	
  Attention:   Montes Piard

  
	
   

  	
   

  	
  Facsimile No.:   (203) 352-4078

  
	
   

  	
   

  	
  Phone:   (203) 352-4077

  
	
   

  	
   

  	
  E-mail: mpiard@chiltoninc.com

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Cleary Gottlieb
  Steen & Hamilton LLP

  
	
   

  	
   

  	
  One Liberty Plaza

  
	
   

  	
   

  	
  New York, New York
  10006

  
	
   

  	
   

  	
  Attention: Richard J.
  Cooper

  
	
   

  	
   

  	
  Facsimile No.:   (212)
  225-3999

  
	
   

  	
   

  	
  Telephone No.:   (212)
  225-2000

  
	
   

  	
   

  	
  E-mail:   rcooper@cgsh.com

  
	
   

  	
   

  	
   

  
	
  If to the Company:

  	
   

  	
  Foamex International
  Inc.

  
	
   

  	
   

  	
  1000 Columbia Avenue

  
	
   

  	
   

  	
  Linwood, Pennsylvania
  19061

  
	
   

  	
   

  	
  Attention:

  	
  Andrew R. Prusky, Esq.

  
	
   

  	
   

  	
   

  	
  Vice President and Deputy General

  
	
   

  	
   

  	
   

  	
  Counsel

  
	
   

  	
   

  	
  Facsimile No.:   (610)
  859-3024

  
	
   

  	
   

  	
  Telephone No.:   (610)
  859-3000

  
	
   

  	
   

  	
  E-mail:  aprusky@foamex.com

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Paul, Weiss, Rifkind,
  Wharton & Garrison LLP

  
	
   

  	
   

  	
  1285 Avenue of the
  Americas

  
	
   

  	
   

  	
  New York, New York
  10019

  
	
   

  	
   

  	
  Attention: Judith R.
  Thoyer, Esq.

  
	
   

  	
   

  	
  Facsimile No.:   (212)
  492-0002

  
	
   

  	
   

  	
  Telephone No.:   (212)
  373-3002

  
	
   

  	
   

  	
  E-mail:  jthoyer@paulweiss.com

  

 

4.3           GOVERNING LAW.  THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF
LAW PRINCIPLES, SHALL GOVERN THE INTERPRETATION OF THIS AGREEMENT.

 

4.4           Entirety and Amendments.  This
Agreement embodies the entire agreement between the parties and supersedes all
prior agreements and understandings, if any, relating to the transactions
contemplated herein, and may be amended or supplemented only by an instrument
in writing executed by the party against whom enforcement is sought.

 

5

 

4.5           Multiple Counterparts.  This
Agreement may be executed in counterparts, each of which shall be an original
but all of which together shall constitute one agreement, binding on all of the
parties hereto notwithstanding that all of the parties hereto are not
signatories to the same counterpart.  For
purposes of this Agreement, each of the parties hereto agrees that a facsimile
copy of the signature of the person executing this Agreement on either party’s
behalf shall be effective as an original signature and legally binding and
effective as an execution counterpart hereof.

 

4.6           Parties Bound.  The Company
shall not have the right to assign this Agreement, without the prior written
consent of the Investor.  The Investor
shall not have the right to assign this Agreement without the prior written
consent of the Company, except the Investor may assign this agreement to such
designees as may be reasonably acceptable to the Company. 
This Agreement will be binding upon and inure to the benefit of the
Company and the Investor and their respective successors and permitted assigns,
and no other party will be conferred any rights by virtue of this Agreement or
be entitled to enforce any of the provisions hereof.

 

4.7           Further Acts.  In addition
to the acts and deeds recited herein and contemplated to be performed, executed
and/or delivered by the Company and the Investor, the Company and the Investor
agree to perform, execute and/or deliver or cause to be performed, executed
and/or delivered at the Closing Date or after
the Closing Date any and all such further acts, deeds and
assurances as may be reasonably necessary to consummate the transactions
contemplated hereby.

 

4.8           Business Days.  All
references to “business days” contained herein are references to days on which
banks are not required or authorized to close in New York City.

 

6

 

IN WITNESS WHEREOF, the
parties hereto have executed this Put Option Agreement as of the date first
above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  FOAMEX INTERNATIONAL
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  John G. Johnson, Jr.

  
	
   

  	
   

  	
  Name: John G.
  Johnson, Jr.

  
	
   

  	
   

  	
  Title: 

  	
    President and

  
	
   

  	
   

  	
   

  	
    Chief Executive
  Officer

  

 

INVESTOR:

 

CGDO, LLC as agent and on behalf of

Chilton Global Distressed Opportunities

Master Fund, LP

 

	
  By:

  	
  Chilton Investment Company, LLC

  
	
   

  	
  Managing Member

  

 

	
  By:

  	
    /s/ James Steinthal

  	
   

  
	
   

  	
  Name: James Steinthal

  
	
   

  	
  Title: Managing Director

  

 

	
  Q FUNDING III, L.P.

  
	
   

  
	
  By: Prufrock Onshore, L.P., its general partner

  
	
   

  
	
  By: J Alfred Onshore, LLC, its general partner

  

 

	
   

  
	
  By:

  	
    /s/ Noel Nesser

  	
   

  
	
   

  	
  Name: Noel Nesser

  
	
   

  	
  Title: CFO & Treasurer

  

 

 

ANNEX A

 

FORM OF EXERCISE NOTICE

 

[Date]

 

TO:         CGDO, LLC (as agent and on behalf of Chilton Global
Distressed Opportunities Master Fund, L.P.) and Q Funding III, L.P.

 

Reference is made to the Put Option
Agreement, dated as of April 1, 2008 (the “Put Option Agreement”),
by and among CGDO, LLC (as agent and on behalf of Chilton Global Distressed
Opportunities Master Fund, L.P.) (“CGDO”) and Q Funding III, L.P. (“Q
Funding III” and, together with CGDO, the “Investor”) and Foamex
International Inc. (the “Company”). 
Capitalized terms used but not otherwise defined herein have the
meanings specified in the Put Option Agreement.

 

The Company hereby notifies you that the
Company is exercising the Put Option pursuant to Section 1.3 of the Put
Option Agreement.

 

The number of Put Option Shares being sold to
the Investor pursuant to the exercise of the Put Option is [      ]
(comprised of [      ] Put Option Shares in
respect of CGDO and [      ] Put Option Shares in
respect of Q Funding III) and the purchase price therefor is $[        ]
(comprised of $[        ] in respect of
CGDO and $[        ] in respect of Q
Funding III).  Upon payment of the
purchase price in accordance with the Put Option Agreement, the Put Option
Shares shall be issued to you.

 

Payment of the purchase price for the Put Option Shares or delivery of Second
Lien Term Loans in lieu thereof shall be made as follows:  [account
details / loan delivery information].

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  FOAMEX
  INTERNATIONAL INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:Exhibit 4.25

 

D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.

 

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 52.226765% 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 $10,445,353.00 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 D. E. Shaw Laminar Portfolios, L.L.C., c/o D. E. Shaw & Co.,
L.P., 120 West 45th Street, 39th Floor, New York, New York 10036,
Attention:  Maureen Knoblauch, Telephone:
(212) 478-0628, Facsimile: (212) 845-1628, e-mail:  Maureen.Knoblauch@deshaw.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 D. E. Shaw Laminar Portfolios, L.L.C. (“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.

 

2

 

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 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,

  
	
   

  	
   

  
	
   

  	
  D. E. SHAW LAMINAR
  PORTFOLIOS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]