As filed with the Securities and Exchange Commission on September 11, 1997
Registration No. 333-30291
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
(Exact name of registrant as specified in its charter)
Delaware 3086 05-0475617
Delaware 9999 22-3182164
Delaware 2273 13-3476119
Delaware 2297 13-3819884
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
(Primary Standard Industrial
Classification Code Number)
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1000 Columbia Avenue, Linwood, Pennsylvania 19061, (610) 859-3000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
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Philip N. Smith, Jr., Esq.
Foamex L.P.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
(610) 859-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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with a copy to:
Laurence D. Weltman, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment that specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 11, 1997
Offer for all Outstanding 9-7/8% Senior Subordinated Notes Due 2007
in Exchange for up to $150,000,000 principal amount of
9-7/8% Senior Subordinated Notes Due 2007
of
Foamex L.P.
Foamex Capital Corporation
[FOAMEX LOGO]
The Exchange Offer
will expire at Midnight, New York City time on , 1997,
unless extended
----------------
Foamex L.P., a Delaware limited partnership ("Foamex") and Foamex Capital
Corporation, a Delaware corporation ("FCC" and together with Foamex, the
"Issuers"), hereby offer upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer") to exchange $1,000 principal amount of the
Issuers' 9-7/8% Senior Subordinated Notes due 2007 (the "New Notes") for each
$1,000 principal amount of their issued and outstanding 9-7/8% Senior
Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes,
the "Notes") from the holders (the "Holders") thereof. The terms of the New
Notes are identical in all material respects to the terms of the Old Notes,
except that the New Notes have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and, therefore, will not bear legends
restricting their transfer and will not contain certain terms providing for an
increase in the interest rate on the Old Notes under certain circumstances
described in the Registration Rights Agreement (as defined). The New Notes
evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the same benefits under, the Indenture (as defined) governing the
Old Notes.
Interest on the Notes is payable semi-annually in cash on June 15 and
December 15 of each year, commencing December 15, 1997. The Notes are
redeemable at the option of the Issuers, in whole or in part, at any time on or
after June 15, 2002 in cash at the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated Damages (as defined), if any,
thereon to the date of redemption. In addition, at any time prior to June 15,
2000, the Issuers may on any one or more occasions redeem up to 35% of the
initially outstanding aggregate principal amount of Notes at a redemption price
equal to 109.875% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings (as defined); provided
that, in each case, at least 65% of the initially outstanding aggregate
principal amount of Notes remains outstanding immediately after the occurrence
of any such redemption. See "Description of Notes--Optional Redemption." In
addition, upon the occurrence of a Change of Control (as defined), each holder
of Notes will have the right to require the Issuers to repurchase all or any
part of such holder's Notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase. See "Description
of Notes--Repurchase at the Option of Holders--Change of Control." There can be
no assurance that, in the event of a Change of Control, the Issuers would have
sufficient funds to purchase all Notes tendered. See "Risk Factors--Limitations
on Ability to Make Change of Control Payment."
The Notes are general unsecured obligations of the Issuers, rank
subordinate in right of payment to all Senior Debt (as defined), rank pari
passu in right of payment to all Pari Passu Debt (as defined) and rank senior
in right of payment to all existing and future subordinated indebtedness of the
Issuers. The Notes are jointly and severally unconditionally guaranteed (the
"Note Guarantees") on a senior subordinated basis by the Subsidiary Guarantors
(as defined). The Note Guarantees are general unsecured obligations of the
Subsidiary Guarantors, rank subordinate in right of payment to all Senior Debt
of the Subsidiary Guarantors, rank pari passu in right of payment to all Pari
Passu Debt of the Subsidiary Guarantors and rank senior in right of payment to
all existing and future subordinated indebtedness of the Subsidiary Guarantors.
As of June 29, 1997, the Notes are subordinated to approximately $370.1 million
of Senior Debt and pari passu with approximately $27.4 million of Pari Passu
Debt.
The New Notes will bear interest from and including their respective dates
of issuance. Holders whose Old Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the New
Notes, such interest to be payable with the first interest payment on the New
Notes, but will not receive any payment in respect of interest on the Old Notes
accrued after the issuance of the New Notes.
The Old Notes were originally issued and sold on June 12, 1997 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A of the
Securities Act (the "Initial Offering"). The Issuers are making the Exchange
Offer in reliance on the position of the staff of the Securities and Exchange
Commission (the "Commission") as set forth in certain no-action letters
addressed to other parties in other transactions. However, the Issuers have not
sought their own no-action letter and there can be no assurance that the staff
of the Commission would make a similar determination with respect to the
Exchange Offer as in such other circumstances.
(Cover continued on next page)
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See "Risk Factors" beginning on page 10 for a discussion of certain factors
that holders of the Old Notes should consider in connection with the Exchange
Offer and that prospective investors in the New Notes should consider in
connection with such investment.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
(Cover continued from previous page)
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (A) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to as a "Restricted Holder").
A Restricted Holder will not be able to participate in the Exchange Offer and
may only sell its Old Notes pursuant to a registration statement containing the
selling securityholder information required by Item 507 of Regulation S-K of
the Securities Act, or pursuant to an exemption from the registration
requirement of the Securities Act.
Each broker-dealer (other than a Restricted Holder) that receives New
Notes for its own account pursuant to the Exchange Offer (a "Participating
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that it
acquired the Old Notes as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with the resale
of such New Notes. Based upon interpretations by the staff of the Commission,
the Issuers believe that New Notes issued pursuant to the Exchange Offer to
Participating Broker-Dealers may be offered for resale, resold, and otherwise
transferred by a Participating Broker-Dealer (other than a Restricted Holder)
upon compliance with the prospectus delivery requirements, but without
compliance with the registration requirements, of the Securities Act. The
Issuers have agreed that for a period of 120 days following consummation of the
Exchange Offer they will make this Prospectus available to Participating
Broker-Dealers for use in connection with any such resale. During such period
of time, delivery of this Prospectus, as it may be amended or supplemented,
will satisfy the prospectus delivery requirements of a Participating
Broker-Dealer engaged in market making or other trading activities. See
"Exchange Offer" and "Plan of Distribution".
Based upon interpretations by the staff of the Commission, the Issuers
believe that New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold, and otherwise transferred by a Holder thereof (other than a
Restricted Holder or a Participating Broker-Dealer) without compliance with the
registration and prospectus delivery requirements of the Securities Act.
The New Notes are new securities for which there is currently no market.
The Issuers presently do not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Issuers have been
advised by the Initial Purchasers, Donaldson, Lufkin & Jenrette Securities
Corporation, Salomon Brothers Inc and Scotia Capital Markets (USA) Inc. that,
following completion of the Exchange Offer, they presently intend to make a
market in the New Notes; however, the Initial Purchasers are not obligated to
do so and any market-making activities with respect to the New Notes may be
discontinued at any time without notice. There can be no assurance that an
active public market for the New Notes will develop.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to
be subject to the existing restrictions upon transfer thereof and the Issuers
will have no further obligation to such holders (other than (x) to the
Restricted Holders, (y) to any Holder prohibited by law or Commission policy
from participating in the Exchange Offer, or (z) to any Holder required to
deliver a prospectus (other than this Prospectus) in connection with the resale
of the New Notes) to provide for the registration under the Securities Act of
the Old Notes held by them. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a Holder's ability to sell untendered Old Notes
could be adversely affected. It is not expected that an active market for the
Old Notes will develop while they are subject to restrictions on transfer.
The Issuers will accept for exchange any and all Old Notes that are
validly tendered and not withdrawn on or prior to Midnight, New York City time,
on the date the Exchange Offer expires, which will be , 1997
(the "Expiration Date"), unless the Exchange Offer is extended by the Issuers
in their sole discretion, in which case the term "Expiration Date" shall mean
the latest date and time to which the Exchange Offer is extended. Tenders of
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the
Exchange Offer is subject to certain conditions which may be waived by the
Issuers in their reasonable discretion and to the terms and provisions of the
Registration Rights Agreement (as defined). Old Notes may be tendered only in
denominations of $1,000 and integral multiples thereof. The Issuers have agreed
to pay all of the expenses incurred by them in connection with the Exchange
Offer. See "The Exchange Offer--Fees and Expenses."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997.
The Issuers will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use
of Proceeds" and "Plan of Distribution."
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Foamex and FCC with the Commission are
incorporated herein by reference:
1. The Issuers' Annual Reports on Form 10-K for the fiscal year ended
December 29, 1996 (other than the financial information of Foamex International
Inc.), filed pursuant to Section 13(a) of the Securities Exchange Act of 1934
(the "Exchange Act").
2. All other reports filed by Foamex pursuant to Section 13(a) or 15(d) of
the Exchange Act since December 29, 1996, consisting of the Issuers' Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 30, 1997 and June 29,
1997 and the Issuers' Current Reports on Form 8-K dated May 28, 1997, June 12,
1997 and August 29, 1997.
All documents filed by Foamex pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of this Exchange Offer shall be deemed to be incorporated by
reference into the Prospectus and to be a part hereof from the dates of filing
of such documents.
These documents are available upon request from Foamex, 1000 Columbia
Avenue, Linwood, Pennsylvania 19061 and its telephone number is (610) 859-3000.
AVAILABLE INFORMATION
The Issuers and the Subsidiary Guarantors have filed with the Commission a
Registration Statement on Form S-4 (the "Registration Statement," which term
shall include all amendments, exhibits, annexes and schedules thereto) pursuant
to the Securities Act, and the rules and regulations promulgated thereunder,
covering the New Notes being offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration Statement
are not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such
reference.
Foamex and FCC are subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports and other information with the Commission.
Reports, proxy statements and other information concerning the Issuers can be
inspected without charge at the Public Reference Room maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549. In
addition, upon request, such reports, proxy statements and other information
will be made available for inspection and copying at the regional offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained upon
request from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois, at the prescribed rates. Such
material may also be accessed electronically at the Commission's site on the
World Wide Web located at http://www.sec.gov.
In the event that the Issuers cease to be subject to the informational
reporting requirements of the Exchange Act, the Issuers have agreed that,
whether or not they are required to do so by the rules and regulations of the
Commission, for so long as any of the Notes remain outstanding, they will
furnish to the holders of the Notes and file with the Commission (unless the
Commission will not accept such a filing) (i) all quarterly and annual
financial information that would be required to be contained in such a filing
with the Commission on Forms 10-Q and 10-K as if the Issuers were required to
file such forms, including a "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and, with respect to the annual
information only, a report thereon by the Issuers' independent accountants and
(ii) all reports that would be required to be filed with the Commission on Form
8-K as if the Issuers were required to file such reports. In addition, for so
long as any of the Old Notes remain outstanding, the Issuers have agreed to
make available to any beneficial owner of the Old Notes in connection with any
sale thereof, the information required by Rule 144A(d)(4) under the Securities
Act.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context requires otherwise, the term "Foamex" refers to Foamex L.P. and its
subsidiaries. Foamex L.P. is an indirect-majority owned subsidiary of Foamex
International Inc. ("Foamex International").
Overview
Foamex is the largest manufacturer and marketer of flexible polyurethane
and advanced polymer foam products in North America. Foamex's products are
utilized primarily in five end-markets: (i) carpet cushion and other carpet
products, (ii) cushioning foams for bedding and furniture fabricators, (iii)
furniture products for furniture manufacturers and packaging fabricators, (iv)
automotive applications, including trim and accessories and (v) specialty and
technical foams. Foamex is the largest North American producer of foams used
for carpet cushion, automotive applications and specialty and technical
products and is a leading North American producer of cushioning foams. As a
result of the 1995 Operational Reorganization discussed below, Foamex has
refocused on its flexible polyurethane and advanced polymer foam business by
divesting of non-foam business segments. Foamex believes that a concentrated
focus in only the foam business segment will allow Foamex to concentrate
management, financial and operational resources and will position Foamex to
pursue its growth strategy of developing new products, improving profitability
and expanding internationally.
Foamex distributes carpet cushion to major floor covering retailers such
as Sears, New York Carpet World and Carpetland USA. Foamex supplies cushioning
foams to major bedding and furniture manufacturers such as Sealy, Simmons and
Ethan Allen. Foamex's packaging foams are supplied to distributors and
manufacturers of computers and other electronic devices, including Seagate
Technology and CompUSA. Foamex distributes its automotive foam products to
original equipment manufacturers ("OEMs"), including Ford, General Motors and
Chrysler, and major tier one suppliers such as Lear Corporation, Johnson
Controls and Delphi Automotive Systems. Foamex's specialty and technical foams
consist of reticulated foams and other customized polyester and polyether foams
used for filtration, reservoiring and consumer products which are utilized
worldwide in a wide variety of applications by companies such as
Hewlett-Packard and Briggs & Stratton.
Foamex and its predecessors have been developing, manufacturing and
marketing polyurethane foam for more than 40 years. For the 52 weeks ended June
29, 1997, Foamex had net sales of $935.8 million, EBDAIT (as defined) of $126.1
million and income from continuing operations of $63.1 million. During such
period, the percentage of net sales generated by cushioning foams; carpet
cushion and other carpet products; automotive foams; and specialty and
technical foams was approximately 36%, 31%, 25% and 8%, respectively. Prior to
the second quarter of 1997, the cushioning foams and furniture product markets
were treated as a single product group; therefore, all historical data in this
Prospectus reflects cushioning foam and furniture products as the single
product group "cushioning foam."
Competitive Strengths
Foamex believes that it possesses a number of competitive strengths that
have allowed it to become the largest manufacturer and marketer of flexible
polyurethane and advanced polymer foam products in North America, including:
Emphasis on New Product Development. Foamex believes it has a significant
research and development capability and, as a result, has been awarded more
than 100 foam-related patents worldwide. This capability provides Foamex with a
stream of new products, new applications for existing products, and new
processes for foam manufacturing. An example of this capability is variable
pressure foaming (VPF[TM]), an innovative manufacturing process currently used
in North America only by Foamex, which has been used to create new products
such as Reflex[TM] and Nexol[TM]. Reflex[TM] is designed to replace fiberfill
in certain cushioning products, and Nexol[TM] is designed to replace rigid
styrene foam in packaging. Foamex has also recently introduced Plushlife[TM]
for the carpet cushion market and Powerthane[TM] for automotive applications.
Another technology developed by Foamex is Surface Modification Technology
(SMT[TM]), which allows for high volume precision contouring of foam surfaces,
thereby improving Foamex's existing products and creating new products such as
sculpted bed mattresses.
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Alignment with Key Customers. Foamex has historically maintained a steady
revenue base by aligning itself with key customers, many of which have been
Foamex's customers for many years. These customer relationships are supported
by Foamex's extensive North American network of 58 strategically located
facilities, which allows Foamex to deliver products cost effectively on a
just-in-time basis. As a result of these relationships, Foamex is able to work
with customers during the design phase for new products and new applications,
thereby favorably positioning Foamex to be the principal supplier for these
products.
High Quality Products. Foamex is a pioneer in manufacturing and
distributing high quality flexible polyurethane and advanced polymer foam
products to satisfy the specific needs of customers. During 1996, Foamex
completed QS-9000 and ISO-9001 certification for its eight domestic facilities
that supply the automotive industry and is pursuing the appropriate
certifications for the remainder of its manufacturing facilities. Foamex was
one of the first flexible polyurethane foam manufacturers to be QS-9000
certified, demonstrating its commitment to producing the highest quality
products and meeting the needs of its customers.
Low Cost Manufacturing Position. Foamex strives to maintain
state-of-the-art manufacturing facilities which utilize recent manufacturing
improvements such as the proprietary VPF[TM] and patented SMT[TM] technologies,
as well as the latest carbon dioxide converting process. These technologies are
designed to, among other things, maximize the conversion efficiency of raw
materials into finished goods and to minimize labor costs. Furthermore, Foamex
has implemented a company-wide Continuous Improvement Process program designed
to continually increase productivity, reduce costs and improve product quality.
In addition, as the largest manufacturer of flexible polyurethane and advanced
polymer foam products in North America, management believes that Foamex is able
to realize economies of scale in its raw materials procurement, which represent
approximately 74% of Foamex's manufacturing costs, and recover costs from the
use of substantially all of its internally generated trim scrap, which is the
principal raw material in the production of bonded carpet cushion.
Growth Strategy
Foamex's strategy focuses on (i) developing new proprietary foam products,
(ii) introducing new uses for advanced foam products, (iii) expanding in
international markets and (iv) reducing costs through continued emphasis on
manufacturing improvements.
New Proprietary Foam Products. Foamex plans to continue to utilize its
significant research and development capability to develop new products. In
recent years, Foamex has developed new proprietary technologies, such as
VPF[TM] and SMT[TM], which have been used to create higher margin, value-added
products designed to replace existing flexible polyurethane foam products.
SMT[TM] has allowed Foamex to develop sculpted mattress toppers, mattress pads
and bed pillows which are replacing traditional polyurethane foam products due
to their superior comfort, quality and value. In certain cases, such as
Plushlife[TM], a proprietary carpet cushion designed to replace traditional
bonded and prime carpet cushion, Foamex brands these products to create product
recognition and to generate higher margins.
New Uses for Foam. Foamex is actively developing new applications for its
advanced foam products to replace other materials. In the automotive industry,
the number of foam applications has increased from 8 per vehicle in 1984 to 20
per vehicle in 1997. For example, Foamex has introduced products such as foam
headliners which are replacing fiberglass headliners (the rigid material
between the fabric and the metal roof of a car). Reflex[TM] foams, which
include cushion wraps and cushion cores and are created using VPF[TM], are
advanced polymer cushioning products designed to improve comfort, quality and
durability in upholstered furniture and to replace standard fiberfill.
Nexol[TM] foams, also created using VPF[TM], expand Foamex's ability to meet
the special packaging requirements of sensitive and fragile products such as
electronic components, and replace standard rigid styrene foam. Foamex's
fastest growing business, specialty and technical foams, focuses on developing
customized foam applications for high-growth product markets such as inkjet
printer cartridges, nickel-metal hydride batteries and oxygenators for
cardio-pulmonary surgery.
International Expansion. Foamex has positioned itself to take advantage of
global opportunities. In Mexico, Foamex has built a new state-of-the-art
manufacturing facility, which is expected to meet increasing demand and to
allow Foamex to increase market penetration. In Asia, which management believes
offers attractive growth opportunities, Foamex is actively exploring strategic
options to enter the foam market. Additionally, Foamex has
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<PAGE>
created an alliance with Recticel s.a. ("Recticel"), Europe's largest flexible
polyurethane foam manufacturer, which will allow Foamex to better meet the
increasing global needs of its automotive customers.
Additional Operating Cost Savings. Foamex is continuing to build on the
1995 Operational Reorganization which was designed to reduce operating costs
and improve productivity. Foamex has identified additional operating cost
savings in 1997 that are expected to result from (i) improved productivity,
through-put and material yields in the manufacturing process, (ii) the full
year benefit of facilities closed during 1996, (iii) the closure of two
additional facilities during 1997 and (iv) the expansion of the Continuous
Improvement Process.
1995 Operational Reorganization
In November 1995, Foamex's parent, Foamex International, announced a plan
(the "1995 Operational Reorganization") to focus on its core flexible
polyurethane and advanced polymer foam business, enhance shareholder value and
maximize future profitability through a series of operational improvements,
asset sales and the reduction of long-term debt. In connection with the 1995
Operational Reorganization, Foamex International sold JPS Automotive L.P. ("JPS
Automotive," a sister subsidiary of Foamex), a manufacturer of automotive
fabric and carpet, and Foamex sold Perfect Fit Industries, Inc. ("Perfect
Fit"), a manufacturer of fabric-based home comfort products. These divestitures
have resulted in a decrease of total debt for Foamex International by
approximately $248.4 million as of June 29, 1997.
As part of the 1995 Operational Reorganization, Foamex implemented a plan
to improve its profitability through (i) the realignment of management to
correspond with product groups, (ii) the consolidation of foam production,
fabrication or branch locations resulting in the elimination of 12 facilities,
a reduction of approximately 300 employees representing approximately 7% of the
work force, and an improved utilization of its remaining production capacity,
(iii) the implementation of additional procedures to reduce manufacturing
costs, including process redesign to eliminate non-value added operations, (iv)
the reduction of selling, general and administrative expenses through cost
containment and (v) the reduction of inventory levels through improved
forecasting and the elimination of inventories associated with closed
facilities. As an example of the improved utilization of the remaining
facilities, Foamex increased the average output per pouring plant by 19% from
1995 to 1996, and by approximately 12% for the first six months of 1997 as
compared to the first six months of 1996.
The Refinancing Plan
On June 12, 1997, Foamex's parent, Foamex International, completed a
refinancing plan (the "Refinancing Plan"), which included (i) a cash tender
offer and consent solicitation (the "Tender Offer") pursuant to which Foamex
purchased (a) $99.8 million of the $104.3 million outstanding principal amount
of the Issuers' 9-1/2% Senior Secured Notes due 2000 (the "Senior Secured
Notes"), (b) $130.1 million of the $135.9 million outstanding principal amount
of the Issuers' 11-1/4% Senior Notes due 2002 (the "Senior Notes"), (c) $105.5
million of the $125.8 million outstanding principal amount of the Issuers'
11-7/8% Senior Subordinated Debentures due 2004 (the "Senior Subordinated
Debentures"), (d) substantially all of the $7.0 million principal amount of the
Issuers' 11-7/8% Senior Subordinated Debentures, Series B due 2004 (the "Series
B Debentures") and (e) all $116.7 million outstanding principal amount of
Senior Secured Discount Debentures due 2004 of Foamex-JPS Automotive L.P.
("FJPS") and Foamex-JPS Capital Corporation (the "FJPS Discount Debentures,"
together with the Senior Secured Notes, the Senior Notes, the Senior
Subordinated Debentures and the Series B Debentures purchased in the Tender
Offer, the "Retired Notes"); (ii) the repayment of $5.2 million of borrowings
under its then existing credit facility (the "Existing Credit Facility"); and
(iii) the payment of fees and expenses. In addition, the indentures pursuant to
which the Senior Secured Notes, Senior Notes, Senior Subordinated Debentures
and Series B Debentures were issued were amended to remove substantially all of
the restrictive covenants. Foamex incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under its new credit facility (the "New Credit Facility") and the net proceeds
from the issuance of $150.0 million principal amount of Old Notes.
The Refinancing Plan was designed to reduce Foamex International's
interest expense and increase its operating and financial flexibility. After
giving effect to the Refinancing Plan, Foamex International reduced total debt
net of cash from $726.2 million at December 31, 1995 to $553.1 million at June
29, 1997. Also, after giving
3
<PAGE>
effect to the Refinancing Plan, Foamex International's pro forma interest
expense for the 52 weeks ended June 29, 1997 would have decreased $5.6 million
and, after the retirement of long-term debt with the net proceeds of the
divestitures in 1996, Foamex International's pro forma interest expense for the
same period would have decreased an additional $1.3 million. In addition, the
Refinancing Plan eliminated the FJPS Discount Debentures thereby eliminating
approximately $2.3 million of additional interest expense that would have been
incurred by Foamex International over the next 12 months as compared to the
previous 12 months.
As a result of the Refinancing Plan, Foamex's total long-term debt
increased $150.1 million to $546.3 million, and variable rate debt comprises a
larger percentage of Foamex's overall indebtedness than in the past, and as a
result, future fluctuations in interest rates will have a greater impact on
Foamex's interest expense than in the past. Foamex expects the Refinancing Plan
to result in increased interest expense of approximately $2.5 million in the
second half of 1997 as compared to the first half of 1997, and annualized
increased interest expense of approximately $5.0 million, as compared to the
debt structure prior to the Refinancing Plan, assuming no material changes in
interest rates. Foamex's future interest expense will vary based on a variety
of factors, including fluctuations in interest rates in general.
In addition, Foamex has called for redemption on October 1, 1997
approximately $26.0 million principal amount of its Senior Notes, Senior
Subordinated Debentures and Series B Debentures of the approximately $30.0
million of its outstanding public debt that was not tendered as part of the
Refinancing Plan. The redemption is expected to be funded with borrowings under
the New Credit Facility. In connection with this redemption, Foamex expects to
incur an extraordinary loss on the early extinguishment of debt of
approximately $2.6 million in the fourth quarter of 1997.
Recent Developments
On August 29, 1997, Foamex entered into a definitive agreement to sell its
needlepunch carpeting, tufted carpeting and artificial grass products business,
located in Dalton, Georgia to Bretlin, Inc., a subsidiary of The Dixie Group,
Inc. The sales price is approximately $33.0 million plus the value of
inventory. The transaction is subject to governmental review and the
satisfaction of certain customary terms and conditions. Foamex intends to use
the net proceeds of the sale to reduce long-term debt.
----------------
The principal executive offices of Foamex are located at 1000 Columbia
Avenue, Linwood, Pennsylvania 19061 and its telephone number is (610) 859-3000.
----------------
The Exchange Offer
<TABLE>
<S> <C>
The Exchange Offer ...................... The Issuers are offering to exchange (the "Exchange
Offer") up to $150,000,000 aggregate principal amount
of 9-7/8% Senior Subordinated Notes due 2007 (the
"New Notes") for up to $150,000,000 aggregate
principal amount of their outstanding 9-7/8% Senior
Subordinated Notes due 2007 (the "Old Notes"). Upon
consummation of the Exchange Offer, the terms of the
New Notes will be identical in all material respects
(including principal amount, interest rate, maturity and
ranking) to the terms of the Old Notes for which they
may be exchanged pursuant to the Exchange Offer,
except that the New Notes have been registered under
the Securities Act, and, therefore, will not bear legends
restricting their transfer and will not contain certain
terms providing for an increase in the interest rate on
the Old Notes under certain circumstances described in
the Registration Rights Agreement (as defined).
4
<PAGE>
Minimum Condition ........................ The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
Expiration Date ........................ The Exchange Offer will expire at Midnight, New York
City time, on , 1997, unless extended (the
"Expiration Date").
Exchange Date ........................... The date of acceptance for exchange for the Old Notes
will be the first business day following the Expiration
Date.
Conditions to the Exchange Offer ......... The obligation of the Issuers to consummate the
Exchange Offer is subject to certain conditions. See
"The Exchange Offer--Conditions." The Issuers
reserve the right to terminate or amend the Exchange
Offer at any time prior to the Expiration Date upon the
occurrence of any such condition.
Withdrawal Rights ........................ Tenders may be withdrawn at any time prior to 5:00
p.m. on the Expiration Date. Any Old Notes not
accepted for any reason will be returned without
expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
Procedures for Tendering Old Notes ...... See "The Exchange Offer--Procedures for
Tendering."
Federal Income Tax Consequences ......... The exchange of Old Notes for New Notes by Holders
will not be a taxable exchange for federal income tax
purposes, and Holders should not recognize any
taxable gain or loss or any interest income as a result
of such exchange.
Certain Representations .................. Each Holder desiring to participate in the Exchange
Offer will be required to represent, among other things,
that (i) it is not an "affiliate" (as defined in Rule 405
of the Securities Act) of the Issuers, (ii) it is not
engaged in, and does not intend to engage in, and has
no arrangement or understanding with any person to
participate in, a distribution of the New Notes, and (iii)
it is acquiring the New Notes in the ordinary course of
its business (a holder unable to make the foregoing
representations is referred to as a "Restricted Holder").
5
<PAGE>
Transfer Restrictions on New Notes ...... Based upon interpretations by the staff of the
Commission, the Issuers believe that New Notes issued
pursuant to the Exchange Offer to Participating
Broker-Dealers may be offered for resale, resold, and
otherwise transferred by a Participating Broker-Dealer
(other than a Restricted Holder) upon compliance with
the prospectus delivery requirements, but without
compliance with the registration requirements, of the
Securities Act. The Issuers have agreed that for a period
of 120 days following consummation of the Exchange
Offer they will make this Prospectus available to
Participating Broker-Dealers for use in connection
with any such resale. During such period of time,
delivery of this Prospectus, as it may be amended or
supplemented, will satisfy the prospectus delivery
requirements of a Participating Broker-Dealer engaged
in market making or other trading activities. See
"Exchange Offer" and "Plan of Distribution". Based
upon interpretations by the staff of the Commission,
the Issuers believe that New Notes issued pursuant to
the Exchange Offer may be offered for resale, resold,
and otherwise transferred by a Holder thereof (other
than a Restricted Holder or a Participating Broker-
Dealer) without compliance with the registration and
prospectus delivery requirements of the Securities Act.
6
<PAGE>
Effect on Holders of Old Notes .......... As a result of the making of this Exchange Offer, and
upon acceptance for exchange of all validly tendered
Old Notes pursuant to the terms of this Exchange Offer,
the Issuers will have fulfilled a covenant contained in
the Registration Rights Agreement (the "Registration
Rights Agreement") dated as of June 12, 1997 by and
among the Issuers, General Felt Industries, Inc.
("General Felt"), Foamex Fibers, Inc. ("Foamex
Fibers") and the Initial Purchasers, and the Issuers will
have no further obligation to such holders (other than
(x) to the Restricted Holders, (y) to any Holder
prohibited by law or Commission policy from
participating in the Exchange Offer, or (z) to any
Holder required to deliver a prospectus (other than this
Prospectus) in connection with the resale of the New
Notes) to provide for the registration under the
Securities Act of the Old Notes held by them. Holders
of the Old Notes who do not tender their Old Notes in
the Exchange Offer will continue to hold such Old
Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture
dated as of June 12, 1997, among the Issuers, General
Felt, Foamex Fibers and The Bank of New York, as
trustee (the "Trustee"), relating to the Old Notes and
the New Notes (the "Indenture"). All untendered, and
tendered but unaccepted, Old Notes will continue to be
subject to the restrictions on transfer provided for in the
Old Notes and the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer,
the trading market, if any, for the Old Notes could be
adversely affected. See "Risk Factors--Consequences
of Failure to Exchange."
7
<PAGE>
The New Notes
Issuers ................................. Foamex L.P., a Delaware limited partnership and
Foamex Capital Corporation, a Delaware corporation.
Maturity Date ........................... June 15, 2007.
Interest Payment Dates .................. The New Notes bear interest at the rate of 9-7/8% per
annum, payable semi-annually in cash on June 15 and
December 15 of each year, commencing December 15,
1997.
Ranking ................................. The New Notes are general unsecured obligations of the
Issuers, rank subordinate in right of payment to all Senior
Debt, rank pari passu in right of payment to all Pari Passu
Debt and rank senior in right of payment to all existing
and future subordinated indebtedness of the Issuers. The
Note Guarantees are general unsecured obligations of the
Subsidiary Guarantors, rank subordinate in right of
payment to all Senior Debt of the Subsidiary Guarantors,
rank pari passu in right of payment to all Pari Passu Debt
of the Subsidiary Guarantors and rank senior in right of
payment to all existing and future subordinated
indebtedness of the Subsidiary Guarantors. As of June 29,
1997, the New Notes would have been subordinated to
approximately $370.1 million of Senior Debt and
pari passu with approximately $27.4 million of Pari
Passu Debt. Also as of June 29, 1997, the maximum
amount of Senior Debt that could have been incurred
pursuant to the most restrictive debt incurrence covenant
applicable to the Company was $221.0 million.
Optional Redemption ..................... The New Notes are redeemable at the option of the
Issuers, in whole or in part, at any time on or after June
15, 2002 in cash at the redemption prices set forth
herein, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption. In
addition, at any time prior to June 15, 2000, the Issuers
may on any one or more occasions redeem up to 35%
of the initially outstanding aggregate principal amount
of New Notes at a redemption price equal to 109.875%
of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net proceeds
of one or more Public Equity Offerings; provided that,
in each case, at least 65% of the initially outstanding
aggregate principal amount of New Notes remains
outstanding immediately after the occurrence of any
such redemption. See "Description of Notes--
Optional Redemption."
8
<PAGE>
Change of Control ....................... Upon the occurrence of a Change of Control, each
holder of New Notes will have the right to require the
Issuers to repurchase all or any part of such holder's
New Notes at an offer price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. See "Description of
Notes--Repurchase at the Option of Holders--Change
of Control." See "Risk Factors--Limitations on
Ability to Make Change of Control Payment."
Note Guarantees .......................... The New Notes are jointly and severally uncon-
ditionally guaranteed on a senior subordinated basis by
each of General Felt and Foamex Fibers. The New
Notes will also be guaranteed by all those Restricted
Subsidiaries (as defined) of the Issuers required in the
future to execute a Note Guarantee pursuant to the
provisions of the Indenture described under
"Description of the Notes--Additional Guarantees"
and any other Subsidiary that executes a Note
Guarantee (together, the "Subsidiary Guarantors").
The obligations of any Subsidiary Guarantor under its
Note Guarantee is limited to an amount that would
cause such Note Guarantee not to constitute a
fraudulent conveyance under applicable law. See "Risk
Factors--Certain Creditors' Rights Considerations."
Certain Covenants ....................... The Indenture contains certain covenants that limit,
among other things, the ability of the Issuers to: (i) pay
dividends, redeem capital stock or make certain other
restricted payments or investments, (ii) incur
additional indebtedness or issue preferred equity
interests, (iii) merge, consolidate or sell all or
substantially all of its assets, (iv) create liens on assets
and (v) enter into certain transactions with affiliates or
related persons. See "Description of Notes--Certain
Covenants."
</TABLE>
For a discussion of certain factors that should be considered by
prospective participants in connection with the Exchange Offer and the Notes,
see "Risk Factors."
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table presents summary historical and pro forma consolidated
financial information of Foamex, for the fiscal years ended January 3, 1993,
January 2, 1994, January 1, 1995, December 31, 1995 and December 29, 1996,
which have been derived from the audited consolidated financial statements of
Foamex, and for the twenty-six week periods ended June 30, 1996 and June 29,
1997, which have been derived from the unaudited condensed consolidated
financial statements of Foamex. The pro forma consolidated financial
information gives effect to the Refinancing Plan as if it had occurred on
January 1, 1996 for fiscal 1996 statements of operations data purposes and on
December 30, 1996 for fiscal 1997 statements of operations data. The pro forma
financial information does not purport to represent what Foamex's results would
have actually been if the Refinancing Plan had occurred at the dates indicated,
nor does such information purport to project the results of Foamex for any
future period. The summary financial information should be read in conjunction
with the consolidated and the condensed consolidated financial statements and
related notes thereto of Foamex included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Fiscal Year (1)(2) Six Months ended June
----------------------------------------------------------------- -----------------------
1992 1993(3) 1994(4) 1995(5) 1996 1996(2) 1997
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales .................. $501,751 $ 684,310 $833,660 $ 862,834 $ 926,351 $459,578 $ 469,007
Gross profit ............... 69,887 93,704 142,395 100,749 153,232 74,198 87,577
Selling, general and
administrative
expenses .................. 29,931 48,403 57,059 63,466 56,778 27,127 31,331
Restructuring and other
charges (credits) ......... -- 7,400 -- 39,249 (6,415) -- --
Operating income (loss) ...... 39,956 37,901 85,336 (1,966) 102,869 47,071 56,246
Income (loss) from
continuing operations ...... 22,011 (7,926) 38,011 (48,126) 53,661 23,166 32,600
Other Data:
EBDAIT(6) .................. $ 58,200 $ 66,773 $107,444 $ 77,593 $ 117,586 $58,005 $ 66,547
Cash flow from operating
activities .................. 37,232 21,263 50,285 27,336 36,180 13,881 (2,187)
Cash flow from investing
activities .................. (23,457) (211,956) (64,478) (30,554) 22,750 (7,299) (110,020)
Cash flow from financing
activities .................. (1,668) 173,188 30,234 (16,163) (38,600) (4,782) 95,747
Gross profit margin ......... 13.9% 13.7% 17.1% 11.7% 16.5% 16.1% 18.7%
EBDAIT margin(7) ............ 11.6 9.8 12.9 9.0 12.7 12.6 14.2
Capital expenditures ......... $ 15,243 $ 21,270 $ 21,201 $ 19,726 $ 23,509 $ 7,798 $ 16,369
Ratio of earnings to fixed
charges(8) .................. 2.12x --(9) 1.94x --(9) 2.31 2.19x 2.54x
Pro Forma Data:
Cash interest expense(10) ... -- -- -- -- $ 46,013 -- $ 22,397
Ratio of EBDAIT to cash
interest expense(11) ...... -- -- -- -- 2.56x -- 2.97x
Ratio of net debt to LTM
EBDAIT(12) .................. -- -- -- -- -- -- 4.33x
Ratio of earnings to fixed
charges(8) .................. -- -- -- -- 2.06x -- 2.31x
</TABLE>
<TABLE>
<CAPTION>
As of June 29, 1997
--------------------
<S> <C>
Balance Sheet Data (at period end):
Cash and cash equivalents ....................................................................... $ 4,508
Total assets ...................................................................................... 600,694
Long-term debt ................................................................................... 537,951
</TABLE>
(footnotes on following page)
10
<PAGE>
Notes to Summary Historical and Pro Forma Consolidated Financial Information
(1) Foamex has a 52-53 week fiscal year ending on the Sunday closest to the
end of the calendar year. Each fiscal year presented was 52 weeks with the
exception of 1992, which was 53 weeks.
(2) Fiscal years 1993 through 1995 and the twenty-six week period ended June
30, 1996 have been restated for discontinued operations resulting from the
sale of Perfect Fit. In addition, fiscal years 1994 and 1995 and the
twenty-six week period ended June 30, 1996 have been restated to reflect
the contribution of Foamex Latin America, Inc. and its subsidiaries
("Foamex Mexico") to Foamex from Foamex International because the
contribution was accounted for in a manner similar to a pooling of
interests because the entities were under common control.
(3) Includes the results of operations of General Felt and Great Western Foam
Products Corporation and certain related entities and assets (collectively
"Great Western") from their respective dates of acquisition of March 23,
1993 and May 1, 1993, and thus may not be comparable to other periods.
Great Western was subsequently merged into Foamex.
(4) Includes the operations of Foamex Mexico from its date of acquisition of
March 31, 1994, and thus may not be comparable to other periods. See Note 2
above.
(5) Includes results of operations of Foamex Fibers from its date of
acquisition of April 13, 1995, and thus may not be comparable to other
periods.
(6) EBDAIT consists of earnings before depreciation, amortization, interest,
income taxes and other non-cash or non-recurring items. EBDAIT is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles ("GAAP") and should not be considered as an
alternative to net income as an indicator of operating performance or to
cash flows as a measure of liquidity. In fiscal years 1992, 1993, 1995 and
1996, there were additional non-cash or non-recurring items of
approximately $3.3 million, $7.4 million, $56.7 million and $(6.4) million,
respectively. The Company believes that EBDAIT is a standard measure
commonly reported and widely used by analysts, investors and other
interested parties and further believes that trends in EBDAIT are similar
to trends in operating income, excluding restructuring charges. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Accordingly, this information has been disclosed herein to
permit a more complete comparative analysis of the Company's operating
performance relative to other companies in the industry. However, not all
companies calculate EBDAIT using the same methods; therefore, the EBDAIT
figures set forth above may not be comparable to EBDAIT reported by other
companies. Certain covenants contained in the New Credit Facility are based
upon measures similar to EBDAIT.
(7) EBDAIT Margin is calculated by dividing EBDAIT by net sales. The Company
believes that EBDAIT Margin is a standard measure commonly reported and
widely used by analysts, investors and other interested parties.
Accordingly, this information has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance
relative to other companies in the industry. However, see Note 6 above.
(8) For purposes of computing this ratio, earnings consist of income
(loss) before income taxes and extraordinary items and fixed charges,
adjusted to exclude capitalized interest. Fixed charges consist of interest
expense, including amounts capitalized, and the portion of operating lease
rental expense that is representative of the interest factor (deemed to be
one-third of operating lease rental expense).
(9) Earnings were insufficient to cover fixed charges by approximately $8.0
million in fiscal year 1993 and approximately $47.0 million in fiscal year
1995. Earnings before fixed charges for the 1993 and 1995 fiscal years were
reduced by non-cash expenses consisting principally of depreciation and
amortization of approximately $21.7 million and $22.9 million,
respectively.
(10) Includes interest on the Notes and the New Credit Facility and the
application of the net proceeds thereof.
(11) Ratio of EBDAIT to cash interest expense is calculated by dividing EBDAIT
by cash interest expense. The Company believes that the Ratio of EBDAIT to
cash interest expense is a standard measure commonly reported and widely
used by analysts, investors and other interested parties. Accordingly, this
information has been disclosed herein to permit a more complete comparative
analysis of the Company's operating performance relative to other companies
in the industry. However, see Note 6 above.
(12) Ratio of net debt to LTM EBDAIT is calculated by subtracting cash and cash
equivalents from total debt and dividing the result by EBDAIT for the prior
12 months. The Company believes that the ratio of net debt to LTM EBDAIT is
a standard measure commonly reported and widely used by analysts, investors
and other interested parties. Accordingly, this information has been
disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in the
industry. However, see Note 6 above.
11
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
investors should consider carefully the following factors, which may be
generally applicable to the Old Notes as well as the New Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable
state securities laws, or pursuant to an exemption therefrom. Except under
certain limited circumstances, the Issuers do not intend to register the Old
Notes under the Securities Act. To the extent Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for the Old Notes
not tendered and the price at which they may be sold, could be adversely
affected. See "The Exchange Offer."
Substantial Leverage
As a result of the Refinancing Plan, Foamex's total long-term debt as of
June 29, 1997 increased by $150.1 million, and Foamex's pro forma interest
expense for the 52 weeks ended June 29, 1997 would have increased by $5.2
million. At June 29, 1997, Foamex had long-term debt of $538.0 million, and
partners' equity (deficit) of ($118.2) million. For 1996, Foamex's ratio of
earnings to fixed charges was 2.31 to 1 and, on a pro forma basis after giving
effect to the Refinancing Plan, Foamex's ratio of earnings to fixed charges
would have been 2.06 to 1. For the twenty-six week period ended June 29, 1997,
Foamex's ratio of earnings to fixed charges was 2.54 to 1 and, on a pro forma
basis after giving effect to the Refinancing Plan, Foamex's ratio of earnings
to fixed charges would have been 2.31 to 1.
Foamex will require substantial amounts of cash to fund scheduled payments
of principal and interest on its outstanding indebtedness as well as future
capital expenditures and any increased working capital requirements. Foamex's
obligation to make principal payments on its debt for the twenty-six weeks
ended December 1997 and for each of the next five years is approximately $4.2
million, $11.9 million, $20.9 million, $31.3 million, $31.3 million and $32.7
million, respectively. Such principal payment obligation may be accelerated in
whole or in part in connection with certain asset sales, upon certain
transactions constituting a "change of control" as defined under the applicable
debt instrument, upon certain debt or equity offerings, as a result of certain
excess cash flows and upon the occurrence of an "event of default" as defined
under the applicable debt instrument. See "Description of Certain Debt
Instruments--New Credit Facility." Foamex's ability to generate such cash flow
in the future will depend on its financial and operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. Also, the Indenture and the New Credit
Facility restrict, among other things, Foamex's ability to incur additional
indebtedness and grant liens on its properties. The restrictions imposed by the
Indenture and the New Credit Facility, together with Foamex's leverage, could
limit Foamex's ability to respond to changing market and economic conditions,
provide for capital expenditures and take advantage of business opportunities.
Foamex believes that it will have sufficient cash flow from operations and
available borrowings to meet its debt service requirements. However, if
Foamex's cash flow and capital resources are insufficient to fund its debt
service obligations, Foamex may be forced to refinance all or a portion of its
indebtedness or sell assets. There can be no assurance that Foamex would be
able to refinance its existing indebtedness or sell assets on terms that are
commercially reasonable or at all.
Partners' Deficit
As of June 29, 1997, Foamex had a partners' deficit of approximately
$118.2 million. There can be no assurance as to when or if such deficit will be
eliminated. Foamex believes that such deficit will not have a material adverse
effect on its liquidity and financial condition. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
12
<PAGE>
Price and Availability of Raw Materials
In 1996, raw materials accounted for approximately 74% of the
manufacturing costs of Foamex. The two principal chemicals used in the
manufacture of flexible polyurethane foam, toulene diisocyanate ("TDI") and
polyol, accounted for approximately 50% of raw material costs. ARCO Chemical
Company, BASF Corporation and The Dow Chemical Company are among Foamex's
largest suppliers of raw materials. Foamex generally has alternative chemical
suppliers for each major raw material and Foamex believes that it could find
alternative sources of supply should it cease doing business with any of its
major suppliers. The price of TDI and polyol is influenced by demand,
manufacturing capacity and oil and natural gas prices.
Historically, the price of raw materials has been cyclical and volatile,
and Foamex's principal suppliers of raw materials used in the manufacture of
flexible polyurethane foam have increased the price of raw materials several
times since September 1994. Significant increases in raw material prices could
have a material adverse effect on the financial condition or results of
operations of Foamex. Foamex attempts to offset raw material cost increases
through selling price increases; however, there can be no assurance that Foamex
will be successful in implementing selling price increases or that competitive
pricing pressure will not require Foamex to adjust selling prices. Results of
operations have been and could be adversely affected by delays in implementing,
or the inability of Foamex to implement, selling price increases to offset raw
material cost increases. For example, Foamex estimates that in 1995 the amount
of net unrecovered raw material cost increases was approximately $25.0 million.
The principal suppliers to the foam industry announced raw material price
increases effective April 1997. The impact of the raw material cost increases
were not significant during the second quarter of 1997. However, Foamex
estimates an unfavorable impact for the raw material cost increases, net of
sale price increases to customers, of between $1.5 million to $3.0 million
during the third quarter of 1997. There can be no assurance that chemical
suppliers will not increase raw material costs in the future or that Foamex
will be able to implement selling price increases to offset any such raw
material cost increases.
Subordination; Rights of Senior Lenders
The Notes are subordinated to all Senior Debt including the indebtedness
under the New Credit Facility. The Notes will also be structurally subordinated
to creditors (including trade creditors) of Foamex's subsidiaries that are not
guarantors of the Notes, including Foamex Canada Inc. and its subsidiaries
("Foamex Canada"), Foamex Mexico and Foamex Asia, Inc. and its subsidiaries
("Foamex Asia"). The incurrence of additional indebtedness by Foamex's
Restricted Subsidiaries (as defined) is restricted by the Indenture. See
"Description of Notes--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." By reason of the subordination of the Notes, in
the event of insolvency, bankruptcy, liquidation, reorganization, dissolution
or other winding-up of the Issuers or upon certain defaults with respect to
Senior Debt, creditors who are holders of Senior Debt must be paid in full
before the holders of the Notes may be paid. As of June 29, 1997, Foamex had
approximately $370.1 million of Senior Debt.
The assets of the Issuers may be insufficient to pay the amount due on the
Notes in the event of any insolvency, bankruptcy, or similar event of default.
Interest Rate Fluctuations
Variable rate debt comprises a larger percentage of the Company's overall
indebtedness than prior to the consummation of the Refinancing Plan, and, as a
result, future fluctuation in interest rates will have a greater impact on the
Company's interest expense than in the past. In addition, as a result of an
interest rate swap, the business of Foamex will be significantly more sensitive
to prevailing interest rates than under the terms of its fixed rate
indebtedness. There can be no assurance that the variable interest payments by
Foamex will not increase significantly in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Certain Creditor's Rights Considerations
The Exchange Offer and the Refinancing Plan may be subject to review under
relevant federal and state fraudulent conveyance laws if a bankruptcy,
reorganization or rehabilitation case or a lawsuit (including in circumstances
where bankruptcy is not involved) were ever commenced by or on behalf of unpaid
creditors of the Issuers or the Subsidiary Guarantors, as the case may be, at
some future date. These laws vary among the various jurisdictions. In general,
under these laws, if a court were to find that, at the time an obligation (such
as the Old
13
<PAGE>
Notes or the New Notes) was incurred or a security interest was granted, either
(a) such obligation was incurred or security interest granted with the intent
of hindering, delaying or defrauding creditors or (b) the entity incurring the
obligation or granting such security interest received less than reasonably
equivalent or fair value or consideration in exchange for the incurrence of
such obligation or the granting of such security interest and (i) was insolvent
or was rendered insolvent by reason thereof, (ii) was engaged in a business or
transaction for which its remaining assets constituted unreasonably small
capital, (iii) intended to incur, or believed, or reasonably should have
believed, that it would incur, debts beyond its ability to pay such debts as
they matured (as all of the foregoing terms are defined in or interpreted under
the fraudulent conveyance statutes) or (iv) such entity was a defendant in an
action for money damages, or had a judgment for money damages docketed against
it (if, in either case, after final judgment, the judgment is unsatisfied) (a
"Fraudulent Conveyance"), such court could impose legal and equitable remedies,
including (x) subordination of the obligation to presently existing and future
indebtedness of the entity, (y) avoidance of the issuance of the obligation or
granting of the security interest, and direction of the repayment of any
amounts paid from the proceeds thereof to a fund for the benefit of the
entity's creditors or (z) taking of other action detrimental to the holders of
the Notes.
The measures of insolvency for purposes of determining whether a
Fraudulent Conveyance occurred would vary depending upon the laws of the
relevant jurisdiction and upon the valuation assumptions and methodology
applied by the court. Generally, however, a company would be considered
insolvent for purposes of the foregoing if the sum of the company's debts,
including contingent unliquidated and unmatured liabilities, is greater than
all the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that would be required to
pay the probable liability on its existing debts as they become absolute and
matured.
Pursuant to the terms of the Indenture, the obligations of any Subsidiary
Guarantor under its Note Guarantee is limited to an amount that would cause
such Note Guarantee not to constitute a fraudulent conveyance under applicable
law. Although the Issuers and the Subsidiary Guarantors are unable to predict
how a court would value a Subsidiary Guarantor on the date of issuance of the
New Notes and/or the Old Notes, the Issuers and the Subsidiary Guarantors view
it as likely that a court would limit the amount of the Note Guarantee of
Foamex Fibers to an amount that is substantially less than the outstanding
principal amount of the Notes, and could limit the amount of the Note Guarantee
of General Felt.
The Issuers believe that because the Issuers received cash in an amount
equal to the principal amount less discounts and commissions upon issuance, the
Issuers received reasonably equivalent and fair value at the time the Old Notes
were issued. The Issuers also believe that they will receive reasonably fair
and equivalent value at the time the New Notes are issued, by virtue of the
surrender of a like principal amount of Old Notes. It is possible, however,
that a court could conclude differently. Notwithstanding such possibility,
however, the Company believes that at the time of, or as a result of, the
issuance of the New Notes, the Company (i) will not be insolvent or rendered
insolvent under the foregoing standards, (ii) will not be engaged in a business
or transaction for which its remaining assets constitute unreasonably small
capital, (iii) does not intend to incur, and does not believe that it will or
would incur, debts beyond its ability to pay such debts as they mature and (iv)
will have sufficient assets to satisfy any probable money judgment against it
in any pending actions. Consequently, the Company believes that even if one or
more elements of the transaction were deemed to involve the incurrence of an
obligation or the grant of a security interest for less than reasonably
equivalent or fair value, a Fraudulent Conveyance would not occur. The
Company's beliefs with regard to the solvency of the Company are based in part
on the Company's operating history and analysis of internal cash flow
projections, estimated values of assets and liabilities of the Company at the
time of the Exchange Offer and an opinion as to the solvency of the Company
received as of the consummation of the Refinancing Plan. There can be no
assurance, however, that a court passing on these issues would adopt the same
methodology or assumption or arrive at the same conclusions.
Control of Foamex by Trace Holdings
FMXI, Inc. ("FMXI"), the managing general partner of Foamex and a
wholly-owned subsidiary of Foamex International, controls the management and
operations of Foamex. Trace International Holdings, Inc. ("Trace Holdings"),
directly and indirectly through Trace Foam Company, Inc. ("Trace Foam"), a
wholly-owned subsidiary, owns in excess of 40% of the outstanding common stock
of Foamex International. In addition, Trace Foam owns a 1% non-managing general
partnership interest in Foamex. Andrea Farace, Chairman and Chief Executive
Officer of Foamex, Foamex International and FMXI is also President of Trace
Holdings. Marshall S. Cogan, Vice Chairman
14
<PAGE>
of the Board of Foamex, Foamex International, FMXI and Chairman of Foamex
International's Executive Committee, owns or has voting control over a majority
of the capital stock of Trace Holdings. Foamex and Trace Foam have entered into
a management services agreement pursuant to which Trace Foam provides Foamex
with certain administrative and advisory services. As a result, Trace Holdings
is expected to have the ability to direct the activities of Foamex. See
"Management," "Security Ownership of Certain Beneficial Owners," "Certain
Relationships and Related Transactions" and "Description of the Partnership
Agreement."
Reliance on Major Customers
Foamex's five largest customers together accounted for approximately 24.3%
of Foamex's net sales in fiscal year 1996. The loss, or a substantial decrease
in the amount, of purchases by any of Foamex's major customers could adversely
affect Foamex's financial position and results of operations. See
"Business--Customers."
Environmental Liabilities and Regulations
The past and present business operations of Foamex and the past and
present ownership and operation of real property by Foamex are subject to
extensive and changing federal, state, local and foreign environmental laws and
regulations, including those relating to the use, handling, storage, discharge
and disposal of hazardous substances and the remediation of environmental
contamination. As a result, Foamex is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. Foamex is currently remediating soil and groundwater contamination in
excess of state standards at several of its current and former facilities, and
is either removing or conducting permanent in place closure of its underground
storage tanks ("USTs") pursuant to federal law. Further, Foamex has been
designated a Potentially Responsible Party by the United States Environmental
Protection Agency with respect to 13 sites. Based on information available at
this time with respect to potential liability involving these facilities and
sites, and in view of indemnification by Trace Holdings and Recticel Foam
Corporation ("RFC") associated with the partnership formation of Foamex, Foamex
believes that any such liability would not have a material adverse effect on
its financial position or results of operations. If management's assessment of
Foamex's liability with respect to these facilities and sites is incorrect,
such liabilities could have a material adverse effect on Foamex.
Foamex cannot predict what environmental legislation or regulations will
be enacted in the future, how existing or future laws or regulations will be
administered or interpreted or what environmental conditions may be found to
exist on its properties. Compliance with more stringent laws or regulations, as
well as more vigorous enforcement policies of the regulatory agencies or
stricter interpretation of existing laws, and discovery of new conditions may
require additional expenditures by Foamex, some of which may be material. See
"Business--Environmental Matters" and "Business--Legal Proceedings."
Litigation
As of August 8, 1997, Foamex and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,000 recipients of
breast implants in various United States federal and state courts and one
Canadian provincial court. Some of these actions allege substantial damages,
but most of these actions allege unspecified damages for personal injuries of
various types. Three of these cases seek to allege claims on behalf of all
breast implant recipients or other allegedly affected parties, but no class has
been approved or certified by the court. In addition, three cases have been
filed alleging claims on behalf of approximately 700 residents of Australia,
New Zealand, England and Ireland. Foamex believes that the number of suits and
claimants may increase.
During 1995, Foamex and Trace Holdings were granted summary judgments and
dismissed as defendants from all cases in the federal courts of the United
States and the state courts of California. Appeals for these decisions were
withdrawn and the decisions are final.
Although breast implants do not contain foam, certain silicone gel
implants were produced using a polyurethane foam covering fabricated by
independent distributors or fabricators from bulk foam purchased from Foamex or
Trace Holdings. Neither Foamex nor Trace Holdings recommended, authorized, or
approved the use of its foam for these purposes. Foamex is indemnified by Trace
Holdings for any such liabilities relating to foam manufactured prior to
October 1990. Although Trace Holdings has paid Foamex's litigation expenses to
date pursuant to such indemnification and Foamex believes Trace Holdings likely
will be in a position to continue to pay such expenses, there can be no
absolute assurance that Trace Holdings will be able to provide such
15
<PAGE>
indemnification. While it is not feasible to predict or determine the outcome
of these actions, based on Foamex's present assessment of the merits of pending
claims, after consultation with the general counsel of Trace Holdings, and
without taking into account the indemnification provided by Trace Holdings, the
coverage provided by Trace Holdings' and Foamex's liability insurance and the
potential indemnity from the manufacturers of polyurethane foam covered breast
implants, Foamex believes that the disposition of matters that are pending or
that may reasonably be anticipated to be asserted should not have a material
adverse effect on either Foamex's or Trace Holdings' consolidated financial
position or results of operations. If Foamex's assessment of liability with
respect to these actions is incorrect, such actions could have a material
adverse effect on Foamex.
Foamex and its subsidiaries are involved in a number of litigation matters
which have arisen in the ordinary course of business. Foamex believes that the
outcome of these legal proceedings will not have a material adverse effect on
Foamex's financial condition or results of operations. See "Business--Legal
Proceedings."
Limitations on Ability to Make Change of Control Payment
The Indenture requires the Issuers, in the event of a Change of Control,
to make an offer to repurchase the Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of repurchase. Certain events involving a Change of Control may be an
event of default under the New Credit Facility or other indebtedness of the
Issuers that may be incurred in the future. Moreover, the exercise by the
holders of the Notes of their right to require the Issuers to repurchase the
Notes may cause a default under the New Credit Facility or such other
indebtedness even if the Change of Control does not constitute an event of
default. Additionally, there can be no assurance that the Issuers will have the
financial resources necessary to repurchase the Notes upon a Change of Control.
In addition, the obligation to make an offer to repurchase upon the occurrence
of a Change of Control may be waived by the holders of a majority of the
outstanding principal amount of the Notes. See "Description of
Notes--Repurchase at the Option of Holders--Change of Control."
Competition
The flexible polyurethane foam market in which Foamex operates is highly
competitive. Some of Foamex's competitors are larger than Foamex and may have
greater financial and other resources available to them and there can be no
assurance that Foamex can compete successfully with such other companies. See
"Business--Competition."
Absence of Public Market for the New Notes
There is no public market for the New Notes, and the New Notes will not be
listed on a securities exchange and they may trade at a discount from their
principal amount, depending upon a number of factors, including the market for
similar securities, prevailing interest rates and the financial condition of
the Issuers. Accordingly, no assurance can be given that a holder of New Notes
will be able to sell such New Notes in the future or that any such sale will be
at a price equal to or higher than the price paid for such New Notes in the
initial resales by the Initial Purchasers. The Issuers have been advised by
each of the Initial Purchasers of the New Notes that they currently intend to
make a market in the New Notes; however, the Initial Purchasers are not
obligated to do so and may discontinue doing so without notice at any time.
Accordingly, no assurance can be given that a liquid trading market for the New
Notes will develop or be sustained. See "Plan of Distribution."
16
<PAGE>
REFINANCING PLAN
On June 12, 1997, Foamex's parent, Foamex International, completed the
Refinancing Plan, which included (i) the Tender Offer pursuant to which Foamex
purchased (a) $99.8 million of the $104.3 million outstanding principal amount
of the Senior Secured Notes, (b) $130.1 million of the $135.9 million
outstanding principal amount of the Senior Notes, (c) $105.5 million of the
$125.8 million outstanding principal amount of the Senior Subordinated
Debentures, (d) substantially all of the $7.0 million outstanding principal
amount of the Series B Debentures and (e) all $116.7 million outstanding
principal amount of the FJPS Discount Debentures; (ii) the repayment of $5.2
million of borrowings under the Existing Credit Facility; and (iii) the payment
of fees and expenses. In addition, the indentures pursuant to which the Senior
Secured Notes, Senior Notes, Senior Subordinated Debentures and Series B
Debentures were issued were amended to remove substantially all of the
restrictive covenants. Foamex incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under the New Credit Facility and the net proceeds from the issuance of $150.0
million principal amount of Old Notes.
The Refinancing Plan was designed to reduce Foamex International's
interest expense and increase its operating and financial flexibility. After
giving effect to the Refinancing Plan, Foamex International reduced total debt
net of cash from $726.2 million at December 31, 1995 to $553.1 million at June
29, 1997. Also, after giving effect to the Refinancing Plan, Foamex
International's pro forma interest expense for the 52 weeks ended June 29, 1997
would have decreased $5.6 million and, after the retirement of long-term debt
with the net proceeds of the divestitures in 1996, Foamex International's pro
forma interest expense for the same period would have decreased an additional
$1.3 million. In addition, the Refinancing Plan eliminated the FJPS Discount
Debentures thereby eliminating approximately $2.3 million of additional
interest expense that would have been incurred by Foamex International over the
next 12 months as compared to the previous 12 months.
As a result of the Refinancing Plan, Foamex's total long-term debt
increased $150.1 million to $546.3 million, and variable rate debt comprises a
larger percentage of Foamex's overall indebtedness than in the past, and as a
result, future fluctuations in interest rates will have a greater impact on
Foamex's interest expense than in the past. Foamex expects the Refinancing Plan
to result in increased interest expense of approximately $2.5 million in the
second half of 1997 as compared to the first half of 1997, and annualized
increased interest expense of approximately $5.0 million, as compared to the
debt structure prior to the Refinancing Plan, assuming no material changes in
interest rates. Foamex's future interest expense will vary based on a variety
of factors, including fluctuations in interest rates in general.
In addition, Foamex has called for redemption on October 1, 1997
approximately $26.0 million principal amount of its Senior Notes, Senior
Subordinated Debentures and Series B Debentures of the approximately $30.0
million of its outstanding public debt that was not tendered as part of the
Refinancing Plan. The redemption is expected to be funded with borrowings under
the New Credit Facility. In connection with this redemption, Foamex expects to
incur an extraordinary loss on the early extinguishment of debt of
approximately $2.6 million in the fourth quarter of 1997.
In connection with the consummation of the Refinancing Plan, FJPS and its
general partner FJGP Inc., were merged into Foamex International. As a result,
the partners of Foamex are Foamex International, with a 98% limited partnership
interest, FMXI, a wholly-owned subsidiary of Foamex International, with a 1%
managing general partnership interest, and Trace Foam, with a 1% non-managing
general partnership interest. In addition, two intercompany promissory notes
(one of Foamex International and one of FJPS) payable to Foamex were
distributed to Foamex's partners, the tax sharing agreement, the tax
distribution advance agreement and the management services agreement were
amended and Trace Holding's promissory note payable to Foamex was amended. See
"Certain Relationships and Related Transactions."
USE OF PROCEEDS
Foamex will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as described
in this Prospectus, Foamex will receive in exchange Old Notes in like principal
amount. The Old Notes surrendered in exchange for the New Notes will be retired
and cancelled and cannot be reissued. Accordingly, the issuance of the New
Notes will not result in any change in the indebtedness of Foamex.
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<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
capitalization of Foamex as of June 29, 1997. Consummation of the Exchange
Offer will not change Foamex's capitalization. This table should be read in
conjunction with the consolidated and the condensed consolidated financial
statements and related notes thereto of Foamex included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
As of June 29, 1997
--------------------
(In thousands)
<S> <C>
Cash and cash equivalents ....................................... $ 4,508
==========
Short-term borrowings and current portion of long-term debt ...... $ 12,311
Long-term debt
9-1/2% Senior Secured Notes ...................................... 4,523
11-1/4% Senior Notes ............................................ 5,825
11-7/8% Senior Subordinated Debentures(1) ....................... 20,224
11-7/8% Series B Debentures ...................................... 45
New Credit Facility ............................................. 338,900
9-7/8% Senior Subordinated Notes ................................ 150,000
Other(2) ......................................................... 18,434
----------
Total long-term debt .......................................... 537,951
Partners' equity (deficit) ....................................... (118,217)
----------
Total capitalization .......................................... $ 432,045
==========
</TABLE>
- ---------------
(1) Net of unamortized debt discount of approximately $0.1 million.
(2) Net of unamortized debt discount of approximately $1.0 million.
18
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected historical consolidated financial
information of Foamex, for the fiscal years ended January 3, 1993, January 2,
1994, January 1, 1995, December 31, 1995 and December 29, 1996, which have been
derived from the audited consolidated financial statements of Foamex, and for
the twenty-six week periods ended June 30, 1996 and June 29, 1997, which have
been derived from the unaudited condensed consolidated financial statements of
Foamex. The selected historical consolidated financial information should be
read in conjunction with the consolidated and the condensed consolidated
financial statements and related notes thereto of Foamex included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
Fiscal Year (1)(2) Six Months ended June
------------------------------------------------------------------ -------------------------
1992 1993(3) 1994(4) 1995(5) 1996 1996(2) 1997
(In thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ........................ $ 501,751 $ 684,310 $833,660 $ 862,834 $ 926,351 $ 459,578 $ 469,007
Gross profit ..................... 69,887 93,704 142,395 100,749 153,232 74,198 87,577
Selling, general and
administrative
expenses ........................ 29,931 48,403 57,059 63,466 56,778 27,127 31,331
Restructuring and other
charges (credits) ............... -- 7,400 -- 39,249 (6,415) -- --
---------- --------- --------- --------- ---------- --------- -----------
Operating income (loss) ......... 39,956 37,901 85,336 (1,966) 102,869 47,071 56,246
Interest and debt issuance
expense ........................ 18,178 47,375 41,532 44,550 43,211 20,724 21,509
Other income (expense),
net .............................. 397 1,809 732 (205) 1,705 537 1,122
---------- --------- --------- --------- ---------- --------- -----------
Income (loss) from
continuing operations
before provision for
income taxes ..................... 22,175 (7,665) 44,536 (46,721) 61,363 26,884 35,859
Provision for income
taxes(6) ........................ 164 261 6,525 1,405 7,702 3,718 3,259
---------- --------- --------- --------- ---------- --------- -----------
Income (loss) from
continuing operations ............ 22,011 (7,926) 38,011 (48,126) 53,661 23,166 32,600
Income (loss) from
discontinued operations,
net .............................. -- 194 1,230 (5,117) (42,050) (39,527) --
Extraordinary loss ............... -- (9,921) -- -- (1,912) -- (45,538)
---------- --------- --------- --------- ---------- --------- -----------
Net income (loss) .................. $ 22,011 $ (17,653) $ 39,241 $ (53,243) $ 9,699 $ (16,361) $ (12,938)
========== ========= ========= ========= ========== ========= ===========
Other Data:
Capital expenditures ............... $ 15,243 $ 21,270 $ 21,201 $ 19,726 $ 23,509 $ 7,798 $ 16,369
Ratio of earnings to fixed
charges(9) ..................... 2.12x --(10) 1.94x --(10) 2.31x 2.19x 2.54x
Balance Sheet Data (at period end):
Cash and cash
equivalents ..................... $ 21,483 $ 3,978 $ 20,019 $ 638 $ 20,968 $ 2,438 $ 4,508
Total assets ..................... 340,900 575,528 654,176 605,892 586,157 574,833 600,694
Long-term debt ..................... 285,762 414,445 441,757 433,956 392,617 429,848 537,951
Partners' equity (deficit) ...... (39,061) 49,386 52,548 (12,604) 12,832 (34,451) (118,217)
(footnotes on following page)
</TABLE>
19
<PAGE>
Notes to Selected Historical Consolidated Financial Information
(1) Foamex has a 52-53 week fiscal year ending on the Sunday closest to the end
of the calendar year. Each fiscal year presented was 52 weeks with the
exception of 1992, which was 53 weeks.
(2) Fiscal years 1993 through 1995 and the twenty-six week period ended June
30, 1996 have been restated for discontinued operations resulting from the
sale of Perfect Fit. In addition, fiscal years 1994 and 1995 and the
twenty-six week period ended June 30, 1996 have been restated to reflect
the contribution of Foamex Mexico to Foamex from Foamex International
because the contribution was accounted for in a manner similar to a
pooling of interests because the entities were under common control.
(3) Includes the results of operations of General Felt and Great Western from
their respective dates of acquisition March 23, 1993 and May 1, 1993, and
thus may not be comparable to other periods. Great Western was
subsequently merged into Foamex.
(4) Includes the operations of Foamex Mexico from its date of acquisition of
March 31, 1994, and thus may not be comparable to other periods. See Note
2 above.
(5) Includes results of operations of Foamex Fibers from its date of
acquisition of April 13, 1995, and thus may not be comparable to other
periods.
(6) Foamex, as a partnership, is not subject to federal and certain state
income taxes. Provision for income taxes for all periods presented relates
to Canadian income tax and certain state income taxes of Foamex and
additionally subsequent to (i) 1992, the federal and state income taxes of
General Felt, (ii) 1993, Mexican income taxes and (iii) 1994, the state
income taxes of Foamex Fibers which files a consolidated federal tax
return with General Felt.
(7) See note 6 to the Notes to Summary Historical and Pro Forma Consolidated
Financial Information.
(8) See note 7 to the Notes to Summary Historical and Pro Forma Consolidated
Financial Information.
(9) For purposes of computing this ratio, earnings consist of income (loss)
before income taxes and extraordinary items and fixed charges, adjusted to
exclude capitalized interest. Fixed charges consist of interest expense,
including amounts capitalized, and the portion of operating lease rental
expense that is representative of the interest factor (deemed to be
one-third of operating lease rental expense).
(10) Earnings were insufficient to cover fixed charges by approximately $8.0
million in fiscal year 1993 and approximately $47.0 million in fiscal year
1995. Earnings before fixed charges for the 1993 and 1995 fiscal years were
reduced by non-cash expenses consisting principally of depreciation and
amortization of approximately $21.7 million and $22.9 million,
respectively.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Foamex is the largest manufacturer and marketer of flexible polyurethane
and advanced polymer foam products in North America. Foamex's products are
utilized primarily in five end-markets: (i) carpet cushion and other carpet
products, (ii) cushioning foams for bedding and packaging fabricators, (iii)
furniture products for furniture manufacturers and furniture fabricators, (iv)
automotive applications, including trim and accessories and (v) specialty and
technical foams. Foamex is the largest North American producer of foams used
for carpet cushion, automotive applications and specialty and technical
products and is a leading North American producer of cushioning foams. As a
result of the 1995 Operational Reorganization, Foamex has refocused on its
flexible polyurethane and advanced polymer foam business by divesting of
non-foam business segments. Foamex believes that a concentrated focus in only
the foam business segment will allow Foamex to concentrate management,
financial and operational resources and will position Foamex to pursue its
growth strategy of developing new products, improving profitability and
expanding internationally.
Prior to the second quarter of 1997, the cushioning foams and furniture
product markets were treated as a single product group; therefore, all
historical data in this Prospectus reflects cushioning foam and furniture
products as the single product group "cushioning foam."
Refinancing Plan
On June 12, 1997, Foamex's parent, Foamex International, completed the
Refinancing Plan which included (i) the Tender Offer pursuant to which Foamex
purchased (a) $99.8 million of the $104.3 million outstanding principal amount
of the Senior Secured Notes, (b) $130.1 million of the $135.9 million
outstanding principal amount of the Senior Notes, (c) $105.5 million of the
$125.8 million outstanding principal amount of the Senior Subordinated
Debentures, (d) substantially all of the $7.0 million outstanding principal
amount of the Series B Debentures and (e) all $116.7 million outstanding
principal amount of the FJPS Discount Debentures; (ii) the repayment of $5.2
million of borrowings under the Existing Credit Facility; and (iii) the payment
of fees and expenses. In addition, the indentures pursuant to which the Senior
Secured Notes, Senior Notes, Senior Subordinated Debentures and Series B
Debentures were issued were amended to remove substantially all of the
restrictive covenants. Foamex incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under the New Credit Facility and the net proceeds from the issuance of $150.0
million principal amount of Old Notes.
The Refinancing Plan was designed to reduce Foamex International's
interest expense and increase its operating and financial flexibility. After
giving effect to the Refinancing Plan, Foamex International reduced total debt
net of cash from $726.2 million at December 31, 1995 to $553.1 million at June
29, 1997. Also, after giving effect to the Refinancing Plan, Foamex
International's pro forma interest expense for the 52 weeks ended June 29, 1997
would have decreased $5.6 million and, after the retirement of long-term debt
with the net proceeds of the divestitures in 1996, Foamex International's pro
forma interest expense for the same period would have decreased an additional
$1.3 million. In addition, the Refinancing Plan eliminated the FJPS Discount
Debentures thereby eliminating approximately $2.3 million of additional
interest expense that would have been incurred by Foamex International over the
next 12 months as compared to the previous 12 months.
As a result of the Refinancing Plan, Foamex's total long-term debt
increased $150.1 million to $546.3 million, and variable rate debt comprises a
larger percentage of Foamex's overall indebtedness than in the past, and as a
result, future fluctuations in interest rates will have a greater impact on
Foamex's interest expense than in the past. Foamex expects the Refinancing Plan
to result in increased interest expense of approximately $2.5 million in the
second half of 1997 as compared to the first half of 1997, and annualized
increased interest expense of approximately $5.0 million, as compared to the
debt structure prior to the Refinancing Plan, assuming no material changes in
interest rates. Foamex's future interest expense will vary based on a variety
of factors, including fluctuations in interest rates in general.
In addition, Foamex has called for redemption on October 1, 1997
approximately $26.0 million principal amount of its Senior Notes, Senior
Subordinated Debentures and Series B Debentures of the approximately $30.0
21
<PAGE>
million of its outstanding public debt that was not tendered as part of the
Refinancing Plan. The redemption is expected to be funded with borrowings under
the New Credit Facility. In connection with this redemption, Foamex expects to
incur an extraordinary loss on the early extinguishment of debt of
approximately $2.6 million in the fourth quarter of 1997.
1995 Operational Reorganization
In November 1995, Foamex's parent, Foamex International, announced the
1995 Operational Reorganization to focus on its core flexible polyurethane and
advanced polymer foam business, enhance shareholder value and maximize future
profitability through a series of operational improvements, asset sales and the
reduction of long-term debt. In connection with the 1995 Operational
Reorganization, Foamex International sold JPS Automotive, a manufacturer of
automotive fabric and carpet, and Foamex sold Perfect Fit, a manufacturer of
fabric-based home comfort products. These divestitures have resulted in a
decrease of total debt for Foamex International by approximately $248.4 million
as of June 29, 1997.
As part of the 1995 Operational Reorganization, Foamex implemented a plan
to improve its profitability through (i) the realignment of management to
correspond with product groups, (ii) the consolidation of foam production,
fabrication or branch locations resulting in the elimination of 12 facilities,
a reduction of approximately 300 employees representing approximately 7% of the
work force, and an improved utilization of its remaining production capacity,
(iii) the implementation of additional procedures to reduce manufacturing
costs, including process redesign to eliminate non-value added operations, (iv)
the reduction of selling, general and administrative expenses through cost
containment and (v) the reduction of inventory levels through improved
forecasting and the elimination of inventories associated with closed
facilities. As an example of the improved utilization of the remaining
facilities, Foamex increased the average output per pouring plant by 19% from
1995 to 1996, and by approximately 12% for the first six months of 1997 as
compared to the first six months of 1996.
Price and Availability of Raw Materials
Historically, the price of raw materials has been cyclical and volatile,
and Foamex's principal suppliers of raw materials used in the manufacture of
flexible polyurethane foam have increased the price of raw materials several
times since September 1994. Significant increases in raw material prices could
have a material adverse effect on the financial condition or results of
operations of Foamex. Foamex attempts to offset raw material cost increases
through selling price increases; however, there can be no assurance that Foamex
will be successful in implementing selling price increases or that competitive
pricing pressure will not require Foamex to adjust selling prices. Results of
operations have been and could be adversely affected by delays in implementing,
or the inability of Foamex to implement, selling price increases to offset raw
material cost increases. For example, Foamex estimates that in 1995 the amount
of net unrecovered raw material cost increases was approximately $25.0 million.
See "Risk Factors--Price and Availability of Raw Materials."
The principal suppliers to the foam industry announced raw material price
increases effective April 1997. The impact of the raw material cost increases
were not significant during the second quarter of 1997. However, Foamex
estimates an unfavorable impact for the raw material cost increases, net of
sale price increases to customers, of between $1.5 million to $3.0 million
during the third quarter of 1997. Foamex believes that due to expected
increases in capacity during the next two years for TDI and polyol, it will be
more difficult for Foamex's suppliers to raise raw material prices in the
future. There can be no assurance that chemical suppliers will not increase raw
material costs in the future or that Foamex will be able to implement selling
price increases to offset any such raw material cost increases.
26 Week Period Ended June 29, 1997 Compared to 26 Week Period Ended June 30,
1996
Results of Operations
Foamex
Net sales for 1997 were $469.0 million as compared to $459.6 million in
1996, an increase of $9.4 million or 2.1%. Carpet cushion products net sales
for 1997 increased 1.8% to $142.9 million from $140.3 million in 1996 primarily
due to increased net sales during the first quarter of 1997 which resulted from
the effect of increased selling prices that were initiated late in the second
quarter of 1996 as well as increased shipments of certain carpet cushion
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products offset by increased competitive pricing pressure during the second
quarter of 1997 as compared to 1996. Cushioning products net sales for 1997
increased 3.9% to $115.4 million from $111.1 million in 1996 primarily due to
an increase in net sales from both new and existing customers of bedding
related products. Furniture products net sales for 1997 of $54.5 million were
consistent as compared to net sales of $54.9 million for 1996. Automotive
products net sales for 1997 of $119.0 million were consistent with net sales of
$119.3 million in 1996 primarily due to increased selling prices implemented
during the first quarter of 1996 offset by reduced net sales volume in 1997 as
compared to 1996 due to the decreased net sales volume resulting from reduced
production of car and light truck builds and the labor strikes at both Chrysler
and General Motors plants. Technical products net sales for 1997 increased 9.2%
to $37.1 million from $34.0 million in 1996 primarily due to increased net
sales volume.
Gross profit as a percentage of net sales increased to 18.7% for 1997 from
16.1% in 1996 primarily due to selling price increases and improved material
and production efficiencies and manufacturing cost containment which includes
(i) the impact during 1997 of the selling prices initiated in 1996 to offset
previous raw material cost increases, (ii) favorable raw material efficiencies
and (iii) an increased favorable impact of the 1995 Operational Reorganization
in 1997 as compared to 1996.
Operating income increased to $56.2 million for 1997 from $47.1 million in
1996 primarily due to improved gross profit margins as discussed above, offset
by a $4.2 million increase in selling, general and administrative expenses for
the second quarter of 1997. The increase in selling, general and administrative
expenses is primarily due to increases in employee compensation and incentives,
research and development costs, and travel and promotion costs associated with
the launching of new products and international expansion.
Income from continuing operations increased to $32.6 million for 1997 as
compared to $23.2 million in 1996. The increase is primarily due to the reasons
cited above. Loss from discontinued operations for 1996 represents the loss on
disposal and the operating loss of Perfect Fit which was sold during 1996. The
decrease in the effective income tax rate for continuing operations for 1997 as
compared to 1996 is primarily due to a decrease in pre-tax earnings and the
related tax provision of a subsidiary that files federal income tax returns.
The extraordinary loss on early extinguishment of debt of approximately
$45.5 million relates to premium and consent fee payments, the write-off of
debt issuance costs and other charges associated with the early extinguishment
of approximately $359.3 million of aggregate principal amount of debt in
connection with the Refinancing Plan and other debt extinguishment during 1997.
Foamex Capital Corporation
FCC is solely a co-issuer of certain indebtedness of Foamex and has no
other material operations.
General Felt
Net sales for 1997 were $148.6 million as compared to $146.0 million for
1996, an increase of $2.6 million, or 1.8%. The increase is primarily due to
increased net sales during the first quarter of 1997 which resulted from the
effect of increased selling prices that were initiated late in the second
quarter of 1996 as well as increased shipments of certain carpet cushion
products offset by increased competitive pricing pressure during the second
quarter of 1997 as compared to 1996.
Gross profit as a percentage of net sales decreased to 10.8% for 1997 from
13.0% in 1996 primarily due to increased shipments of lower margin carpet
cushion products and competitive pricing pressure during the second quarter of
1997, offset by the effect of the selling price increases initiated during the
second quarter of 1996.
Operating income decreased to $6.5 million for 1997 as compared to $9.8
million for 1996 primarily due to the reasons discussed above. Selling, general
and administrative expenses of $9.6 million for 1997 were fairly consistent as
compared to $9.2 million for 1996.
The effective income tax rate decreased to 40% for 1997 as compared to 42%
for 1996. The decrease is primarily due to reduced permanent differences for
income taxes and a decrease in the effective state tax rate.
The loss from discontinued operations related to the loss on disposal and
the operating loss of Perfect Fit which was sold during 1996.
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Foamex Fibers
Net sales for 1997 were $11.9 million as compared to $10.5 million for
1996, an increase of $1.4 million, or 13.1%. The increase is primarily due to
increased net sales volume of certain products during 1997 and the effect of
increased selling prices that were initiated during 1996.
Gross profit as a percentage of net sales increased to 24.4% for 1997 from
20.1% in 1996 primarily due to the effect of the selling price increases
initiated during 1996.
Income from operations increased to $2.2 million for 1997 as compared to
$1.7 million for 1996 primarily due to the reasons discussed above. Selling,
general and administrative expenses of $0.6 million for 1997 were fairly
consistent as compared to $0.5 million for 1996.
The effective tax rate remained constant at 37% for 1997 as compared to
1996.
Year Ended December 29, 1996 Compared to Year Ended December 31, 1995
Foamex
Net sales for 1996 were $926.4 million as compared to $862.8 million in
1995, an increase of $63.6 million or 7.4%. Carpet cushion net sales for 1996
increased 7.5% to $291.3 million from $271.0 million in 1995 primarily due to
increased selling prices initiated during the second quarter of 1996 as well as
increased volume of shipments due to improved carpet sales. Cushioning foam net
sales for 1996 increased 7.4% to $332.9 million from $310.0 million in 1995
primarily due to increased net sales volume from both new and existing
customers of bedding related products, increased selling prices initiated at
the beginning of 1996 and a full year of results for a company acquired in
April 1995 which manufactures cushioning products. Automotive foam net sales
for 1996 increased 5.5% to $231.9 million from $219.8 million in 1995 primarily
due to a continued increase in net sales of tri-laminates and composite
headliners and increased selling prices initiated at the beginning of 1996.
Specialty and technical foam net sales for 1996 increased 13.4% to $70.3
million from $62.0 million in 1995 primarily due to increased selling prices
and increased net sales volume.
Gross profit as a percentage of net sales increased to 16.5% for 1996 from
11.7% in 1995 primarily due to selling price increases and improved material
and production efficiencies, which include (i) selling price increases during
1996 to offset the adverse affect of the 1995 and 1994 raw material cost
increases, (ii) reductions in customer deductions for pricing disputes,
promotional programs and other matters and (iii) reductions in salaries and
other overhead costs associated with the implementation of the 1995 Operational
Reorganization.
Operating income was $102.9 million for 1996 as compared to a loss from
operations of $2.0 million in 1995. The increase was primarily due to an
increase in gross profit margin as discussed above, a decrease in restructuring
and other charges (credits) of $45.7 million and a decrease in selling, general
and administrative expenses of $6.7 million for 1996 as compared to 1995. The
decrease in restructuring and other charges (credits) is comprised of the $39.2
million charge for restructuring and other charges in 1995 plus the net
restructuring credit of $6.4 million in 1996. The 1996 net restructuring credit
is comprised of an $11.3 million credit due to Foamex's decision not to close a
facility which was part of the 1995 Operational Reorganization and $1.7 million
of credits relating primarily to the favorable termination of lease agreements
and other matters relating to the 1995 Operational Reorganization, offset by
$6.6 million of restructuring charges relating to the planned closure of two
facilities during 1997. The decrease in selling, general and administrative
expenses is the result of reductions in the provision for uncollectible
accounts of approximately $3.9 million, salaries and employee costs of
approximately $3.7 million and a reduction of approximately $2.0 million in
environmental accruals offset by increases in selling expenses associated with
the increased net sales volume and management realignment in connection with
the 1995 Operational Reorganization.
Income from continuing operations before provision for income taxes was
$61.4 million for 1996 as compared to a loss from continuing operations before
provision for income taxes of $46.7 million in 1995. The increase is primarily
due to the reasons cited above and a decrease in interest and debt issuance
expense of $1.3 million. The decrease in interest and debt issuance expense is
primarily due to a $2.3 million increased benefit from interest rate swap
agreements offset by the amount of interest allocated to discontinued
operations in 1996 as compared to 1995. See Note 3 to the consolidated
financial statements for further discussion.
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Foamex, as a limited partnership, is not subject to federal and certain
state income taxes. However, the consolidated financial statements include a
provision for income taxes which primarily relates to the federal and state
income taxes of corporate subsidiaries and subsidiaries located in foreign
jurisdictions that file separate income tax returns. See Note 10 to the
consolidated financial statements for further discussion.
The loss from discontinued operations of $42.1 million (net of $2.6
million income tax benefit) in 1996 relates to the net loss on the sale of the
home comfort products business segment which consisted primarily of the net
assets of Perfect Fit and the operating loss of Perfect Fit through the closing
date. See Note 3 to the consolidated financial statements for further
discussion.
The extraordinary loss on early extinguishment of debt of $1.9 million
primarily relates to the write-off of debt issuance costs and redemption
premiums associated with the early extinguishment of $30.6 million of long-term
debt. See Note 11 to the consolidated financial statements for further
discussion.
General Felt
Net sales for 1996 were $302.6 million as compared to $279.1 million in
1995, an increase of $23.5 million or 8.4%. The increase is primarily due to
increased selling prices for carpet cushion initiated during the second quarter
of 1996, increased volume of shipments of carpet cushion and a full year of
results for Foamex Fibers.
Gross profit as a percentage of net sales increased to 13.0% for 1996 from
9.5% in 1995 primarily due to (i) selling price increases, (ii) reductions in
customer deductions for pricing disputes, promotional programs and other
matters and (iii) reductions in salaries and other overhead costs associated
with the implementation of the 1995 Operational Reorganization.
Income from operations was $26.0 million for 1996 as compared to a loss
from operations of $9.9 million in 1995. The increase was primarily due to an
increase in gross profit margins as discussed above, a decrease in
restructuring and other charges (credits) of $19.6 million and a decrease in
selling, general and administrative expenses of $3.5 million for 1996 as
compared to 1995. The decrease in restructuring and other charges (credits) is
comprised of the $14.2 million charge for restructuring and other charges in
1995 plus the net restructuring credit of $5.4 million in 1996. The 1996 net
restructuring credit is comprised of a $11.3 million credit due to General
Felt's decision not to close a facility which was part of the 1995 Operational
Reorganization offset by $5.9 million of restructuring charges relating to the
closure of a facility during 1997. The decrease in selling, general and
administrative expenses is the result of reductions in the provision for
uncollectible accounts of approximately $2.0 million, salaries and employee
costs of approximately $2.0 million offset by increases in selling expenses
associated with the increased net sales volume and management realignment in
connection with the 1995 Operational Reorganization.
Income from continuing operations before provision for income taxes was
$24.8 million for 1996 as compared to a loss from continuing operations before
provision for income taxes of $11.0 million in 1995. The increase is primarily
due to the reasons cited above and an increase in other income of $1.0 million,
offset by an increase in interest expense of $1.0 million. The increase in
interest expense is due to increased borrowings during 1996 under the revolving
promissory notes with Foamex, offset by a decrease in term borrowings under the
Existing Credit Facility. The increase in other income is primarily due to
interest income associated with the net proceeds from the sale of Perfect Fit.
The increase in the tax provision during 1996 is due to the limitation on
the utilization of certain tax benefits.
The loss from discontinued operations of $45.7 million (net of $1.4
million income tax benefit) in 1996 relates to the net loss on the sale of the
home comfort products business segment which consisted of the net assets of
Perfect Fit and the operating loss of Perfect Fit through the closing date.
Foamex Fibers
Foamex Fibers was formed on March 29, 1995 for the purpose of acquiring
certain assets and assuming certain liabilities of GS Industries, Inc. and
Pontotoc Fibers, Inc. manufacturers of various nonwoven textile fiber products
used primarily for carpet padding and in the furniture industry (collectively,
the "Predecessor Company"). On April 13, 1995, Foamex Fibers acquired such
assets and assumed such liabilities for an aggregate price of approximately
$8.0 million.
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Net sales for 1996 were $21.4 million as compared to net sales of $19.7
million by the Predecessor Company for the period from January 1, 1995 to April
12, 1995 and by Foamex Fibers for the period from April 13, 1995 to December
31, 1995 ("Combined 1995"), an increase of $1.7 million or 8.7%. The increase
is primarily due to selling price increases initiated during 1996 and increased
net sales volume in 1996 as compared to Combined 1995.
Gross profit as a percentage of net sales increased to 21.3% for 1996 from
16.1% for Combined 1995 primarily due to selling price increases and production
efficiencies resulting from the increased net sales volume.
Income from operations was $3.3 million for 1996 as compared to $1.8
million for Combined 1995. The increase was primarily due to the reasons
discussed above.
The effective income tax rate decreased to 37.3% for 1996 as compared to
40.0% for the period from April 13, 1995 to December 31, 1995 due to a decrease
in the state effective income tax rate. The Predecessor Company was not subject
to corporate income taxes.
Year Ended December 31, 1995 Compared to Year Ended January 1, 1995
Foamex
Net sales for 1995 were $862.8 million as compared to $833.7 million in
1994, an increase of $29.1 million or 3.5%. Carpet cushion net sales for 1995
decreased 7.4% to $271.0 million from $292.5 million in 1994 primarily due to
reduced net sales volume of certain carpet cushion products resulting from weak
carpet sales and a change in product mix to carpet cushion with lower selling
prices. In addition, carpet cushion selling prices were under pressure from an
excess supply of low priced scrap foam, the primary component of rebond carpet
cushion. Cushioning foam net sales for 1995 increased 7.2% to $310.0 million
from $289.2 million in 1994 primarily due to the April 1995 acquisition of a
company which manufactures cushioning products and increased selling prices
offset by a reduction in net sales volume due to competitive pricing pressures
and reduced demand for certain cushioning foam products. Automotive foam net
sales for 1995 increased 11.0% to $219.8 million from $198.0 million in 1994
primarily due to increased net sales volume of tri-laminates and composite
headliner products offset by a reduction in net sales volume of other
automotive foam products. Specialty and technical foam net sales for 1995
increased 14.8% to $62.0 million from $54.0 million in 1994 primarily due to
increased selling prices and increased net sales volume.
Gross profit as a percentage of net sales decreased to 11.7% for 1995 from
17.1% for 1994. This unfavorable relationship was primarily due to net
unrecovered raw material cost increases of approximately $25.0 million during
1995. In addition, the decrease in gross profit margin for 1995 as compared to
1994 was also associated with (i) approximately $7.7 million of increased
customer deductions for pricing disputes, promotion programs and other matters,
(ii) approximately $3.5 million of increased employee benefits accruals
associated with insurance and pension plans and other accruals, (iii)
approximately $1.5 million of inventory write-offs associated with scrap foam
inventory and discontinued or slow moving product lines, (iv) an increase in
net sales of automotive tri-laminates, which have a lower-margin than other
foam products, (v) under-utilization of manufacturing capacities due to reduced
net sales volume of certain product lines and (vi) carpet cushion selling
prices remaining under pressure from an excess supply of low-priced scrap foam,
the primary component of rebond carpet cushion.
A loss from operations of $2.0 million was incurred for 1995 as compared
to operating income of $85.3 million for 1994. The decrease in operating income
was primarily due to (i) the reduction in gross profit margin as a percentage
of net sales as discussed above, (ii) an increase in selling, general and
administrative expenses of $6.4 million for 1995 as compared to 1994 including
an increase of $3.7 million in the provision for uncollectible accounts and
(iii) restructuring and other charges of $39.2 million (as discussed below).
In 1995, Foamex approved the 1995 Operational Reorganization to
consolidate 13 foam production, fabrication or branch locations to concentrate
resources as a result of industry conditions and better position itself to
achieve its strategic growth objectives. Foamex recorded restructuring and
other charges of $39.2 million which were comprised of charges of $35.6 million
associated with the consolidation of the foam production, fabrication or branch
locations, $2.2 million associated with the completion of the 1993
restructuring plan and $1.4 million associated with merger and acquisition
activities of Foamex. The components of the $35.6 million restructuring charge
include: $16.7 million for fixed asset writedowns, $15.1 million for plant
closure and operating lease obligations and $3.8 million for personnel
reductions. The $3.8 million cost for personnel reductions primarily
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represents severance and employee benefit costs associated with the elimination
of manufacturing and administrative personnel. See Note 4 to the consolidated
financial statements for further discussion.
A net loss of $53.2 million was incurred for 1995 as compared to net
income of $39.2 million for 1994. The decrease is primarily due to (i) the
reasons cited above and (ii) an increase in interest and debt issuance expense
of $3.0 million. The increase in interest and debt issuance expense was
primarily associated with (i) a decrease of $1.6 million in the benefit
received from interest rate swap agreements in 1995 as compared to 1994 and
(ii) an increase in term loan interest expense due to a full year of borrowings
in 1995 as compared to 1994.
Foamex, as a limited partnership, is not subject to federal and certain
state income taxes. However, the consolidated financial statements include a
provision for income taxes which primarily relates to the federal and state
income taxes of corporate subsidiaries and subsidiaries located in foreign
jurisdictions that file separate income tax returns. See Note 10 to the
consolidated financial statements for further discussion.
General Felt
Net sales for 1995 were $279.1 million as compared to $290.6 million in
1994, a decrease of $11.5 million or 3.9%. The decrease is primarily due to
reduced net sales volume of certain carpet cushion products offset by the April
1995 acquisition of the Predecessor Company. The reduced net sales volume of
carpet cushion resulted from weak carpet sales and a change in product mix to
carpet cushion with lower selling prices. In addition, carpet cushion selling
prices were under pressure from an excess supply of low priced scrap foam, the
primary component of rebond carpet cushion.
Gross profit as a percentage of net sales decreased to 9.5% for 1995 from
13.6% for 1994. This unfavorable relationship was primarily due the change in
product mix to carpet cushion with lower selling prices. In addition, the
decrease in gross profit margins for 1995 as compared to 1994 was also
associated with (i) approximately $2.2 million of increased customer deductions
for pricing disputes, promotion programs and other matters, (ii) approximately
$0.3 million of inventory write-offs associated with scrap foam inventory and
discontinued or slow moving product lines, (iii) under-utilization of
manufacturing capacities due to reduced net sales volume of carpet cushion and
(iv) carpet cushion selling prices remaining under pressure from an excess
supply of low priced scrap foam, the primary component of rebond carpet
cushion.
A loss from operations of $9.9 million was incurred for 1995 as compared
to income of $15.1 million for 1994. The decrease in income from operations was
primarily due to the reduction in gross profit margins as a percentage of net
sales as discussed above and restructuring and other charges of $14.2 million
(as discussed below), offset by a decrease in selling, general and
administrative expenses of $2.1 million for 1995 as compared to 1994. The
decrease in selling, general and administrative expenses is primarily due to
decreased promotion expense of $4.2 million during 1995 as compared to 1994 and
decreased employee costs of $0.5 million during 1995 as compared to 1994 offset
by an increase in the provision for uncollectible accounts of $2.4 million
during 1995 as compared to 1994.
In 1995, General Felt approved its portion of the 1995 Operational
Reorganization to consolidate two foam production, fabrication or branch
locations to concentrate resources as a result of industry conditions and
better position itself to achieve its strategic growth objectives. General Felt
recorded restructuring and other charges of $14.2 million which were comprised
of charges of $13.1 million associated with the consolidation of the foam
production, fabrication or branch locations and a $1.1 million charge
associated with the completion of the 1993 restructuring plan. The components
of the $13.1 million restructuring charge include: $8.5 million for fixed asset
writedowns (net of estimated proceeds), $3.8 million for plant closure and
operating lease obligations and $0.8 million for personnel reductions. The $0.8
million cost for personnel reductions primarily represents severance and
employee benefit costs associated with the elimination of manufacturing and
administrative personnel.
A loss from continuing operations of $12.0 million was incurred for 1995
as compared to income from continuing operations of $8.4 million for 1994. The
decrease is primarily due to the reasons cited above offset by a decrease in
the provision for income taxes. The decrease in the provision for income taxes
is primarily due to reduced pretax earnings as discussed above, offset by a
limitation on the utilization of certain tax benefits.
The loss from discontinued operations for 1995 and 1994 relate to the
operating loss of Perfect Fit.
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Foamex Fibers
Net sales for Combined 1995 were $19.7 million as compared to net sales by
the Predecessor Company of $16.8 million for 1994, an increase of $2.9 million,
or 17.4%. The increase is primarily due to increased net sales volume in
Combined 1995 as compared to 1994.
Gross profit as a percentage of net sales decreased to 16.1% for Combined
1995 from 19.2% for 1994 primarily due to increased shipments of certain
products with lower margins in Combined 1995.
Income from operations was $1.8 million for Combined 1995 as compared to
$1.7 million for 1994. The increase is primarily due to the reasons discussed
above, offset by decreased selling, general and administrative expenses of $0.2
million
The Predecessor Company was not subject to corporate income taxes.
Liquidity and Capital Resources
Foamex's primary capital requirements consist principally of working
capital requirements, scheduled payments of principal and interest on
outstanding indebtedness and capital expenditures. Foamex believes that cash
flow from operating activities, cash on hand and periodic borrowings under the
New Credit Facility, if necessary, will be adequate to meet these capital
requirements. The ability to meet the operating cash requirements could be
impaired if Foamex fails to comply with any of the covenants contained in the
New Credit Facility and such noncompliance is not cured by Foamex or waived by
the lenders. Foamex was in compliance with the covenants in the New Credit
Facility as of June 29, 1997, and expects to be in compliance with the
covenants in the New Credit Facility for the foreseeable future.
Cash flow from operating activities was $(2.2) million and $13.9 million
for the first six months of 1997 and for the first six months of 1996,
respectively. The decrease is primarily due to an increase in the use of cash
for operating assets and liabilities offset by improved results from continuing
operations. Cash flow from continuing operations was $36.7 million, $36.5
million and $50.6 million in 1996, 1995 and 1994, respectively. Cash flow from
continuing operations remained consistent for 1996 as compared to 1995
primarily as a result of improved operating results from continuing operations
offset by an increased use of cash by the operating assets and liabilities.
Cash flow from continuing operations decreased in 1995 as compared to 1994
primarily as a result of the reduction in operating results from continuing
operations.
During the first six months of 1997, Foamex spent approximately $16.4
million on capital expenditures and expects to maintain or reduce spending for
capital expenditures for the foreseeable future since significant capital
projects, such as the new Mexico City facility, are expected to be completed
during 1997. Future capital expenditures are expected to focus primarily on the
maintenance of existing equipment and on the installation of the VPF[TM]
manufacturing process. From the beginning of 1994 through 1996, Foamex spent
approximately $63.9 million on capital improvements. The expenditures included:
(i) installation of new VPF[TM] technology in the Verona, Mississippi and
Orange, California facilities; (ii) initiation of the construction of a
facility in Mexico City, Mexico to improve manufacturing efficiencies and to
meet the growing demand for flexible polyurethane foam products; and (iii)
installation of more efficient flexible polyurethane foam production line
systems and fabricating equipment in a number of manufacturing facilities.
During 1996, Foamex received net sale proceeds of approximately $42.7
million in connection with the sale of Perfect Fit which was finalized in 1996.
The net sale proceeds were used to repurchase long-term debt of approximately
$30.6 million during 1996 and for the payment of certain retained liabilities,
with the remainder held as restricted cash as of December 29, 1996 for the
repurchase of additional long-term debt during 1997. During the twenty-six week
period ended June 29, 1997, Foamex repurchased approximately $8.0 million of
long-term debt and repaid $3.8 million of term borrowings under the Existing
Credit Facility with the remaining net sale proceeds.
On June 28, 1994, Foamex purchased an $87.9 million principal amount note
due 2006 from its 98% limited partner FJPS for $35.3 million (the "FJPS Note").
During December 1996, Foamex received a partial repayment of the FJPS Note in
the amount of $18.4 million. The FJPS Note was cancelled as part of the
Refinancing Plan. See Note 13 to the consolidated financial statements
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In March 1994, Foamex International acquired Transformacion De Espumas Y
Fieltros, S.A. de C.V. ("TEFSA") for an aggregate purchase price of $4.5
million, including related fees and expenses of approximately $0.4 million, to
be paid over a three-year period with an initial cash payment of $1.7 million.
In April 1995, Foamex acquired certain assets and assumed certain liabilities
of manufacturers of synthetic fabrics for the carpet and furniture industries
for an aggregate consideration of approximately $8.0 million, including related
fees and expenses of approximately $0.3 million, with an initial cash payment
of $7.2 million. During 1996, Foamex International contributed its interest in
Foamex Mexico to Foamex. Also, during 1996 Foamex made a scheduled cash payment
of approximately $0.8 million in accordance with the purchase agreement. The
final payment of approximately $0.9 million was made in April 1997.
On August 29, 1997, Foamex entered into a definitive agreement to sell its
needlepunch carpeting, tufted carpeting and artificial grass products business,
located in Dalton, Georgia, to Bretlin, Inc., a subsidiary of The Dixie Group,
Inc. The sales price is approximately $33.0 million plus the value of
inventory. The transaction is subject to governmental review and the
satisfaction of certain customary terms and conditions. Foamex intends to use
the net proceeds of the sale to reduce long-term debt.
As of June 29, 1997, there were approximately $49.0 million of outstanding
revolving credit borrowings under the New Credit Facility with unused
availability of approximately $84.9 million. See "Description of Certain Debt
Instruments--New Credit Facility." Borrowings by Foamex Canada as of June 29,
1997 were approximately $3.5 million under a revolving credit agreement with
unused availability of approximately $1.0 million. Borrowings by Foamex Mexico
as of June 29, 1997 were approximately $0.5 million under a revolving credit
agreement with unused availability of approximately $1.5 million.
In May 1997, Foamex Mexico entered into a loan agreement which provides for
(i) a $5.0 million term loan and (ii) a $2.0 million line of credit. Borrowings
under such loan agreement bear interest at a rate of LIBOR plus 4.5% and are
collateralized secured by certain assets of Foamex Mexico. The $5.0 million term
loan is amortized in equal quarterly payments after the first year and will
mature in 2002. The $2.0 million line of credit will be used for working capital
purposes and is renewable annually. Foamex Mexico plans to use the proceeds of
the term loan for expenditures associated with the construction of a new
manufacturing facility and to repay $2.0 million of borrowings under three
promissory notes.
Foamex made cash distributions to its partners, pursuant to the Tax
Sharing Agreement (as defined), of approximately $4.5 million, $3.5 million,
$2.4 million and $3.3 million in the twenty-six week period ended June 29, 1997
and in the years ended 1996, 1995 and 1994, respectively. As of June 29, 1997,
Foamex had accrued an unpaid tax sharing obligation of approximately $12.6
million, of which it has made subsequent payments of approximately $3.0
million.
Interest Rate Swap Agreements. Foamex enters into interest rate swaps to
lower funding costs and/or to manage interest costs and exposure to changing
interest rates. Foamex does not hold or issue financial instruments for trading
purposes.
In connection with the Refinancing Plan, Foamex's existing interest rate
swap agreements with a notional amount of $300.0 million were considered to be
effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex entered into an amendment of the existing interest rate swap
agreements resulting in one interest rate swap agreement with a notional amount
of $150.0 million through June 2007. Accordingly, the $8.2 million fair value
liability has been recorded as a deferred credit which will be amortized as a
reduction in interest and debt issuance expense on a straight-line basis over
the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex is obligated to make fixed payments of
5.75% per annum through December 1997 and variable payments based on the higher
of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in June 2002, and annually thereafter, for a cash settlement based on the
fair market value of the amended interest rate swap agreement. Interest and
debt issuance expense is subject to fluctuations in LIBOR during the term of
the swap agreement except during 1997. Foamex is exposed to credit loss in the
event of nonperformance by the swap partner;
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however, the occurrence of this event is not anticipated. The effect of the
interest rate swaps described above was a favorable adjustment to interest and
debt issuance expense of $1.9 million and $1.7 million for the twenty-six week
periods ended June 30, 1996 and June 29, 1997, respectively. See "Risk
Factors--Interest Rate Fluctuations."
Effects of the Refinancing Plan. On June 12, 1997, Foamex's parent,
Foamex International, completed the Refinancing Plan, which included (i) the
Tender Offer pursuant to which Foamex purchased (a) $99.8 million of the $104.3
million outstanding principal amount of the Senior Secured Notes, (b) $130.1
million of the $135.9 million outstanding principal amount of the Senior Notes,
(c) $105.5 million of the $125.8 million outstanding principal amount of the
Senior Subordinated Debentures, (d) substantially all of the $7.0 million
outstanding principal amount of the Series B Debentures, and (e) all $116.7
million outstanding principal amount of the FJPS Discount Debentures; (ii) the
repayment of $5.2 million of borrowings under the Existing Credit Facility; and
(iii) the payment of fees and expenses. In addition, the indentures pursuant to
which the Senior Secured Notes, Senior Notes, Senior Subordinated Debentures
and Series B Debentures were issued were amended to remove substantially all of
the restrictive covenants. Foamex incurred an extraordinary loss on the early
extinguishment of debt associated with the Refinancing Plan of approximately
$44.5 million. The Refinancing Plan was funded by $347.0 million of borrowings
under the New Credit Facility and the net proceeds from the issuance of $150.0
million principal amount of Old Notes. See "Risk Factors--Substantial Leverage"
and "--Partners' Deficit and Charge to Earnings."
As a result of the Refinancing Plan, Foamex's long-term debt increased
$150.1 million to $546.3 million, and variable rate debt comprises a larger
percentage of Foamex's overall indebtedness than in the past, and as a result,
future fluctuations in interest rates will have a greater impact on Foamex's
interest expense than in the past. Foamex expects the Refinancing Plan to
result in increased interest expense of approximately $2.5 million in the
second half of 1997 as compared to the first half of 1997, and annualized
increased interest expense of approximately $5.0 million, as compared to the
debt structure prior to the Refinancing Plan, assuming no material changes in
interest rates. Foamex's future interest expense will vary based on a variety
of factors, including fluctuations in interest rates in general.
In connection with the consummation of the Refinancing Plan, Foamex
distributed (i) to FJPS and FMXI, all FJPS Discount Debentures purchased in the
Tender Offer, the FJPS Note and the promissory note of Foamex International
payable to Foamex, and (ii) to Trace Foam, an amount in cash equal to 1/99th of
the distribution to FJPS and FMXI. As part of the Refinancing Plan (a) FMXI
dividended its distribution to Foamex International, (b) each of the FJPS
Discount Debentures distributed to FJPS, the Foamex International promissory
note, and the FJPS Note were canceled and (c) FJPS and its general partner,
FJGP Inc., were merged into Foamex International.
On July 7, 1996, Trace Holdings issued to Foamex a promissory note for
approximately $4.4 million plus accrued interest of approximately $0.4 million,
which is an extension of an earlier note. As part of the Refinancing Plan, the
Note was amended and restated, with accrued interest being added to principal,
the maturity was extended to July 7, 2001, and the interest rate was changed to
the sum of 2 3/8% plus Three Month LIBOR. In connection with the Refinancing
Plan, Foamex agreed to permit up to an additional $5.0 million of borrowings by
Trace International (which was borrowed on July 1, 1997) on terms and
conditions substantially similar to the existing promissory note, and the tax
distribution advance agreement was amended to increase the permitted advances
to Foamex International from $17.0 million to $25.0 million.
In addition, Foamex has called for redemption on October 1, 1997,
approximately $26.0 million principal amount of its Senior Notes, Senior
Subordinated Debentures and Series B Debentures of the approximately $30.0
million of its outstanding public debt that was not tendered as part of the
Refinancing Plan. The redemption is expected to be funded with borrowings under
the New Credit Facility. In connection with this redemption, Foamex expects to
incur an extraordinary loss on the early extinguishment of debt of
approximately $2.6 million in the fourth quarter of 1997.
Inflation and Other Matters
There was no significant impact on Foamex's operations as a result of
inflation during the prior three year period. Effective in January 1997,
Foamex's operations in Mexico became subject to highly inflationary accounting
for financial reporting purposes. Translation adjustments resulting from
fluctuations in the exchange rate between the Mexican peso and the U.S. dollar
will be included in Foamex's consolidated statement of operations as compared
to partners' equity (deficit). Large fluctuations in the Mexican peso exchange
rate could have an adverse impact on Foamex's results of operations. The effect
of the translation adjustments on the 1997 results of operations have
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<PAGE>
been insignificant. In some circumstances, market conditions or customer
expectations may prevent Foamex from increasing the price of its products to
offset the inflationary pressures that may increase its costs in the future.
See "--Results of Operations--Year Ended December 31, 1995 Compared to Year
Ended January 1, 1995" and "Risk Factors--Price and Availability of Raw
Materials" for a discussion of the impact of raw material price increases.
Business Cycle and Seasonality
Foamex's automotive foam customers are predominantly automotive OEMs or
other automotive suppliers. As such, the sales of these product lines are
directly related to the overall level of passenger car and light truck
production in North America. Also, Foamex's sales are sensitive to sales of new
and existing homes, changes in personal disposable income and seasonality.
Foamex typically experiences two seasonally slow periods during each year, in
early July and in late December, due to scheduled plant shutdowns and holidays.
Environmental Matters
Foamex is subject to extensive and changing environmental laws and
regulations. Expenditures to date in connection with Foamex's compliance with
such laws and regulations have not had a material adverse effect on its
operations, financial position, capital expenditures or competitive position.
The amount of liabilities recorded by Foamex in connection with environmental
matters as of June 29, 1997 was approximately $4.2 million. In addition, as of
June 29, 1997, Foamex has net receivables of approximately $1.0 million for
indemnification of environmental liabilities from former owners, net of a $1.0
million allowance relating to potential disagreements regarding the scope of
the indemnification. Although it is possible that new information or future
developments could require Foamex to reassess its potential exposure to all
pending environmental matters, including those described in the footnotes to
Foamex's condensed consolidated financial statements, Foamex believes that,
based upon all currently available information, the resolution of all such
pending environmental matters will not have a material adverse effect on
Foamex's operations, financial position, capital expenditures or competitive
position. See "Risk Factors--Environmental Liabilities and Regulations."
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BUSINESS
Foamex's operations are conducted together with its wholly-owned
subsidiaries, General Felt, Foamex Fibers, Foamex Canada, Foamex Mexico and
Foamex Asia, and their respective operations. FCC is a wholly-owned special
purpose subsidiary of Foamex whose sole business is to act as a co-issuer of
certain indebtedness of Foamex.
Business Overview
Foamex is the largest manufacturer and marketer of flexible polyurethane
and advanced polymer foam products in North America. Foamex's products are
utilized primarily in five end-markets: (i) carpet cushion and other carpet
products, (ii) cushioning foams for bedding and furniture fabricators, (iii)
furniture products for furniture manufacturers and packaging fabricators, (iv)
automotive applications, including trim and accessories and (v) specialty and
technical foams. Foamex is the largest North American producer of foams used
for carpet cushion, automotive applications and specialty and technical
products and is a leading North American producer of cushioning foams. As a
result of the 1995 Operational Reorganization, Foamex has refocused on its
flexible polyurethane and advanced polymer foam business by divesting of
non-foam business segments. Foamex believes that a concentrated focus in only
the foam business segment will allow Foamex to concentrate management,
financial and operational resources and will position Foamex to pursue its
growth strategy of developing new products, improving profitability and
expanding internationally.
Foamex distributes carpet cushion to major floor covering retailers such
as Sears, New York Carpet World and Carpetland USA. Foamex supplies cushioning
foams to major bedding and furniture manufacturers such as Sealy, Simmons and
Ethan Allen. Foamex's packaging foams are supplied to distributors and
manufacturers of computers and other electronic devices, including Seagate
Technology and CompUSA. Foamex distributes its automotive foam products to
OEMs, including Ford, General Motors and Chrysler, and major tier one suppliers
such as Lear Corporation, Johnson Controls and Delphi Automotive Systems.
Foamex's specialty and technical foams consist of reticulated foams and other
customized polyester and polyether foams used for filtration, reservoiring and
consumer products which are utilized worldwide in a wide variety of
applications by companies such as Hewlett-Packard and Briggs & Stratton.
Foamex and its predecessors have been developing, manufacturing and
marketing polyurethane foam for more than 40 years. For the 52 weeks ended June
29, 1997, Foamex had net sales of $935.8 million, EBDAIT of $126.1 million and
income from continuing operations of $63.1 million. During such period, the
percentage of net sales generated by cushioning foams; carpet cushion and other
carpet products; automotive foams; and specialty and technical foams was
approximately 36%, 31%, 25% and 8%, respectively. Prior to the second quarter
of 1997, the cushioning foams and furniture product markets were treated as a
single product group; therefore, all historical data in this Prospectus
reflects cushioning foam and furniture products as the single product group
"cushioning foam."
Competitive Strengths
Foamex believes that it possesses a number of competitive strengths that
have allowed it to become the largest manufacturer and marketer of flexible
polyurethane and advanced polymer foam products in North America, including:
Emphasis on New Product Development. Foamex believes it has a significant
research and development capability and, as a result, has been awarded more
than 100 foam-related patents worldwide. This capability provides Foamex with a
stream of new products, new applications for existing products, and new
processes for foam manufacturing. An example of this capability is VPF[TM], an
innovative manufacturing process currently used in North America only by
Foamex, which has been used to create new products such as Reflex[TM] and
Nexol[TM]. Reflex[TM] is designed to replace fiberfill in certain cushioning
products, and Nexol[TM] is designed to replace rigid styrene foam in packaging.
Foamex has also recently introduced Plushlife[TM] for the carpet cushion market
and Powerthane[TM] for automotive applications. Another technology developed by
Foamex is SMT[TM], which allows for high volume precision contouring of foam
surfaces, thereby improving Foamex's existing products and creating new
products such as sculpted bed mattresses.
Alignment with Key Customers. Foamex has historically maintained a steady
revenue base by aligning itself with key customers, many of which have been
Foamex's customers for many years. These customer relationships are supported
by Foamex's extensive North American network of 58 strategically located
facilities, which allows Foamex to deliver products cost effectively on a
just-in-time basis. As a result of these relationships, Foamex is
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able to work with customers during the design phase for new products and new
applications, thereby favorably positioning Foamex to be the principal supplier
for these products.
High Quality Products. Foamex is a pioneer in manufacturing and
distributing high quality flexible polyurethane and advanced polymer foam
products to satisfy the specific needs of customers. During 1996, Foamex
completed QS-9000 and ISO-9001 certification for its eight domestic facilities
that supply the automotive industry and is pursuing the appropriate
certifications for the remainder of its manufacturing facilities. Foamex was
one of the first flexible polyurethane foam manufacturers to be QS-9000
certified, demonstrating its commitment to producing the highest quality
products and meeting the needs of its customers.
Low Cost Manufacturing Position. Foamex strives to maintain
state-of-the-art manufacturing facilities which utilize recent manufacturing
improvements such as the proprietary VPF[TM] and patented SMT[TM] technologies,
as well as the latest carbon dioxide converting process. These technologies are
designed to, among other things, maximize the conversion efficiency of raw
materials into finished goods and to minimize labor costs. Furthermore, Foamex
has implemented a company-wide Continuous Improvement Process program designed
to continually increase productivity, reduce costs and improve product quality.
In addition, as the largest manufacturer of flexible polyurethane and advanced
polymer foam products in North America, management believes that Foamex is able
to realize economies of scale in its raw materials procurement, which represent
approximately 74% of Foamex's manufacturing costs, and recover costs from the
use of substantially all of its internally generated trim scrap, which is the
principal raw material in the production of bonded carpet cushion.
Growth Strategy
Foamex's strategy focuses on (i) developing new proprietary foam products,
(ii) introducing new uses for advanced foam products, (iii) expanding in
international markets and (iv) reducing costs through continued emphasis on
manufacturing improvements.
New Proprietary Foam Products. Foamex plans to continue to utilize its
significant research and development capability to develop new products. In
recent years, Foamex has developed new proprietary technologies, such as
VPF[TM] and SMT[TM], which have been used to create higher margin, value-added
products designed to replace existing flexible polyurethane foam products.
SMT[TM] has allowed Foamex to develop sculpted mattress toppers, mattress pads
and bed pillows which are replacing traditional polyurethane foam products due
to their superior comfort, quality and value. In certain cases, such as
Plushlife[TM], a proprietary carpet cushion designed to replace traditional
bonded and prime carpet cushion, Foamex brands these products to create product
recognition and to generate higher margins.
New Uses for Foam. Foamex is actively developing new applications for its
advanced foam products to replace other materials. In the automotive industry,
the number of foam applications has increased from 8 per vehicle in 1984 to 20
per vehicle in 1997. For example, Foamex has introduced products such as foam
headliners which are replacing fiberglass headliners (the rigid material
between the fabric and the metal roof of a car). Reflex[TM] foams, which
include cushion wraps and cushion cores and are created using VPF[TM], are
advanced polymer cushioning products designed to improve comfort, quality and
durability in upholstered furniture and to replace standard fiberfill.
Nexol[TM] foams, also created using VPF[TM], expand Foamex's ability to meet
the special packaging requirements of sensitive and fragile products such as
electronic components, and replace standard rigid styrene foam. Foamex's
fastest growing business, specialty and technical foams, focuses on developing
customized foam applications for high-growth product markets such as inkjet
printer cartridges, nickel-metal hydride batteries and oxygenators for
cardio-pulmonary surgery.
International Expansion. Foamex has positioned itself to take advantage
of global opportunities. In Mexico, Foamex has built a new state-of-the-art
manufacturing facility, which is expected to meet increasing demand and to
allow Foamex to increase market penetration. In Asia, which management believes
offers attractive growth opportunities, Foamex is actively exploring strategic
options to enter the foam market. Additionally, Foamex has created an alliance
with Recticel, Europe's largest flexible polyurethane foam manufacturer, which
will allow Foamex to better meet the increasing global needs of its automotive
customers.
Additional Operating Cost Savings. Foamex is continuing to build on the
1995 Operational Reorganization which was designed to reduce operating costs
and improve productivity. Foamex has identified additional operating cost
savings in 1997 that are expected to result from (i) improved productivity,
through-put and material yields
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in the manufacturing process, (ii) the full year benefit of facilities closed
during 1996, (iii) the closure of two additional facilities during 1997 and
(iv) the expansion of the Continuous Improvement Process.
Products
Foamex is a manufacturer and distributor of quality flexible polyurethane
and advanced polymer foam products designed to satisfy the specific needs of
customers. Foamex's 46 foam manufacturing and 12 distribution facilities enable
it to source production efficiently and meet the needs of its customers
throughout North America. Such facilities are also important for satisfying all
of the foam requirements of large national customers in a timely and cost
effective manner.
Foamex's products are utilized primarily in five end-markets: (i) carpet
cushion and other carpet products, (ii) cushioning foams for bedding and
furniture fabricators, (iii) furniture products for furniture manufacturers and
packaging fabricators, (iv) automotive applications, including trim and
accessories and (v) specialty and technical foams. Prior to the second quarter
of 1997, the cushioning foams and furniture product markets were treated as a
single product group; therefore, all historical data in this Prospectus
reflects cushioning foam and furniture products as the single product group
"cushioning foam." The table below sets forth net sales of Foamex by product
category for the periods indicated:
<TABLE>
<CAPTION>
Fiscal Year Six months ended June
-------------------------------------------------------------- -----------------------------------------
1994 1995 1996 1996 1997
-------------------- -------------------- -------------------- -------------------- --------------------
$ % $ % $ % $ % $ %
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carpet cushion $ 292.5 35.1% $ 271.0 31.4% $ 291.3 31.5% $ 140.3 30.5% $ 142.9 30.5%
Cushioning
foams ......... 289.2 34.7 310.0 35.9 332.9 35.9 166.0 36.1 170.0 36.2
Automotive
foams ......... 198.0 23.7 219.8 25.5 231.9 25.0 119.3 26.0 119.0 25.4
Specialty and
technical
foams ......... 54.0 6.5 62.0 7.2 70.3 7.6 34.0 7.4 37.1 7.9
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total ...... $ 833.7 100.0% $ 862.8 100.0% $ 926.4 100.0% $ 459.6 100.0% $ 469.0 100.0%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
Carpet Cushion. Foamex is one of the largest manufacturers and
distributors of prime, bonded, sponge rubber and felt carpet cushion in North
America. Foamex also manufactures synthetic "grass" turf, primarily for the
residential market. Synthetic turf is tufted from polypropylene yarn in a
variety of colors, textures and qualities. In addition, Foamex manufactures a
variety of textured carpeting and wall coverings primarily using solution dyed
polypropylene staple fiber. Such needlepunch carpets have generally been used
as indoor/outdoor floor covering but, through the development of patterned
products and stylized color lines, have found increasing acceptance in both
residential and commercial applications. On August 29, 1997, Foamex entered
into a definitive agreement to sell its needlepunch carpeting, tufted carpeting
and artificial grass products business. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." Foamex has also developed Plushlife[TM], a proprietary
bonded carpet cushion product, introduced in February 1997, which Foamex
believes to be one of the most significant improvements in bonded carpet
cushion products in many years. Plushlife[TM] combines two cushions into a
single structure one to absorb the energy of foot traffic and the other to
enhance comfort.
Foamex developed ComfortWear[RegTM], a quality prime carpet cushion, which
was introduced in February 1994 in conjunction with significant consumer and
trade promotions. ComfortWear[RegTM] currently is sold in retail outlets
throughout the United States. ComfortWear[RegTM] is marketed through floor
covering retailers in the United States such as Sears, New York Carpet World
and Carpetland USA.
Cushioning Foams. Foamex is one of the largest manufacturers of cushioning
foams in North America. These foams are used by the bedding industry in quilts,
toppers, cores and border rolls for mattresses and by the furniture industry
for seating products. Cushioning foams are generally sold in large volumes on a
regional basis because of high shipping costs. Due to its size and the
strategic location of its production facilities, Foamex believes it will
continue to have an advantage over small regional producers in supplying large
national accounts with all of their foam requirements.
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The development and introduction of value added products continues to be a
priority of Foamex and has included (i) Reflex[TM] and Nexol[TM] discussed
below, (ii) viscoelastic or "memory" foams for the bedding industry, which
maintain their resiliency better than other foams and materials and (iii) Latex
Plus[TM], a urethane-based replacement for latex, a material used in bedding
products. Foamex's most recent product introductions have included Reflex[TM]
and Nexol[TM] for the cushioning and packaging industries, respectively, which
were created using the VPF[TM] manufacturing process. Reflex[TM] materials,
which include cushion wraps and cushion cores, are advanced polymer cushioning
products designed to improve comfort, quality and durability in upholstered
furniture. Nexol[TM] expands Foamex's capabilities in meeting the special
packaging requirements of sensitive and fragile products such as electronic
components.
Foamex's cushioning foams for bedding products are sold to mattress
customers, such as Sealy, Simmons, Serta, and Spring Air Company, both directly
and through independent fabrication operators located across the United States.
Also, Foamex supplies cut-to-size seat cushions, backs and other pieces to the
furniture industry, including to Berkline, Action and Schnadig.
Automotive Foams. Foamex is one of the largest suppliers of the trim foam
requirements of the North American operations of American OEM's. Depending on
the automotive manufacturer and/or the application, foam is supplied by Foamex
either directly to the manufacturer or indirectly through subsuppliers.
Automotive foams are used for trim pads, door panel parts, headliners,
acoustical purposes, flame and adhesive laminates and rolls for tri-lamination.
Tri-laminated foam is applied to automotive fabrics to form a foam/fabric
composite that results in cost savings and aesthetic value for the automotive
manufacturer.
The domestic automotive manufacturers have narrowed their supply base
during recent years, increasing the percentage and dollar amount of components
that they purchase from outside suppliers. As a result, a smaller number of
companies are supplying an increasing percentage of these manufacturers' needs.
Foamex believes it has benefited from this trend, which favors suppliers with
quality facilities and products, cost efficient plants, long- standing
relationships, strong design, technical and product development support and
broad product lines. Foamex believes this outsourcing trend will continue,
particularly for components such as foam, trim and accessories that represent a
small portion of the overall cost of a vehicle. Automotive suppliers are
increasingly offering integrated systems which lower overall cost and improve
quality relative to previous sourcing methods in which individually sourced
components were assembled and installed by the OEMs.
During 1996, Foamex entered into a strategic alliance with Recticel to
design, manufacture and market polyurethane products for the automotive
industry in order to meet the worldwide requirements of the OEMs and the major
tier one suppliers such as Lear Corporation, Johnson Controls, Inc., and Delphi
Automotive Systems. Under this alliance, both companies will jointly supply the
automotive suppliers, with products manufactured in North America by Foamex and
in Europe by Recticel.
Foamex believes that the automotive manufacturers' just-in-time inventory
requirements will provide Foamex with a competitive advantage due to the
quality of Foamex's foam products, its flexible manufacturing capacity and its
46 strategically located manufacturing facilities and 12 distribution
facilities that enable Foamex to minimize shipping time and costs. In addition,
Foamex expects foam usage per vehicle to continue to increase because
manufacturers have generally increased their investment in upgrading automobile
and light truck interiors to improve comfort, attractiveness, safety and noise
absorption capabilities. Foam is well suited to meet these requirements.
Foamex's new product development and flexible manufacturing capabilities
allow it to produce quality products to satisfy changing specifications.
Examples of Foamex's ability to react to changing industry requirements include
thermoformable headliners, tri-laminates, advanced cutting technology and
energy absorbing foams. For example, Foamex is one of the first suppliers to
introduce a thermoformable headliner, Customfit[TM], made from rigid
polyurethane foam. The use of foam headliners is expected to continue to grow
due to concerns for automotive workers' safety caused by fiberglass processing.
Foamex intends to continue manufacturing and supplying foam and fabric
components, such as tri-laminated material for automotive seating. The use of
tri-laminates has become increasingly prevalent due to significant cost savings
for manufacturers and improved aesthetics for consumers.
Automotive manufacturers are increasingly requiring the production
facilities of their suppliers to meet certain high quality standards. Foamex
has achieved the highest quality ratings awarded to foam suppliers by
automotive manufacturers. For instance, the Ford Motor Company has announced
that it will buy components only from plants
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which have achieved or are currently being evaluated for the Ford Q-1 status.
All Foamex plants which supply parts to the Ford Motor Company are currently
rated Q-1. In addition, Foamex's facilities that supply the automotive industry
have been highly rated by the General Motors Corporation's "Target for
Excellence" program, and a majority of such facilities that supply the Chrysler
Corporation have received Chrysler's "Quality Excellence" award. Eventually,
all tier one and tier two automotive supplier facilities worldwide will be
required to meet the QS-9000 quality manufacturing standards set by United
States automotive manufacturers. In 1996, Foamex completed QS-9000 and ISO-9001
certification for its eight domestic facilities which supply the automotive
industry. Foamex was one of the first polyurethane manufacturers to be QS-9000
certified which demonstrates its commitment to producing the highest quality
products and meeting the needs of its customers.
Specialty and Technical Foams. Foamex believes that it is one of the foam
industry's prime innovators and producers of industrial, specialty, consumer
and safety foams (collectively, "specialty and technical foams"). Specialty and
technical foams consist of reticulated foams and other custom polyester and
polyether foams, which are sometimes combined with other materials to yield
specific properties. Reticulation is the thermal or chemical process used to
remove the membranes from the interconnecting cells within foam. This leaves a
porous, skeletal structure allowing for the free flow of gases and/or liquids.
Reticulated foams are well suited for filtration, reservoiring, sound
absorption and sound transmission. Industrial applications include carburetors,
computer cabinets, ink pad reservoirs, high speed inkjet printers and speaker
grills. Medical applications include oxygenators for cardiopulmonary surgery,
instrument holders for sterilization, pre-op scrubbers impregnated with
anti-microbial agents and EKG pads containing conductive gels. Other specialty
and technical foams have unique characteristics such as flame retardancy and
fluid absorption. In addition, felting and lamination with other foams or
materials give these composites specific properties. Additional products sold
within this group include foams for refrigerated supermarket produce counters,
mop heads, paint brushes, diapers and cosmetic applications.
Foamex utilizes advertising in trade journals and related media in order
to attract customers and, more generally, to create an awareness of its
capabilities for specialty and technical foams. In addition, due to the highly
specialized nature of most specialty and technical foams, Foamex's research
staff works with customers to design, develop and manufacture each product to
specification.
Marketing and Sales
Foamex has a marketing and sales force of approximately 200 employees.
Product business managers direct sales efforts toward each of the end-user
markets (i.e., carpet cushion, cushioning foams, furniture products, automotive
foams and specialty and technical foams).
Foamex's carpet cushion marketing program includes the broad distribution
of products to both the retail and wholesale levels. Furthermore, promotions,
marketing and advertising expenditures are important in positioning Foamex's
carpet cushions as premium, trade branded products.
Bedding and furniture products are sold directly by Foamex to customers
and also through third party independent fabricators. The key strategic
elements supporting growth in these areas are a focus on marketing and sales
efforts, high quality, cost-competitive products and low freight costs through
optimal plant location. Plant locations are critical in this regionalized line
of business where the transportation cost typically comprises a significant
portion of product cost.
Foamex has been a leading supplier of automotive foam products to the
automotive industry for more than 30 years. Foamex is the primary supplier of
automotive foam products to certain tier one suppliers, including Lear
Corporation, Johnson Controls, Inc. and Delphi Automotive Systems. For its
other customers, Foamex competes for new business both at the beginning of the
development of new models and upon the redesign of existing models. Once a foam
producer has been designated to supply parts for a new program, the foam
producer usually produces parts for the life of the program. Competitive
factors in the market include product quality and reliability, cost and timely
service, technical expertise and development capability, new product innovation
and customer service.
Foamex markets most of its specialty and technical foams through a network
of independent fabrication and distribution companies in North America, the
United Kingdom and South Korea. Such fabricators or distributors often further
process or finish these products to meet the specific needs of the end user.
Foamex's specialty and
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technical foams service unique end user requirements and are generally sold at
relatively high margins. This line of business is characterized by a diversity
and complexity of both customers and applications.
International and Domestic Operations and Export Sales
International ventures initiated in 1996 illustrate Foamex's long-term
commitment to expanding outside North America. These international ventures
include Foamex's expansion of its international capabilities in Mexico and the
exploration of opportunities in Asia. The first international venture was
Foamex's expansion in Mexico to meet the steady growth in demand there over the
past year. Foamex has a total of three facilities in Mexico serving the
automotive and cushioning industries. Two such facilities are located within
Mexican free trade zones close to the U.S. border and primarily service
automotive customers. The new state-of-the-art Mexico City facility services
both automotive and cushioning customers.
Foamex has created an alliance with Recticel, Europe's largest flexible
polyurethane foam manufacturer, which will allow Foamex to meet the global
needs of its automotive customers. In addition, the alliance will allow Foamex
and Recticel to jointly design, manufacture and market products for U.S. and
European automotive customers. The alliance facilitates supplying automotive
customers with polyurethane foam products in both North America and Europe.
Foamex has in the past exchanged technical information and expertise relating
to foam manufacturing with Recticel.
Foamex has been servicing the Asian market with technical products for
several years primarily through third party distributors. Foamex believes Asia
offers attractive growth opportunities and is exploring opportunities in Asia.
Net sales to customers in foreign markets in 1996, 1995 and 1994 were
$76.0 million (8.2% of net sales), $73.3 million (8.5% of net sales) and $66.6
million (8.0% of net sales), respectively.
Customers
During the past three fiscal years, no one customer accounted for more
than 10.0% of Foamex's net sales. However, 1996 net sales to the five largest
customers comprised $225.4 million or 24.3% of Foamex's net sales. See "Risk
Factors--Reliance on Major Customers."
Manufacturing and Raw Materials
Foamex produces bulk and fabricated flexible polyurethane foam at 46
manufacturing facilities in North America with a total of approximately 6.9
million square feet of floor space. Foamex believes that its manufacturing
facilities are well suited for their intended purposes and are in good
condition. See " --Properties." The manufacturing facilities are strategically
located to service their major customers because high freight cost in relation
to the cost of the foam product generally results in distribution being most
cost effective within 200 to 300 miles from each facility.
In 1996, raw materials accounted for approximately 74% of the
manufacturing costs of Foamex. The two principal chemicals used in the
manufacture of flexible polyurethane foam, TDI and polyol, accounted for
approximately 50% of raw material costs. ARCO Chemical Company, BASF
Corporation and The Dow Chemical Company are among Foamex's largest suppliers
of raw materials. Foamex generally has alternative chemical suppliers for each
major raw material and Foamex believes that it could find alternative sources
of supply should it cease doing business with any of its major suppliers. The
price of TDI and polyol is influenced by demand, manufacturing capacity and oil
and natural gas prices.
Foamex's principal suppliers of raw materials used in the manufacture of
flexible polyurethane foam have increased the price of raw materials several
times since September 1994. In response, Foamex increased selling prices, where
possible, for cushioning, automotive and specialty and technical foam products.
Results of operations have been and could be adversely affected by delays in
implementing, or the inability of Foamex to implement, selling price increases
to offset raw material cost increases. For example, Foamex estimates that in
1995 the amount of net unrecovered raw material cost increases was
approximately $25.0 million. Foamex's principal suppliers of raw materials
unsuccessfully attempted to implement price increases in October 1996 and these
suppliers have again announced price increases effective April 1997. Foamex
believes that if any price increases are sustained in the industry, Foamex will
also be impacted by such increases to the extent any such price increases are
not offset through
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a selling price increase. The impact of raw material cost increases was not
significant during the second quarter of 1997. However, Foamex estimates an
unfavorable impact for the raw material cost increases, net of sales price
increases to customers of between $1.5 million to $3.0 million during the third
quarter of 1997. Significant increases in raw material costs could have a
material adverse effect on Foamex's financial condition or results of
operations. There can be no assurance that chemical suppliers will not increase
raw material costs in the future or that Foamex will be able to implement
selling price increases to offset any such raw material cost increases. See
"Risk Factors--Price and Availability of Raw Materials."
Employees
As of June 29, 1997, Foamex employed approximately 4,675 persons, with
4,150 of such employees involved in manufacturing, 325 in administration and
200 involved in sales and marketing. Approximately 900 of these employees are
located outside the United States. Also, approximately 1,350 of these employees
are covered by collective bargaining agreements with labor unions, which
agreements expire on various dates from 1997 through 2001. Foamex considers
relations with its employees to be good.
Competition
The flexible polyurethane foam industry is highly competitive. With
respect to flexible polyurethane foam, competition is based primarily on price,
quality of products and service. Foamex's larger competitors in the
polyurethane foam industry include E. R. Carpenter Company, Crain Industries
Inc., Hickory Springs Manufacturing Company, Vitafoam, Inc., General Foam
Corporation, Flexible Foam Products, Inc. and Crest Foam Industries, Inc. None
of such competitors competes in all of the product categories in which Foamex
does business. See "Risk Factors--Competition."
Patents and Trademarks
Foamex owns various United States and foreign patents relating to the
manufacture and processing of foam. Patented technologies developed by Foamex
have included SMT[TM], reticulation and felting. Trademarks and servicemarks
include Foamex[RegTM], General Felt Industries[RegTM], ComfortWear[RegTM],
Plushlife[TM], SMT[TM], Reflex[TM], Nexol[TM], Chamber TechnologySM and
Berber-Mate[TM]. The registered processes and products were developed through
on-going research and development activities to improve quality, reduce costs
and expand markets through the development of new applications for flexible
polyurethane foam products. Foamex uses several additional trademarks and
tradenames for product identification, the majority of which are used in the
carpet cushion and specialty and technical foams product lines. See "--Research
and Development" below for a discussion of the VPF[TM] technology. Foamex
believes its business is not dependent upon any individual patent, trademark,
servicemark or tradename.
Research and Development
Foamex believes it has a significant research and development capability.
This capability give Foamex a significant advantage in the on-going development
of new products and new applications for existing products. Foamex has research
and development facilities located in Hayward, California; Dalton, Georgia; and
Eddystone, Pennsylvania employing approximately 28 full-time employees.
Expenditures for research and development amounted to $2.7 million, $3.2
million and $2.5 million for 1994, 1995 and 1996, respectively.
Foamex and Recticel, have exchanged know-how, trade secrets, engineering
and other data, designs, specifications, chemical formulations, technical
information, market information and drawings which are necessary or useful for
the manufacture, use or sale of foam products and it is anticipated that they
will continue to do so in the future. Foamex, Recticel and Beamech Group
Limited, an unaffiliated third party ("Beamech"), have an interest in a Swiss
corporation that develops new manufacturing technology for the production of
polyurethane foam including the VPF[TM] manufacturing process. VPF[TM] is a
manufacturing process that contains no chlorofluorocarbons and eliminates
volatile auxiliary blowing agents. Moreover, VPF[TM] produces polymers with a
wide range of properties, including previously unavailable low density,
ultrasoft products. Foamex believes that the VPF[TM] process will expand
applications for urethane-based products. Foamex, Recticel, and their
affiliates have a royalty-free license to use technology developed by the Swiss
corporation. The Swiss corporation, subject to certain limitations, is free to
license the VPF[TM] technology to third parties. Foamex currently operates the
only two VPF[TM] units in North America.
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Foamex recently developed SMT[TM] which allows for high volume precision
contouring of foam surfaces, including the pattern, the size of the pattern and
the depth of the cut, thereby improving Foamex's existing products and creating
new products such as sculpted bed mattresses that provide enhanced comfort.
Properties
As of June 29, 1997, Foamex conducted its operations through 46
manufacturing and 12 distribution facilities. Of these 58 facilities, 19 are
owned and 39 are leased. Total floor space in use at the owned manufacturing
and distribution facilities is approximately 3.9 million square feet and total
floor space in use at the leased manufacturing and distribution facilities is
approximately 3.5 million square feet. Fifty of these facilities are located in
36 cities in the United States, five facilities are located in two cities in
Canada and three facilities are located in three cities in Mexico. The 1997
annual base rental with respect to such leased facilities is approximately $7.4
million under leases expiring from 1997 to 2005. Foamex does not anticipate any
problem in renewing or replacing any of such leases expiring in 1997. In
addition, Foamex has approximately 1.1 million square feet of idle space of
which approximately 0.5 million is leased.
Foamex maintains administrative and sales offices in Linwood,
Pennsylvania; Hayward, California; Chicago, Illinois; Southfield, Michigan; and
New York, New York.
Environmental Matters
Foamex is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During 1996, expenditures in connection with Foamex's
compliance with federal, state, local and foreign environmental laws and
regulations did not have a material adverse effect on its operations, financial
position, capital expenditures or competitive position. As of June 29, 1997,
Foamex has accruals of approximately $4.2 million for environmental matters.
The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air
pollutants including methylene chloride and TDI, principal raw materials used
in the manufacturing of foam. On December 27, 1996, the United States
Environmental Protection Agency (the "EPA") proposed regulations under the 1990
CAA Amendments that will require manufacturers of slab stock polyurethane foam
to reduce emissions of methylene chloride. Because these regulations are
subject to change prior to finalization, Foamex cannot accurately predict the
actual cost of their implementation. Foamex does not believe implementation of
the regulations will require it to make material expenditures, however, due to
Foamex's use of alternative technologies which do not utilize methylene
chloride and its ability to shift current production to the facilities which
use these alternative technologies. The 1990 CAA Amendments also may result in
the imposition of additional standards regulating air emissions from
polyurethane foam manufacturers, but these standards have not yet been proposed
or promulgated.
Foamex has reported to appropriate state authorities that it has found
soil contamination in excess of state standards at facilities in Orlando,
Florida; La Porte, Indiana; Conover, North Carolina; Cornelius, North Carolina;
Fort Wayne, Indiana; Philadelphia, Pennsylvania; and at a former facility in
Dallas, Texas and groundwater contamination in excess of state standards at the
Orlando, Conover, Philadelphia, and Cornelius facilities. Foamex has begun
remediation and is conducting further investigations into the extent of the
contamination at these facilities and, accordingly, the extent of the
remediation that may ultimately be required. The actual cost and the timetable
of any such remediation cannot be predicted with any degree of certainty at
this time. Foamex, based on engineering estimates of the remaining potential
remediation costs for these facilities, has accruals of $3.0 million for the
estimated cost of completing remediation and established a net receivable of
$1.0 million on the basis of indemnifications by Trace Holdings and RFC
associated with the partnership formation of Foamex. Foamex has completed
remediation of soil contamination at a former Trenton, New Jersey manufacturing
facility closed in October 1993 and is awaiting final closure approvals from
the New Jersey Department of Environmental Protection regarding the remediation
of soil contamination and monitoring of groundwater at the former Trenton
facility. Also, Foamex has completed remediation at its Mesquite, Texas
facility and is awaiting a certificate of completion under the Texas Voluntary
Clean Up program.
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Federal regulations require that by the end of 1998 all USTs be removed or
upgraded in all states to meet applicable standards. Foamex has six USTs that
will require removal or permanent in-place closure by the end of 1998. Due to
the age of these tanks, leakage may have occurred resulting in soil and
possibly groundwater contamination. Foamex has accrued approximately $0.3
million for the estimated removal and remediation costs, if any, associated
with these USTs. However, the full extent of contamination, and accordingly,
the actual cost of such remediation cannot be predicted with any degree of
certainty at this time. Foamex believes that its USTs do not pose a significant
risk of environmental liability because of its monitoring practices for USTs
and conditional approval for the permanent in-place closure for certain USTs.
However, there can be no assurance that such USTs will not result in
significant environmental liability in the future.
On April 10, 1997, the Occupational Health and Safety Administration
promulgated new standards governing employee exposure to methylene chloride,
which is used as a blowing agent in some of Foamex's manufacturing processes.
Foamex does not believe that it will be required to make any material
expenditures to comply with these new standards due to its use of alternative
technologies which do not use methylene chloride and its ability to shift
production to facilities which use these technologies.
Foamex has been designated as a Potentially Responsible Party ("PRP") by
the EPA with respect to 13 sites with an estimated total liability to Foamex
for the 13 sites of less than approximately $0.5 million. Estimates of total
cleanup costs and fractional allocations of liability are generally provided by
the EPA or the committee of PRPs with respect to the specified site. In each
case, the participation of Foamex is considered to be immaterial.
On May 5, 1997, there was an accidental chemical spill at one of Foamex's
manufacturing facilities. Such spill was contained on site and the clean-up
will consist of on-site remediation and disposal of contaminated soil at an
anticipated cost of approximately $0.4 million. Although it is possible that
new information or future developments could require Foamex to reassess its
potential exposure relating to all pending environmental matters, including
those described herein, Foamex believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on Foamex's operations, financial position,
capital expenditures or competitive position. The possibility exists, however,
that new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material. See
"Risk Factors--Environmental Liabilities and Regulations."
Legal Proceedings
As of August 8, 1997, Foamex and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,000 recipients of
breast implants in various United States federal and state courts and one
Canadian provincial court. Some of these actions allege substantial damages,
but most of these actions allege unspecified damages for personal injuries of
various types. Three of these cases seek to allege claims on behalf of all
breast implant recipients or other allegedly affected parties, but no class has
been approved or certified by the court. In addition, three cases have been
filed alleging claims on behalf of approximately 700 residents of Australia,
New Zealand, England, and Ireland. Foamex believes that the number of suits and
claimants may increase.
During 1995, Foamex and Trace Holdings were granted summary judgments and
dismissed as defendants from all cases in the federal courts of the United
States and the state courts of California. Appeals for these decisions were
withdrawn and the decisions are final.
Although breast implants do not contain foam, certain silicone gel
implants were produced using a polyurethane foam covering fabricated by
independent distributors or fabricators from bulk foam purchased from Foamex or
Trace Holdings. Neither Foamex nor Trace Holdings recommended, authorized, or
approved the use of its foam for these purposes. Foamex is indemnified by Trace
Holdings for any such liabilities relating to foam manufactured prior to
October 1990. Although Trace Holdings has paid Foamex's litigation expenses to
date pursuant to such indemnification and Foamex believes Trace Holdings likely
will be in a position to continue to pay such expenses, there can be no
absolute assurance that Trace Holdings will be able to provide such
indemnification. While it is not feasible to predict or determine the outcome
of these actions, based on Foamex's present assessment of the merits of pending
claims, after consultation with the general counsel of Trace Holdings, and
without taking into account the indemnification provided by Trace Holdings, the
coverage provided by Trace Holdings' and Foamex's liability insurance, and the
potential indemnity from the manufacturers of polyurethane covered breast
implants, Foamex believes that the disposition of matters that are pending or
that may reasonably
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be anticipated to be asserted should not have a material adverse effect on
either Foamex's or Trace Holdings' consolidated financial position or results
of operations. If Foamex's assessment of liability with respect to these
actions is incorrect, such actions could have a material adverse effect on
Foamex.
Foamex is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
Foamex that the disposition of these lawsuits will not, individually or in the
aggregate, have a material adverse effect on the financial position or results
of operations of Foamex. If Foamex's assessment of Foamex's liability with
respect to these actions is incorrect, such actions could have a material
adverse effect on Foamex's consolidated financial position. See "Risk
Factors--Litigation."
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Issuers on June 12, 1997 to the Initial
Purchasers, who placed the Old Notes with certain institutional and accredited
investors. In connection therewith, the Issuers, the Subsidiary Guarantors and
the Initial Purchasers entered into the Registration Rights Agreement, pursuant
to which the Issuers and the Subsidiary Guarantors agreed, for the benefit of
the Holders of the Old Notes, that the Issuers and the Subsidiary Guarantors
would, at their sole cost, (i) within 45 days following the original issuance
of the Old Notes, file with the Commission the Exchange Offer Registration
Statement (of which this Prospectus is a part) under the Securities Act with
respect to an issue of a series of new notes of the Issuers identical in all
material respects to the series of Old Notes and (ii) use their reasonable best
efforts to cause such Exchange Offer Registration Statement to become effective
under the Securities Act at the earliest possible time, but in no event later
than 120 days following the original issuance of the Old Notes. Upon the
effectiveness of the Exchange Offer Registration Statement (of which this
Prospectus is a part), the Issuers will offer to the Holders of the Old Notes
the opportunity to exchange their Old Notes for a like principal amount of New
Notes, to be issued without a restrictive legend and which may, subject to
certain exceptions described below, be reoffered and resold by the Holder
without restrictions or limitations under the Securities Act. The term "Holder"
with respect to any Note means any person in whose name such Note is registered
on the books of Foamex.
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (A) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to herein as a "Restricted
Holder"). A Restricted Holder will not be able to participate in the Exchange
Offer, and may only sell its Old Notes pursuant to a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K of the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each Participating Broker-Dealer is required to acknowledge in the Letter
of Transmittal that it acquired the Old Notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such New Notes. Based upon interpretations by the
staff of the Commission, the Issuers believe that New Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer (other than
a Restricted Holder) upon compliance with the prospectus delivery requirements,
but without compliance with the registration requirements, of the Securities
Act. The Issuers have agreed that for a period of 120 days following
consummation of the Exchange Offer they will make this Prospectus available to
Participating Broker-Dealers for use in connection with any such resale. During
such period of time, delivery of this Prospectus, as it may be amended or
supplemented, will satisfy the prospectus delivery requirements of a
Participating Broker-Dealer engaged in market making or other trading
activities. See "Plan of Distribution."
Based upon interpretations by the staff of the Commission, the Issuers
believe that New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by a Holder thereof (other than a
Restricted Holder or a Participating Broker-Dealer) without compliance with the
registration and prospectus delivery requirements of the Securities Act.
If (i) the Issuers are not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or Commission policy or
(ii) any Holder of Transfer Restricted Securities (as defined) notifies the
Issuers 20 business days following the consummation of the Exchange Offer that
(A) such Holder is prohibited by law or Commission policy from participating in
the Exchange Offer or (B) such Holder may not resell the New Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and this
Prospectus is not appropriate or available for such resales or (C) such Holder
is a broker-dealer and owns Old Notes acquired directly from the Issuers or an
affiliate of the Issuers, then the Issuers are required under the Registration
Rights Agreement to file with the Commission a shelf registration statement
(the "Shelf Registration Statement") to cover resales of Transfer Restricted
Securities by the Holder thereof who satisfies certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. The Issuers are required under the Registration Rights Agreement to
use their reasonable best efforts to cause the Shelf Registration Statement to
be declared effective at the earliest possible time but in
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no event later than 120 days after the date on which the Issuers become
obligated to file such Shelf Registration Statement and, except under certain
circumstances, keep effective such Shelf Registration Statement until two years
after its effective date. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until the earliest to occur of (i) the date on
which such Old Note has been exchanged by a person other than a Participating
Broker-Dealer for a New Note in the Exchange Offer, (ii) following the exchange
by a Participating Broker-Dealer in the Exchange Offer of an Old Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such Participating Broker-Dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii)
the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act. The Issuers will, in the event
of the filing of the Shelf Registration Statement, provide to each Holder of
Transfer Restricted Securities covered by the Shelf Registration Statement
copies of any Shelf Registration Statement or any prospectus which is a part of
the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of Transfer Restricted Securities.
A Holder of Transfer Restricted Securities that sells such Transfer Restricted
Securities pursuant to the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to the purchaser, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such Holder (including certain indemnification
obligations). In addition, Holders of Transfer Restricted Securities will be
required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights
Agreement in order to have their Transfer Restricted Securities included in the
Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages, if any, set forth in the following paragraph.
If the Issuers are required to file the Shelf Registration Statement and
(i) the Issuers fail to file the Shelf Registration Statement on or prior to 30
days after such filing obligation arises, (ii) the Shelf Registration Statement
is not declared effective by the Commission on or prior to 120 days after such
filing obligation arises or (iii) the Shelf Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the period specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iii) above, a "Registration Default"), then the Issuers will pay
liquidated damages ("Liquidated Damages"), if any, to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues. The amount of Liquidated Damages, if any, will increase by
an additional $.05 per week per $1,000 principal amount of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages, if any,
of $.50 per week per $1,000 principal amount of Transfer Restricted Securities.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages, if any, shall cease.
Payment of Liquidated Damages is the sole remedy available to the Holders
of Transfer Restricted Securities in the event that the Issuers do not comply
with the deadlines set forth in the Registration Rights Agreement with respect
to the registration of Transfer Restricted Securities for resale under the
Shelf Registration Statement.
As of June 29, 1997, the Notes are subordinated to approximately $370.1
million of Senior Debt and pari passu with approximately $27.4 million of Pari
Passu Debt.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Issuers will issue $1,000 principal amount of New
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only
in integral multiples of $1,000.
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The form and terms of the New Notes will be identical in all material
respects (including principal amount, interest rate, maturity and ranking) to
terms of the Old Notes for which they may be exchanged pursuant to the Exchange
Offer except that the New Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer and will not
contain certain terms providing for an increase in the interest rate on the Old
Notes under certain circumstances described in the Registration Rights
Agreement (as defined). The New Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of the Indenture under which the Old
Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of the Old Notes is outstanding. The Issuers have fixed the close of
business on , 1997 as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of such date, there was one registered
Holder of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under law or the Indenture in connection with the Exchange Offer. The Issuers
intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commission or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean Midnight, New York City time, on
, 1997, unless the Issuers, in their reasonable discretion, extend the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the
Exchange Agent (as defined) of any extension by oral or written notice and will
make a public announcement thereof prior to 9:00 a.m., New York City time, on
the next business day after each previously scheduled Expiration Date, unless
otherwise required by applicable law or regulation.
The Issuers reserve the right, in their reasonable discretion, (i) to
delay accepting any Old Notes, to extend the Exchange Offer or, if in their
reasonable judgment any of the conditions set forth below under the caption "--
Conditions" shall not have been satisfied, to terminate the Exchange Offer,
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof. If the
Exchange Offer is amended in a manner determined by the Issuers to constitute a
material change, the Issuers will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered Holders, and
the Issuers will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which the Issuers may choose to make a
public announcement of any delay, extension, termination or amendment of the
Exchange Offer, the Issuers shall have no obligation to publish, advertise or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
Procedures for Tendering
Only a Holder of Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, together with any required signature
guarantees, or, in the case of a book-entry transfer, Agent's Message (as
defined), and any other required documents, to the Exchange Agent prior to
Midnight, New York City time, on the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent prior to
the Expiration Date along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes into the Exchange Agent's account at The Depository Trust Company ("DTC"
or the "Book-Entry Transfer Facility") pursuant to the
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<PAGE>
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Old Notes, or Book-Entry Confirmation, as the case may be, the
Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "--Exchange Agent" prior to
Midnight, New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO
THE BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS PROCEDURE DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
DTC has authorized DTC participants that hold Old Notes on behalf of
beneficial owners of Old Notes through DTC to tender their Old Notes as if they
were Holders. To effect a tender of Old Notes, DTC participants should either
(i) complete and sign the Letter of Transmittal (or a manually signed facsimile
thereof), have the signature thereon guaranteed if required by the Instructions
to the Letter of Transmittal, and mail or deliver the Letter of Transmittal (or
such manually signed facsimile) to the Exchange Agent pursuant to the procedure
set forth in "Procedures for Tendering" or (ii) transmit their acceptance to
DTC through the DTC Automated Tender Offer Program ("ATOP") for which the
transaction will be eligible and follow the procedure for book-entry transfer
set forth in "--Book-Entry Transfer."
The tender by a Holder will constitute an agreement between such Holder
and the Issuers in accordance with the terms and subject to the conditions set
forth herein and in the Letter of Transmittal.
The method of delivery of the Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes, or Book-Entry Confirmation, as the case may
be, should be sent to the Issuers.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
owner must, prior to completing and executing the Letter of Transmittal and
delivering such beneficial owner's Old Notes, either make appropriate
arrangement to register ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the registered Holder. The transfer
of registered ownership may take considerable time.
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power and signed by such
registered Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuers in their sole discretion, which determination shall be final and
binding. The Issuers reserve the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Issuers' acceptance of which would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also
reserve the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The
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Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Issuers shall determine. Neither the Issuers, the Exchange Agent nor any other
person shall incur any liability for failure to give notice of any defect or
irregularity with respect to any tender of Old Notes. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will not be deemed to have been properly tendered. Any Old
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
By tendering, each Holder will represent to the Issuers, among other
things, that such Holder is not a Restricted Holder. Each Participating
Broker-Dealer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
Acceptance of Old Notes for Exchange; Delivery of New Notes
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For purposes of the Exchange Offer, the Issuers shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if the
Issuers have given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal or Agent's Message and all other required documents. If any
tendered Old Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the Holder desires to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering
Holder thereof (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the Expiration Date.
Book-Entry Transfer
The Exchange Agent will establish a new account or utilize an existing
account with respect to the Old Notes at DTC promptly after the date of this
Prospectus, and any financial institution that is a participant in DTC and
whose name appears on a security position listing as the owner of Old Notes may
make a book-entry tender of Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account in accordance with DTC's procedures for such
transfer. However, although tender of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
validly executed, with any required signature guarantees, or an Agent's Message
in lieu of the Letter of Transmittal, and any other required documents, must,
in any case, be received by the Exchange Agent at its address set forth below
under the caption "Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with. The
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC as described above is referred to herein as a "Book-Entry
Confirmation." Delivery of documents to DTC in accordance with DTC's procedures
does not constitute delivery to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
the participant in DTC tendering the Old Notes stating (i) the aggregate
principal amount of Old Notes which have been tendered by such participant,
(ii) that such participant has received and agrees to be bound by the term of
the Letter of Transmittal and (iii) that the Company may enforce such agreement
against the participant.
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<PAGE>
Guarantee Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date or (iii) who cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the Holder, the certificate number(s) of such Old
Notes and the principal amount of Old Notes tendered, stating that the tender
is being made thereby and guaranteeing that, within three New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) or, in the case of a book-entry transfer, an Agent's
Message, together with the certificate(s) representing the Old Notes, or a
Book-Entry Confirmation, as the case may be, and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof) or, in the case of a book-entry transfer, an Agent's
Message, as well as the certificate(s) representing all tendered Old Notes in
proper form for transfer, or a Book-Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within three New York Stock Exchange trading days after the
Expiration Date.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes), (iii) be signed by the
Holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the procedure
for book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of the Book Entry Transfer Facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Issuers in their sole discretion, which determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Properly withdrawn Old Notes may be retendered by following one of
the procedures described above under "--Procedures for Tendering" at any time
prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for
the Old Notes).
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<PAGE>
Conditions
Notwithstanding any other term of the Exchange Offer, the Issuers shall
not be required to accept for exchange, or exchange New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer which,
in the reasonable judgment of the Issuers, might materially impair the ability
of the Issuers to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Issuers, or any material
adverse development has occurred in any existing action or proceeding with
respect to the Issuers or any of their subsidiaries;
(b) any change, or any development involving a prospective change, in the
business or financial affairs of the Issuers or any of their subsidiaries has
occurred which, in the reasonable judgment of the Issuers, might materially
impair the ability of the Issuers to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Issuers;
(c) any law, statute, rule or regulation is proposed, adopted or enacted,
which, in the reasonable judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer to the Issuers; or
(d) any governmental approval has not been obtained, which approval the
Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The foregoing conditions are for the sole benefit of the Issuers and may
be asserted by the Issuers regardless of the circumstances giving rise to any
such condition or may be waived by the Issuers in whole or in part at any time
and from time to time in their reasonable discretion. The failure by the
Issuers at any time to exercise any of the foregoing rights shall not be deemed
a waiver of such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
If the Issuers determine in their reasonable discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering Holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of Holders to withdraw such
Old Notes (see "--Withdrawal of Tenders" above) or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn. If such waiver constitutes a material
change to the Exchange Offer, the Issuers will promptly disclose such waiver by
means of a prospectus supplement that will be distributed to the registered
Holders, and the Issuers will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
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<PAGE>
Exchange Agent
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
To: The Bank of New York
By Hand/Overnight Courier:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attn: Denise Robinson
Reorganization Section
Facsimile Transmission:
(212) 815-6339
Confirm by Telephone: (212) 815-2791
Fees and Expenses
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
The Issuers will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering Holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old
Notes, which is the principal amount as reflected in the Issuers' accounting
records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized. The expenses of the Exchange Offer and
the unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the Notes.
Regulatory Approvals
The Issuers do not believe that the receipt of any material federal or
state regulatory approvals will be necessary in connection with the Exchange
Offer, other than the effectivenss of the Exchange Offer Registration Statement
under the Securities Act.
Other
Participation in the Exchange Offer is voluntary and Holders of Old Notes
should carefully consider whether to accept the terms and conditions thereof.
Holders of the Old Notes are urged to consult their financial and tax advisors
in making their own decisions on what action to take with respect to the
Exchange Offer.
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<PAGE>
MANAGEMENT
Directors and Executive Officers of the Issuers and the Subsidiary Guarantors
Pursuant to the Partnership Agreement (as defined), Foamex is managed by
its managing general partner, FMXI. All of the directors and executive officers
of FMXI are employees of Foamex and/or Foamex International and are not
compensated by FMXI for their services as directors and executive officers of
FMXI. See "Description of the Partnership Agreement."
FCC and General Felt are wholly owned subsidiaries of Foamex. Foamex
Fibers is a wholly owned subsidiary of General Felt. The directors of each of
FCC, General Felt and Foamex Fibers are not compensated by FCC, General Felt or
Foamex Fibers for their services as directors.
The following sets forth certain information with respect to the persons
who, as of the Offering, are executive officers of Foamex and/or directors and
executive officers of FMXI, FCC, General Felt and/or Foamex Fibers.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Andrea Farace ............ 41 Chairman and Chief Executive Officer of
Foamex, FMXI, FCC and Foamex Fibers;
Chairman of General Felt
Marshall S. Cogan ......... 60 Vice Chairman of Foamex and FMXI; a
director of FCC, General Felt and Foamex
Fibers
Robert J. Hay ............ 71 Chairman Emeritus of Foamex
Salvatore J. Bonanno ...... 56 President and Chief Operating Officer of
Foamex and FMXI; a director of FMXI, FCC and
Foamex Fibers
Kenneth R. Fuette ......... 52 Senior Vice President of Finance and Chief
Financial Officer of Foamex and FCC; Senior
Vice President of Finance and a director of
FMXI; a director of General Felt and FCC; Vice
President and Treasurer of Foamex Fibers
William H. Bundy ......... 56 Executive Vice President of Foamex; Vice
President of Foamex Fibers
Paul A. Haslanger ......... 50 Senior Vice President, Manufacturing Support
of Foamex
Barry Zimmerman ............ 59 Executive Vice President of Productivity and
Quality of Foamex; Vice President of FMXI; and
Vice President and a director of General Felt
Philip N. Smith, Jr. ...... 54 Vice President of Foamex; Vice President,
Secretary and General Counsel and a director of
FMXI; Vice President and Secretary of FCC,
General Felt and Foamex Fibers
Theodore J. Kall ......... 56 President and a director of General Felt
George L. Karpinski ...... 49 Senior Vice President, Treasurer and Secretary
of Foamex; Vice President of FMXI, FCC,
General Felt and Foamex Fibers
Robert H. Nelson .......... 51 Vice President and a director of FCC
</TABLE>
The board of directors of each of FMXI, FCC, General Felt and Foamex
Fibers is elected annually until their successors are elected and qualified.
Successors are required to be elected by stockholder vote while vacancies in
unexpired terms and any additional positions created by board action are filled
by action of the existing board of directors. The executive officers named
above were elected to serve in such capacities until their respective
successors have been duly elected and have been qualified, or until their
earlier death, resignation, disqualifications or removal from office. There is
no family relationship between any of the directors and executive officers.
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Andrea Farace began serving as Chairman and Chief Executive Officer of
Foamex, Foamex International, FMXI, FCC, Foamex Fibers and certain affiliated
entities in May 1997. Mr. Farace has also served as Chairman of the Board of
General Felt since May 1997. Mr. Farace has also served as a director of Foamex
International since February 1996, and has been President and a director of
Trace Holdings since December 1994 and December 1993, respectively. Prior to
December 1993, Mr. Farace held several executive positions within Trace Holdings
beginning in April 1991. Mr. Farace was Senior Executive of C.I.R. S.p.A. from
May 1990 to March 1991. Prior to that, Mr. Farace was a Managing Director at
Shearson Lehman Hutton, Inc. Mr. Farace is a director of Trace Foam and CHF
Industries, Inc., both of which are subsidiaries of Trace Holdings, as well as
Atlantic Auto Finance, Inc., an affiliate of Trace Holdings, and General Felt.
Additionally, Mr. Farace is a director of the Managed High Income Portfolio,
Inc.("Atlantic Finance"), and a member of the Advisory Board of the Italy Fund,
both of which are NYSE-listed mutual funds.
Marshall S. Cogan began serving as Vice Chairman of Foamex International,
Foamex and FMXI and as a director of FCC, General Felt and Foamex Fibers in May
1997. Additionally, Mr. Cogan became the Chairman and Chief Executive Officer
of United Auto Group, Inc. ("UAG"), an affiliate of Trace Holdings in April
1997. Mr. Cogan served as the Chairman of the Board and Chief Executive Officer
of Foamex, FMXI and FCC from January 1994 to May 1997. Additionally, Mr. Cogan
served as Chairman of the Board and Chief Executive Officer of Foamex
International from its inception in September 1993 to May 1997. Mr. Cogan has
served as Chairman of the Executive Committee of Foamex International since
September 1993. Mr. Cogan has been a director of Trace Foam since December 1991
and the Chairman of the Board and President of Trace Foam and its wholly-owned
subsidiary Trace Foam Sub, Inc. ("Trace Foam Sub"), since January 1992 and
March 1995, respectively. Mr. Cogan also served as Vice Chairman of Foamex from
January 1993 until January 1994. Mr. Cogan has been the principal stockholder,
Chairman or Co-Chairman of the Board and Chief Executive Officer or Co-Chief
Executive Officer of Trace Holdings, since 1974. He has also been a member of
the Board of Directors of UAG since November 1990, and of Recticel since
February 1993. Additionally, Mr. Cogan serves on the Board of Directors of the
American Friends of the Israel Museum and the American Ballet Theater, the
Board of Trustees of The Museum of Modern Art, the Boston Latin School and New
York University Medical Center. Mr. Cogan also serves on several committees of
Harvard University.
Robert J. Hay has been Chairman Emeritus of Foamex since January 1994. Mr.
Hay was Chairman Emeritus and a director of FMXI from January 1994 to May 1997
and also served as Chairman Emeritus and a director of Foamex International
from 1993 to 1997. Mr. Hay was Chairman and Chief Executive Officer of Foamex
from January 1993 to January 1994. Mr. Hay was President of Foamex and its
predecessor from 1972 through 1992. Mr. Hay began his career as a chemist with
The Firestone Tire and Rubber Company, a predecessor of Foamex, in 1948.
Salvatore J. Bonanno has been President of Foamex since July 1995 and
began serving as President of Foamex International and FMXI in May 1997 and as
Chief Operating Officer of Foamex and FMXI in July 1997. Mr. Bonanno has also
served as Executive Vice President of Manufacturing, Corporate Planning of
Foamex International since July 1995, and a director since February 1996. Prior
to joining Foamex International, Mr. Bonanno was employed with Chrysler
Corporation for thirty years, most recently serving as the General Manager of
International Manufacturing Operations. Mr. Bonanno currently serves on the
Industrial Advisory Board of Lawrence Livermore National Laboratories and
became a director of FCC and Foamex Fibers in June 1997.
Kenneth R. Fuette has been Senior Vice President of Finance and Chief
Financial Officer of Foamex and Foamex International since July 1997, and
Senior Vice President of Finance of FMXI since January 1994. Mr. Fuette began
serving as a director of FMXI, Senior Vice President of Finance, Chief Financial
Officer and a director of FCC and Vice President and Treasurer of Foamex Fibers
in May 1997. Prior thereto, Mr. Fuette served as Senior Vice President of
Finance, Chief Accounting Officer and Chief Financial Officer of Foamex and
Foamex International from January 1996 to July 1997. Mr. Fuette served as a Vice
President of Foamex International and its predecessors from 1983 to 1995 and as
Controller of Foamex International or its predecessors from 1977 to 1995. Mr.
Fuette became a director of General Felt in June 1997.
William H. Bundy has been an Executive Vice President of Foamex since July
1997 and a Senior Vice President of Foamex International since March 1994. Mr.
Bundy began serving as Vice President of Foamex Fibers in May 1997. Prior
thereto, Mr. Bundy served as a Senior Vice President of Foamex from January
1994 to July 1997 and as a Senior Vice President of FMXI from March 1994 to May
1997. Mr. Bundy also served as a director of Foamex International from September
1993 to May 1994, President and Chief Operating Officer of Foamex International
51
<PAGE>
from September 1993 to January 1994 and President and Chief Operating Officer
of Foamex from January 1993 until January 1994.
Mr. Bundy was Senior Vice President of Manufacturing of Foamex from 1984
through 1992. Mr. Bundy began his career as a production manager for the
predecessor to Foamex in 1967.
Paul A. Haslanger began serving as Senior Vice President, Manufacturing
Support of Foamex International and Foamex in July 1997. Prior thereto, Mr.
Haslanger served as Senior Vice President of Technical Products of Foamex
International and Foamex from October 1995 to July 1997. Mr. Haslanger served
as Senior Vice President of Manufacturing of FMXI from October 1993 through May
1997 and Senior Vice President of Foamex International from September 1993 to
January 1996. Mr. Haslanger was also Senior Vice President of Manufacturing of
Foamex from February 1993 to January 1996. Prior thereto, Mr. Haslanger was
Vice President of Manufacturing of Foamex and its predecessor from 1984 through
January 1993. He began his career with the predecessor to Foamex in 1969.
Barry Zimmerman has been Executive Vice President of Productivity and
Quality of Foamex since November 1996, Chairman, President and a director of
Foamex Mexico since September 1993 and Vice President of FMXI and General Felt
since April 1995. Mr. Zimmerman has been a Senior Vice President of Foamex from
October 1995 to November 1996 and a Senior Vice President or Vice President and
Managing Director of Trace Holdings since October 1986. Prior to that, Mr.
Zimmerman held several executive positions within Trace Holdings beginning in
August 1978. Mr. Zimmerman has been a director of Trace Foam since October
1990. Mr. Zimmerman has served as director of General Felt since March 1993 and
director of FCC since July 1992.
Philip N. Smith, Jr. has been Vice President of Foamex, Vice President,
Secretary and General Counsel of FMXI since October 1993 and Vice President,
Secretary and General Counsel of Foamex International since its inception in
September 1993 and of UAG since June 1996. Since May 1997, Mr. Smith has served
as a director of FMXI and Vice President and Secretary of FCC, General Felt and
Foamex Fibers. Mr. Smith has been the Secretary of Trace Foam since its
inception in October 1990 and a Vice President of Trace Foam since December
1991. Mr. Smith has been a Vice President or Senior Vice President and the
Secretary and General Counsel of Trace Holdings since January 1988 and has
overseen and been actively involved in transaction negotiations, litigation,
stockholder and director relations and other corporate legal matters. Prior to
joining Trace Holdings, he was the sole shareholder of a professional
corporation which was a partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Theodore J. Kall was appointed President and a director of General Felt in
April 1995. Mr. Kall previously served as General Felt's National Accounts
Manager since July 1993. Mr. Kall has served in various sales, marketing and
product management positions including Vice President of Sales and Marketing
from 1980 to 1993. He began his career with General Felt in 1974.
George L. Karpinski has been Senior Vice President, Treasurer and
Secretary of Foamex since July 1997 and has been Vice President and Treasurer
of Foamex International since May 1996. Prior thereto, Mr. Karpinski served as
Vice President, Secretary and Treasurer of Foamex from May 1993 to July 1997.
Mr. Karpinski was Treasurer of Foamex from March 1989 to May 1993 and was
Assistant Treasurer of Foamex from November 1985 to March 1989. Mr. Karpinski
began serving as Vice President of FMXI, FCC, General Felt and Foamex Fibers in
May 1997 and became a director of Foamex Mexico in June 1997. Mr. Karpinski
began his career with the predecessor to Foamex in 1969.
Robert H. Nelson has served as Vice President and a director of FCC since
July 1992. Mr. Nelson has also served as Executive Vice President, and Chief
Financial Officer of UAG since January 1997 and as a director since January
1996. He has also served as Vice Chairman of Atlantic Finance since March 1996,
Chief Financial Officer and Treasurer of Trace since 1987 and Senior Vice
President, Chief Operating Officer and a director of Trace since 1994.
For information regarding executive compensation for Foamex, and General
Felt, see Foamex's 1996 Annual Report on Form 10-K. The executive officers of
General Felt and Foamex Fibers, with the exception of Theodore J. Kall, are not
compensated in connection with their positions at General Felt and Foamex
Fibers. In the case of Theodore J. Kall, his compensation is paid by General
Felt and Foamex provides information regarding such compensation in its annual
report. See "Incorporation of Certain Documents by Reference."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 15, 1997, the beneficial
ownership of the partnership interests of Foamex by (i) each person who is
known to Foamex to own beneficially more than 5.0% of any class of Foamex's
partnership interests, (ii) each director of FMXI (the managing general partner
of Foamex) and FCC, (iii) each executive officer listed in the summary
compensation table of Foamex's 1996 Form 10-K and (iv) all executive officers
and directors of Foamex, FMXI and FCC as a group. FCC and General Felt are each
wholly owned subsidiaries of Foamex. Foamex Fibers is a wholly owned subsidiary
of General Felt.
Name and Address Type of % of % of
of Beneficial Owners Interest Profits Class
FMXI, Inc. (1)
1000 Columbia Avenue
Linwood, Pennsylvania 19061 ......... General Partner 1.0 50.0
Trace Foam Company, Inc. (2)
375 Park Avenue, 11th Floor
New York, New York 10152 ............ General Partner 1.0 50.0
Foamex International Inc. (1)
1000 Columbia Avenue
Linwood, Pennsylvania 19061 ......... Limited Partner 98.0 100.0
Marshall S. Cogan (2)
375 Park Avenue, 11th Floor
New York, New York 10152 ............ General Partner 1.0 50.0
All officers and directors as
a group (11 persons) (2), (3) ...... General Partner 1.0 50.0
- ----------------
(1) FMXI is wholly owned by Foamex International.
(2) Trace Foam is a wholly owned subsidiary of Trace Holdings. Marshall S.
Cogan, a director of FMXI, Foamex International and Trace Foam, is the
majority stockholder of Trace Holdings. Mr. Cogan disclaims beneficial
ownership of the partnership interest owned by Trace Foam. The disclosure
of Marshall S. Cogan's beneficial ownership does not include the
beneficially owned partnership interests of Foamex International. Trace
Holdings beneficially owns in excess of 40% of the common stock of Foamex
International.
(3) The disclosure of beneficial ownership of officers and directors does not
include any beneficial ownership arising solely by virtue of such person's
position with FMXI or Foamex International.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Foamex regularly enters into transactions with its affiliates on terms it
believes to be no less favorable to Foamex than those which Foamex could have
obtained from unaffiliated third parties. Payments to affiliates by Foamex and
its subsidiaries in connection with any such transactions are governed by the
provisions of the Indenture and the New Credit Facility, which generally
provide that such transactions be on terms comparable to those generally
available in equivalent transactions with third parties.
Airplane Lease
Foamex was party to a lease agreement for an airplane with Trace Aviation
Corp., a subsidiary of Trace Holdings ("Trace Aviation"). During 1995, Foamex
paid Trace Aviation $1.6 million, pursuant to the lease agreement. The lease
agreement also provided for the use of the airplane by Trace Holdings with
remuneration to Foamex based on actual usage of the airplane. During 1995,
Trace Holdings paid to Foamex $0.6 million pursuant to the lease agreement.
During August 1995, Foamex Aviation Inc. ("Aviation"), a wholly-owned
subsidiary of Foamex International, acquired the airplane from Trace Holdings
and the Foamex lease and other agreements were terminated. Foamex anticipates
that it will distribute approximately $2.0 million per year to Aviation to
enable Aviation to pay debt service and certain operating costs.
Tax Sharing Agreement
In 1992, Foamex and its partners entered into a tax sharing agreement, as
amended (the "Tax Sharing Agreement"), pursuant to which Foamex agreed to make
quarterly distributions to its partners which, in the aggregate, will equal the
tax liability that Foamex would have paid if it had been a Delaware corporation
filing separate tax returns rather than a Delaware partnership. In connection
with Foamex International's initial public offering in 1993 and the attendant
reallocation of partnership interests, the Foamex Tax Sharing Agreement was
amended to provide that 99% of the payments will be made to Foamex
International and its subsidiaries and 1% of the payments would be made to
Trace Foam. For the fiscal years ended January 1, 1995, December 31, 1995 and
December 29, 1996, Foamex made payments of approximately $3.3 million, $2.4
million and $3.5 million, respectively, pursuant to the terms of the Tax
Sharing Agreement to Foamex International and its subsidiaries. As of June 29,
1997, there were accrued, but unpaid, distributions under the Tax Sharing
Agreement of approximately $12.6 million, of which Foamex has made subsequent
payments of approximately $3.0 million.
Tax Distribution Advance Agreement
On December 11, 1996, Foamex and FJPS entered into a Tax Distribution
Advance Agreement pursuant to which FJPS has the right to obtain up to $17.0
million of advances against future distributions to the Tax Sharing Agreement.
Any such advances will bear interest at a rate equal to 13.25% per annum. All
advances must be repaid by December 31, 1999, and FJPS is obligated to use
50.0% of any tax distribution to prepay the outstanding advances. As of June
29, 1997, there were no advances outstanding under this agreement. In
connection with the Refinancing Plan, the maximum amount of advances was
increased to $25.0 million and FJPS's rights and obligations under the Tax
Distribution Advance Agreement were assumed by Foamex International.
Management Services Agreement
Foamex and Trace Foam entered into a management services agreement,
pursuant to which Trace Foam provides Foamex with general managerial services
of a financial, technical, legal, commercial, administrative and/or advisory
nature for an annual fee of $3.0 million and reimbursement of expenses
incurred. During the last three years the annual fee was $1.75 million. Foamex
believes that the agreement is no less favorable to Foamex than that which
Foamex could have obtained from unaffiliated third parties.
Indemnification Regarding Environmental Matters
Pursuant to the Asset Transfer Agreement, dated as of October 2, 1990, as
amended, between Trace Holdings and Foamex (the "Trace Holdings Asset Transfer
Agreement"), Foamex is indemnified by Trace Holdings for any liabilities
incurred by Foamex arising out of or resulting from, among other things, the
ownership or use of any of the assets transferred pursuant to the Trace
Holdings Asset Transfer Agreement or the conduct of the transferred business on
or prior to October 2, 1990, including, without limitation, any loss actually
arising out of or resulting from any events, occurrences, acts or activities
occurring after October 2, 1990, to the extent resulting from
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conditions existing on or prior to October 2, 1990, relating to (i) injuries to
or the contraction of any diseases by any person resulting from exposure to
Hazardous Substances (as defined in the Trace Holdings Asset Transfer
Agreement) without regard to when such injuries or diseases are first
manifested, (ii) the generation, processing, handling, storage or disposition
of or contamination by any waste or Hazardous Substance, whether on or off the
premises from which the transferred business has been conducted or (iii) any
pollution or other damage or injury to the environment, whether on or off the
premises from which the transferred business has been conducted. Foamex is also
indemnified by Trace Holdings for any liabilities arising under Environmental
Laws (as defined in the Trace Holdings Asset Transfer Agreement) relating to
current or former Trace Holdings assets and for any liability relating to
products of the transferred business shipped on or prior to October 2, 1990.
Certain Transactions Relating to the Acquisition of General Felt
In connection with Foamex's acquisition of General Felt in March 1993,
Trace Holdings and General Felt entered into a reimbursement agreement pursuant
to which Trace Holdings agreed to reimburse General Felt on a pro rata basis
reflecting the period of time each occupied a former General Felt facility for
costs relating to an environmental cleanup plan.
In 1994, General Felt leased two facilities from limited partnerships in
which directors and officers of Foamex International, Foamex and/or Trace Foam
have an interest. These partnerships purchased the properties from General Felt
in 1978. The rental terms under each lease were determined on the basis of
appraised values for comparable properties within each respective area. The
lessor under the first of these leases (the "East State Lease") was East State
Associates, the partners of which include Mr. Cogan. The East State Lease
related to a 100,000 square foot warehouse in Hamilton Township (Trenton), New
Jersey. In accordance with the terms of the East State Lease, the lessor
exercised its right to require General Felt to purchase the facility at the
appraised fair market value of $2,250,000, as agreed by both parties. General
Felt assigned the purchase contract for the property to an unaffiliated third
party who purchased the property on March 28, 1994.
The lessor under the second lease (the "West State Lease") was West State
Associates, the partners of which include Mr. Cogan. The West State Lease
related to a General Felt manufacturing facility in Pico Rivera, California. On
August 26, 1994, General Felt in mutual agreement with the lessor purchased the
facility at the appraised fair market value of $3,350,000.
Certain Transactions Relating to the Acquisition of Great Western
In connection with the acquisition of Great Western in May 1993, Foamex
entered into lease agreements dated May 1993, with John Rallis ("Rallis"),
individually, or an affiliate, relating to former Great Western manufacturing
facilities. Aggregate lease payments for each of the fiscal years ended January
1, 1995, December 31, 1995 and December 29, 1996 were $1.6 million, $1.6
million and $1.7 million, respectively. Foamex has the option to purchase each
of the properties at any time after April 2001 at a price equal to fair market
value.
Part of the aggregate consideration paid by Foamex for the assets of Great
Western was in the form of a subordinated promissory note payable to Rallis in
the principal amount of $7,014,864 that bears interest at a maximum rate of
6.0% per annum payable semi-annually.
FJPS Note
On June 28, 1994, Foamex purchased an $87.9 million principal amount note
due 2006 from its 98% limited partner FJPS for $35.3 million (the "FJPS Note").
In December 1996 in exchange for certain waivers and amendment of the FJPS
Note, FJPS repaid $18.4 million of the FJPS Note and a waiver payment of $0.2
million using a portion of the proceeds from the sale of its partnership
interest in JPS Automotive. The FJPS Note was classified in partners' equity
(deficit) and the accreted principal of $16.3 million for the period from June
28, 1994 to December 29, 1996 was included in the FJPS Note. In connection with
the Refinancing Plan, the FJPS Note was distributed by Foamex to its partners
and canceled.
Foamex International Supply Agreement
In June 1994, Foamex also entered into a supply agreement with Foamex
International (the "Supply Agreement"). Pursuant to the terms of the Supply
Agreement, at the option of Foamex, Foamex International will purchase certain
raw materials which are necessary for the manufacture of Foamex's products, and
resell such raw materials to Foamex
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at a price equal to net cost plus reasonable out-of-pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than
those which Foamex could have obtained from an unaffiliated third party. For
the fiscal years ended January 1, 1995, December 31, 1995 and December 29,
1996, Foamex purchased $66.6 million, $105.1 million and $129.7 million,
respectively, in raw materials under the Supply Agreement.
Certain Transactions in Connection with the Refinancing Plan
In connection with the consummation of the Refinancing Plan, Foamex
distributed (i) to FJPS and FMXI, all FJPS Discount Debentures purchased in the
Tender Offer, the FJPS Note and the promissory note of Foamex International
payable to Foamex, and (ii) to Trace Foam, an amount in cash equal to 1/99th of
the distribution to FJPS and FMXI. As part of the Refinancing Plan (a) FMXI
dividended its distribution to Foamex International, (b) each of the FJPS
Discount Debentures distributed to FJPS, the Foamex International promissory
note, and the FJPS Note were canceled and (c) FJPS and its general partner,
FJGP Inc., were merged into Foamex International.
On July 7, 1996, Trace Holdings issued to Foamex a promissory note for
approximately $4.4 million plus accrued interest of approximately $0.4 million,
which is an extension of an earlier note. As part of the Refinancing Plan, the
Note was amended and restated, with accrued interest being added to principal,
the maturity was extended to July 7, 2001, and the interest rate was changed to
the sum of 2-3/8% plus Three Month LIBOR. In connection with the Refinancing
Plan, on July 1, 1997 Trace International borrowed an additional $5.0 million
on terms and conditions substantially similar to the existing promissory note,
and the tax distribution advance agreement was amended to increase the
permitted advances to Foamex International from $17.0 million to $25.0 million.
In connection with the Refinancing Plan, FJPS and its general partner FJGP
Inc. were merged into Foamex International. As a result, the partners of Foamex
are Foamex International, with a 98% limited partnership interest, FMXI, a
wholly owned subsidiary of Foamex International, with a 1% managing general
partnership interest, and Trace Foam, with a 1% non-managing general
partnership interest. In addition, Foamex's tax sharing agreement, tax
distribution advance agreement and management agreement were amended as
described above.
Other Transactions
For each of the fiscal years ended January 1, 1995, December 31, 1995 and
December 29, 1996, Foamex made charitable contributions to the Trace
International Holdings, Inc. Foundation (the "Foundation") in the amount of
$0.2 million. The Foundation is a Delaware tax-exempt private foundation.
Marshall S. Cogan, Vice Chairman of Foamex International and Foamex, is the
sole director of the Foundation.
In December 1995, Foamex entered into a $2.0 million promissory note with
Foamex International. The note bore interest at a rate per annum equal to six
month LIBOR plus 4.0% and was payable semi-annually in June and December. The
note was scheduled to mature in December 1997. The note was classified in the
other component of partners' equity (deficit). This note was distributed to
Foamex's partners and canceled in connection with the Refinancing Plan.
Trace Holdings rents approximately 5,900 square feet of general, executive
and administrative office space in New York, New York from Foamex on
substantially the same terms as Foamex leases such space from a third party
lessor. The lease commenced October 1, 1993 with the occupancy and rent
payments commencing on October 1, 1994. The lease provides for an initial term
of 11 years and expires on September 30, 2004. The lease provides for two
optional five-year renewal periods at the fair market rental value of the
property on the first day of such renewal term. The annual rental for the
period October 1, 1994 through September 30, 2004 is approximately $0.7
million. Under the lease, Foamex is required to pay certain excess real estate
taxes and operating expenses incurred by the lessor relating to the property
for which it will be proportionally reimbursed by Trace Holdings. The rental
terms were the result of arm-length negotiations between Foamex and the third
party lessor. Trace Holdings will reimburse, through increased rent, Foamex for
the cost of any leasehold improvements applicable to the space occupied for the
benefit of Trace Holdings.
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DESCRIPTION OF CERTAIN DEBT INSTRUMENTS
Set forth below is a summary of all of the material payment terms of
certain debt instruments to which Foamex is a party.
New Credit Facility
Foamex and General Felt have entered into a credit agreement with a group
of banks for which The Bank of Nova Scotia ("Scotiabank") and Citicorp USA,
Inc. act as administrative agents (the "Administrative Agents"). The New Credit
Facility provides for (i) $330 million of term loans, comprised of a $120
million term A sub-facility (the "Term A Loan"), a $110 million term B
sub-facility (the "Term B Loan") and a $100 million term C sub-facility (the
"Term C Loan") and (ii) a $150 million revolving credit facility (the
"Revolving Facility").
Any unused Term A Loan commitments will remain open until June 15, 1998
and can be drawn for the purpose of funding any future repurchase of notes not
repurchased in connection with the Refinancing Plan. In conjunction with the
Refinancing Plan, $88.0 million of Term A Loans, $110.0 million of Term B
Loans, $100.0 million of Term C Loans and $49.0 million of borrowings under the
Revolving Facility were drawn.
The Term A Loan, the Term B Loan and the Term C Loan are amortized each
year and will mature on the sixth, eighth and ninth anniversaries,
respectively, of the closing of the Refinancing Plan. The Revolving Facility
will terminate on the sixth anniversary of the closing of the Refinancing Plan.
Set forth below are the aggregate principal amounts of the term loans that are
amortized in each year following the Refinancing Plan assuming 100% of each
term loan is drawn and no excess cash flow or other prepayments are made.
Calendar Year Amount
1997 ............ $ 4,050,000
1998 ............ 11,100,000
1999 ............ 17,100,000
2000 ............ 23,100,000
2001 ............ 27,600,000
2002 ............ 32,100,000
2003 ............ 40,050,000
2004 ............ 68,700,000
2005 ............ 76,200,000
2006 ............ 30,000,000
------------
Total ........... $330,000,000
============
The maturity of borrowings under the New Credit Facility may be
accelerated upon the occurrence of certain events. In addition, Foamex and
General Felt are required, subject to certain exceptions, to prepay outstanding
borrowings from the net proceeds of certain asset sales, equity and debt
issuances and a percentage of annual excess cash flow (based on Foamex's then
current Leverage Ratio (as defined below)). Borrowings under the New Credit
Facility are secured by the accounts receivable, inventories, certain real and
personal property and certain intangible assets of Foamex and General Felt, the
partnership interests of Foamex and the capital stock of all the direct and
indirect subsidiaries of Foamex and General Felt.
Funds borrowed under the New Credit Facility bear interest at either (i)
Scotiabank's alternate base rate ("Base Rate") or (ii) LIBOR plus, in each
case, an applicable margin (the "Applicable Margin") based on Foamex's ratio
(the "Leverage Ratio") of (a) total funded indebtedness less cash to (b) its
trailing four quarter EBDAIT. Generally, for LIBOR borrowings, the Applicable
Margin ranges from 0.625% (corresponding to a Leverage Ratio less than 2.50) to
2.625% (corresponding to a Leverage Ratio greater than or equal to 4.50).
Generally, for Base Rate borrowings, the Applicable Margin ranges from 0.0%
(corresponding to a Leverage Ratio less than 3.00) to 1.625% (corresponding to
a Leverage Ratio greater than or equal to 4.50). Within these ranges, the
Applicable Margin varies depending on the maturity date of the borrowings.
The New Credit Facility restricts, among other things and subject to
certain exceptions, Foamex's and General Felt's ability: (i) to incur
additional indebtedness, except for extensions or refundings of certain
permitted indebtedness, (ii) to merge, consolidate, liquidate, dissolve, sell
or transfer all or substantially all of their assets or make other similar
fundamental changes, (iii) to sell assets outside the ordinary course of
business in excess
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of amounts set forth therein in any fiscal year, (iv) to guarantee or invest
in, or make loans or advances to, other persons or entities, (v) to declare or
pay dividends or make other distributions with respect to their equity
interests and (vi) to engage in certain transactions with affiliates and
holders of their equity interests. In general, these covenants are more
restrictive than those contained in the Indenture. The New Credit Facility also
requires Foamex to maintain specified financial ratios.
Events of default under the New Credit Facility include, among other
things: (i) any failure by Foamex or General Felt to pay principal thereunder
when due, or to pay interest or any other amount due within five days after the
date due, (ii) the failure of Foamex or any of its subsidiaries to pay any
other indebtedness (including capitalized leases) when due in excess of amounts
set forth therein, or the occurrence of any breach, default or event of default
that would cause or permit the acceleration of indebtedness in excess of
amounts set forth therein, (iii) the breach by Foamex, General Felt, FMXI or
Trace Foam of certain covenants and agreements of the New Credit Facility, (iv)
the material inaccuracy of any representation or warranty given by Foamex,
General Felt, FMXI or Trace Foam in the New Credit Facility, (v) the
continuance of a default by Foamex, General Felt, FMXI or Trace Foam in the
performance of or compliance with other covenants and agreements in the New
Credit Facility for 30 days after the occurrence thereof and (vi) certain
changes of control and acts of bankruptcy, insolvency or dissolution. Under the
terms of the Indenture, an event of default under the New Credit Facility would
result in an Event of Default under the Indenture.
9-1/2% Senior Secured Notes due 2000
The Senior Secured Notes were issued on June 3, 1993 and bear interest at
the rate of 9-1/2% payable semi-annually on each June 1 and December 1. The
Senior Secured Notes mature on June 1, 2000. The Senior Secured Notes are
collateralized by a first-priority lien on substantially all of the assets of
Foamex except for receivables, real estate and fixtures. The Senior Secured
Notes may be redeemed at the option of Foamex, in whole or in part, at any time
on or after June 1, 1998, initially at 101.583% of their principal amount, plus
accrued interest, and declining to 100% on or after June 1, 1999. As part of
the Refinancing Plan, the indenture pursuant to which the Senior Secured Notes
were issued was amended to remove substantially all restrictive covenants.
11-1/4% Senior Notes due 2002
The Senior Notes bear interest at the rate of 11-1/4% payable semi-annually
on each April 1 and October 1. The Senior Notes mature on October 1, 2002. The
Senior Notes may be redeemed at the option of Foamex, in whole or in part, at
any time on or after October 1, 1997, initially at 104.219% of their principal
amount, plus accrued interest, and declining to 100% on or after October 1,
2000. In October 1994, Foamex provided certain real property as collateral for
the Senior Notes, with a net book value of $37.8 million at December 29, 1996.
As part of the Refinancing Plan, the indenture pursuant to which the Senior
Notes were issued was amended to remove substantially all restrictive
covenants. The outstanding Senior Notes have been called for redemption on
October 1, 1997.
11-7/8% Senior Subordinated Debentures due 2004
The Senior Subordinated Debentures bear interest at the rate of 11-7/8%
payable semi-annually on each April 1 and October 1. The Senior Subordinated
Debentures mature on October 1, 2004. The Senior Subordinated Debentures may be
redeemed at the option of Foamex, in whole or in part, at any time on or after
October 1, 1997, initially at 105.938% of their principal amount, plus accrued
interest, and declining to 100% on or after October 1, 2002. The Senior
Subordinated Debentures are subordinated in right of payment to all senior
indebtedness, including the Senior Secured Notes and the Senior Notes and are
pari passu in right of payment with the Notes. As part of the Refinancing Plan,
the indenture pursuant to which the Senior Subordinated Debentures were issued
was amended to remove substantially all restrictive covenants. The outstanding
Senior Subordinated Debentures have been called for redemption on October 1,
1997.
11-7/8% Senior Subordinated Debentures, Series B due 2004
The Series B Debentures were issued July 30, 1993, by Foamex in an
exchange offer to holders of senior subordinated debentures issued in
connection with the acquisition of General Felt on March 23, 1993. The Series B
Debentures have terms substantially similar to the Senior Subordinated
Debentures, except that holders of the Series B Debentures are entitled to
receive proceeds from an asset sale only if any proceeds remain after an offer
to repurchase has been made to the holders of the Senior Subordinated
Debentures. As part of the Refinancing Plan, the indenture pursuant to which
the Series B Debentures were issued was amended to remove substantially all
restrictive covenants. The Series B Debentures have been called for redemption
on October 1, 1997.
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Industrial Revenue Bonds ("IRBs")
Two bond issues in the principal amount of $1.0 million and $6.0 million,
maturing in 2005 and 2013, respectively, are collateralized by certain
properties which have an approximate net carrying value of $11.3 million at
December 29, 1996 and letters of credit approximating $7.3 million. The IRBs
bear interest at a variable rate with options available to Foamex to convert to
a fixed rate. The interest rates on the IRBs were 4.85% and 4.0% at December
29, 1996 for the $6.0 million and $1.0 million bond issues, respectively. The
interest rate on the $6.0 million bond issue varies weekly based on an interest
rate that is indicative of current bidside yields on high quality short-term,
tax-exempt obligations, or if such interest rate is not available, 70.0% of the
interest rate for thirteen week United States Treasury Bills. The maximum
interest rate for either of the IRBs is 15.0% per annum. At the time of a
conversion to a fixed interest rate and upon appropriate notice, the IRBs are
redeemable at the option of the bondholders.
Subordinated Note Payable
This note payable was issued to the former Chief Operating Officer of
Foamex International, on May 6, 1993 by Foamex in connection with the
acquisition of Great Western. The note bears interest at a maximum rate of 6.0%
per annum and the principal amount is payable in three equal annual
installments beginning May 6, 1999. See "Certain Relationships and Related
Transactions--Certain Transactions Relating to the Acquisition of Great
Western."
Foamex Mexico Loan Agreement
In May 1997, Foamex Mexico entered into a loan agreement which provides for
(i) a $5.0 million term loan and (ii) a $2.0 million line of credit. Borrowings
under such loan agreement bear interest at a rate of LIBOR plus 4.5% and are
collateralized by certain assets of Foamex Mexico. The $5.0 million term loan is
amortized in equal quarterly payments after the first year and will mature in
2002. The $2.0 million line of credit will be used for working capital purposes
and is renewable annually. Foamex Mexico plans to use the proceeds of the term
loan for expenditures associated with the construction of a new manufacturing
facility.
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DESCRIPTION OF NOTES
General
The Old Notes were issued and the New Notes will be issued pursuant to an
indenture (the "Indenture") among Foamex and FCC, as joint and several
obligors, General Felt and Foamex Fibers as Subsidiary Guarantors, and The Bank
of New York, as trustee (the "Trustee"). The terms of the New Notes are
identical in all material respects to the terms of the Old Notes, except that
the New Notes have been registered under the Securities Act, and, therefore,
will not bear legends restricting their transfer and will not contain certain
terms providing for an increase in the interest rate on the Old Notes under the
circumstances described in the Registration Rights Agreement. The terms of the
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following is a summary of all the material provisions of the
Indenture. A copy of the Indenture and Registration Rights Agreement are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
The definitions of certain terms used in the following summary are set forth
below under "--Certain Definitions." For purposes of this summary, the term
"Issuers" refers only to Foamex and FCC and not to any of their respective
Subsidiaries.
The Notes are general unsecured obligations of the Issuers, subordinated
in right of payment to all existing and future Senior Debt of the Issuers,
including Indebtedness pursuant to the New Credit Facility. The Issuers'
obligations under the Notes are jointly and severally unconditionally
guaranteed (the "Note Guarantees") on a senior subordinated basis by the
Subsidiary Guarantors. See "--Note Guarantees." As of June 29, 1997, the
Issuers had approximately $371.1 million aggregate principal amount of Senior
Debt and approximately $27.4 million aggregate principal amount of Pari Passu
Debt. The Indenture permits the incurrence of additional Senior Debt, Pari
Passu Debt and Subordinated Indebtedness in the future.
The operations of Foamex are conducted in part through its Subsidiaries,
and Foamex may, therefore, be dependent upon the cash flow of its Subsidiaries
to meet its debt obligations, including its obligations under the Notes. While
all of the existing domestic subsidiaries of the Issuers are, and certain
future domestic subsidiaries are expected to be, Subsidiary Guarantors, certain
other foreign Subsidiaries of Foamex are not guarantors and may be restricted
in their ability to pay dividends to Foamex pursuant to instruments governing
indebtedness of such Subsidiaries. Under certain circumstances, the Issuers
will be able to designate any Subsidiaries formed by the Issuers or acquired by
the Issuers after the original issuance of the Notes as Unrestricted
Subsidiaries. Unrestricted Subsidiaries are not Subsidiary Guarantors and are
not subject to most of the restrictive covenants set forth in the Indenture.
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $150.0 million and
will mature on June 15, 2007. Interest on the Notes will accrue at the rate of
9-7/8% per annum and will be payable semi-annually in arrears on June 15 and
December 15 of each year, commencing on December 15, 1997, to Holders of record
on the immediately preceding June 1 and December 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, interest, premium and Liquidated Damages on the Notes will be
payable at the office or agency of the Issuers maintained for such purpose
within the City and State of New York or, at the option of the Issuers, payment
of interest and Liquidated Damages, if any, may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, interest, premium
and Liquidated Damages, if any, with respect to Notes, the Holders of which
have given wire transfer instructions to the Issuers, will be required to be
made by wire transfer of immediately available next day funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Issuers,
the Issuers' office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of
$1,000 and integral multiples thereof.
Subordination
The payment of principal of, interest and premium and Liquidated Damages,
if any, on the Notes is subordinate in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt, whether outstanding
on the date of the Indenture or thereafter created, incurred or assumed and all
permissible renewals, extensions, refundings or refinancings thereof.
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The Indenture provides that, upon any payment or distribution of assets of
the Issuers of any kind or character, whether in cash, property or securities,
to creditors in any Insolvency or Liquidation Proceeding with respect to either
Issuer all amounts due or to become due under or with respect to all Senior
Debt will first be paid in full before any payment is made on account of the
Notes, except that the Holders of Notes may receive Reorganization Securities.
Upon any such Insolvency or Liquidation Proceeding, any payment or distribution
of assets of Foamex or FCC of any kind or character, whether in cash, property
or securities (other than Reorganization Securities), to which the Holders of
the Notes or the Trustee would be entitled will be paid by Foamex or FCC or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, or by the Holders of the Notes or by the
Trustee if received by them, directly to the holders of Senior Debt (pro rata
to such holders on the basis of the amounts of Senior Debt held by such
holders) or their Representative or Representatives, as their interests may
appear, for application to the payment of the Senior Debt remaining unpaid
until all such Senior Debt has been paid in full, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
Senior Debt.
The Indenture provides that (a) in the event of and during the
continuation of any default in the payment of principal of, interest or
premium, if any, on any Senior Debt, or any Obligation owing from time to time
under or in respect of Senior Debt, or in the event that any event of default
(other than a payment default) with respect to any Senior Debt will have
occurred and be continuing and will have resulted in such Senior Debt becoming
or being declared due and payable prior to the date on which it would otherwise
have become due and payable, or (b) if any event of default other than as
described in clause (a) above with respect to any Designated Senior Debt will
have occurred and be continuing permitting the holders of such Designated
Senior Debt (or their Representative or Representatives) to declare such
Designated Senior Debt due and payable prior to the date on which it would
otherwise have become due and payable, then no payment will be made by or on
behalf of Foamex or FCC on account of the Notes (other than payments in the
form of Reorganization Securities) (x) in case of any payment or nonpayment
default specified in (a), unless and until such default will have been cured or
waived in writing in accordance with the instruments governing such Senior Debt
or such acceleration will have been rescinded or annulled, or (y) in case of
any nonpayment event of default specified in (b), during the period (a "Payment
Blockage Period") commencing on the date the Issuers or the Trustee receive
written notice (a "Payment Notice") of such event of default (which notice will
be binding on the Trustee and the Holders of Notes as to the occurrence of such
a payment default or nonpayment event of default) from the Credit Agent (or
other holders of Designated Senior Debt or their Representative or
Representatives) and ending on the earliest of (A) 179 days after such date,
(B) the date, if any, on which such Designated Senior Debt to which such
default relates is paid in full or such default is cured or waived in writing
in accordance with the instruments governing such Designated Senior Debt by the
holders of such Designated Senior Debt and (C) the date on which the Trustee
receives written notice from the Credit Agent (or other holders of Designated
Senior Debt or their Representative or Representatives), as the case may be,
terminating the Payment Blockage Period. During any consecutive 360-day period,
the aggregate of all Payment Blockage Periods shall not exceed 179 days and
there shall be a period of at least 181 consecutive days in each consecutive
360-day period when no Payment Blockage Period is in effect. No event of
default which existed or was continuing with respect to the Senior Debt to
which notice commencing a Payment Blockage Period was given on the date such
Payment Blockage Period commenced shall be or be made the basis for the
commencement of any subsequent Payment Blockage Period unless such event of
default is cured or waived for a period of not less than 90 consecutive days.
As a result of the subordination provisions described above, in the event
of Foamex's or FCC's liquidation, dissolution, bankruptcy, reorganization,
insolvency, receivership or similar proceeding or in an assignment for the
benefit of the creditors or a marshalling of the assets and liabilities of
either of the Issuers, Holders of Notes may recover less ratably than creditors
of the Issuers who are holders of Senior Debt. See "Risk
Factors--Subordination." The Indenture will limit, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Debt, that the
Issuers and their respective Restricted Subsidiaries can incur. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Note Guarantees
The Issuers' payment obligations under the Notes are jointly and severally
unconditionally guaranteed by the Subsidiary Guarantors. The Note Guarantees
will be subordinated to the prior payment in full of all Senior Debt of each
Subsidiary Guarantor (including such Subsidiary Guarantor's guarantee of the
New Credit Agreement, if
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any) to the same extent that the Notes are subordinated to Senior Debt of the
Issuers. The obligations of any Subsidiary Guarantor under its Note Guarantee
will be limited so as not to constitute a fraudulent conveyance under
applicable law. See "Risk Factors--Certain Creditors' Rights Considerations."
The Indenture provides that no Subsidiary Guarantor may consolidate with
or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person), another corporation, Person or entity whether or not
affiliated with such Subsidiary Guarantor unless, subject to the provisions of
the following paragraph, (i) the Person formed by or surviving any such
consolidation or merger (if other than such Subsidiary Guarantor) assumes all
the obligations of such Subsidiary Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes and the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such Subsidiary
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) Foamex would be
permitted by virtue of Foamex's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described below under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock." The requirements of clauses
(iii) and (iv) of this paragraph will not apply in the case of a consolidation
with or merger with or into any other Person if the acquisition of all of the
Equity Interests in such Person would have complied with the provisions of the
covenants described below under the captions "--Restricted Payments" and
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture provides that (a) in the event of a sale or other
disposition of all of the assets of any Subsidiary Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Subsidiary Guarantor, or (b) in the event that either of
the Issuers designates a Subsidiary Guarantor to be an Unrestricted Subsidiary,
or such Subsidiary Guarantor ceases to be a Subsidiary of the Issuers, then
such Subsidiary Guarantor (in the event of a sale or other disposition, by way
of such a merger, consolidation or otherwise, of all of the capital stock of
such Subsidiary Guarantor or any such designation) or the entity acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Subsidiary Guarantor) will be released and relieved of any obligations
under its Note Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "--Repurchase at the Option of Holders." In the case of a sale,
assignment, lease, transfer, conveyance or other disposition of all or
substantially all of the assets of a Subsidiary Guarantor, upon the assumption
provided for in clause (i) in the preceding paragraph, such Subsidiary
Guarantor shall be discharged from all further liability and obligation under
the Indenture.
Optional Redemption
The Notes will not be redeemable at the Issuers' option prior to June 15,
2002. Thereafter, the Notes will be redeemable at the option of the Issuers, in
whole or in part, at any time upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if
any, thereon, to the applicable redemption date, if redeemed during the
twelve-month period beginning on June 15 of the years indicated below:
Year Percentage
---- -----------
2002 ..................... 104.938%
2003 ..................... 103.292
2004 ..................... 101.646
2005 and thereafter ...... 100.000%
Notwithstanding the foregoing, at any time prior to June 15, 2000, the
Issuers may on any one or more occasions redeem up to 35% of the initially
outstanding aggregate principal amount of Notes at a redemption price equal to
109.875% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the redemption date, with the cash
proceeds of one or more Public Equity Offerings; provided that, in each case,
at least 65% of the initially outstanding aggregate principal amount of Notes
remains outstanding immediately after the occurrence of such redemption; and
provided, further, that such redemption shall occur within 45 days of the date
of the closing of such Public Equity Offering.
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Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of Holders,"
the Issuers are not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuers to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Issuers will mail a notice to each Holder describing the transaction or
transactions that constituted the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than the fifth Business Day preceding the last day of the
fiscal quarter of Foamex next following the Change of Control date (the "Change
of Control Payment Date"), pursuant to the procedures required by the Indenture
and described in such notice. The Issuers will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Issuers. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant, but in
any event prior to the Change of Control Payment Date, the Issuers will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Issuers will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date. See "Risk Factors--Limitations on Ability to
Make Change of Control Payment."
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility restricts the Issuers from repurchasing any Notes
and also provides that certain asset sales and change of control events with
respect to the Issuers would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which either of the
Issuers becomes a party may
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contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Issuers are prohibited from purchasing Notes, the
Issuers could seek the consent of their respective lenders to purchase the
Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Issuers do not obtain such consent or repay such
borrowings, the Issuers will remain prohibited from purchasing Notes. In such
case, the Issuers' failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the New Credit Facility and would likely cause an event of default under any
other outstanding Senior Debt. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to the Holders of
Notes. See "Risk Factors--Subordination; Rights of Senior Lenders" and
"Description of Certain Debt Instruments."
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Issuers and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of each of the Issuers and each of their respective
Subsidiaries taken as a whole. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Issuers to repurchase such Notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Issuers and their respective Subsidiaries taken as a whole to
another Person or group may be uncertain.
The obligation to make a Change of Control Offer, together with
restrictions in the Indenture described herein on the ability of Foamex and its
Restricted Subsidiaries to incur additional Indebtedness, to grant liens on its
property, to make Restricted Payments and to make Asset Sales, may make more
difficult or discourage a takeover of Foamex, whether favored or opposed by the
management of Foamex. Consummation of any such transaction in certain
circumstances may require redemption or repurchase of the Notes, and there can
be no assurance that Foamex or the acquiring party will have sufficient
financial resources to effect such redemption or repurchase. Such restrictions
and the restrictions on transactions with Affiliates may, in certain
circumstances, make it more difficult to discourage any leveraged buyout of
Foamex or any of its Subsidiaries by the management of Foamex. While such
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford the
Holders of Notes protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction. In addition, while neither Foamex nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control,
such right may be waived by the holders of a majority of the outstanding
principal amount of the Notes.
Asset Sales
The Indenture provides that each of the Issuers will not, and will not
permit any of their respective Restricted Subsidiaries to, consummate an Asset
Sale unless (i) such Issuer (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (evidenced by an Officers' Certificate delivered to the
Trustee and a resolution of the Board of Directors) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by such Issuer or such Restricted Subsidiary is
in the form of (A) cash, (B) assets useful in a Permitted Business not to
exceed $30.0 million in the aggregate over the life of the Notes, or (C) Equity
Interests representing a controlling interest in a Permitted Business not to
exceed $30.0 million in the aggregate over the life of the Notes (collectively,
the "Permitted Consideration"); provided that the amount of (x) any liabilities
(as shown on such Issuer's or such Restricted Subsidiary's most recent balance
sheet), of such Issuer or any Restricted Subsidiary (other than contingent
liabilities (except to the extent reflected (or reserved for) on a balance
sheet of the Issuers or any Restricted Subsidiary as of the date prior to the
date of consummation of such transaction) and liabilities that are by their
terms subordinated to the Notes or the Note Guarantees) that are assumed by the
transferee of any such assets and (y) any securities, notes or other
obligations received by such Issuer or any such Restricted Subsidiary from such
transferee that are converted within 90 days by such Issuer or such Restricted
Subsidiary into Permitted Consideration (to the extent so received), shall be
deemed to be Permitted Consideration for purposes of this provision; and
provided further, that the 80% limitation referred to above shall not apply to
any Asset Sale in which the Permitted Consideration
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portion of the consideration received therefor is equal to or greater than what
the net after-tax proceeds would have been had such Asset Sale complied with
the aforementioned 80% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuers may apply such Net Proceeds, at their option, (a) to repay Senior
Debt, or (b) to the acquisition of assets to be used in a Permitted Business.
Pending the final application of any such Net Proceeds, the Issuers may
temporarily reduce the New Credit Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $15.0 million,
the Issuers will be required to make an offer to all Holders of Notes (an
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Issuers may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis; provided,
however, that the Issuers shall not be obligated to purchase Notes in
denominations other than integral multiples of $1,000. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that each of the Issuers will not, and will not
permit any of their respective Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of the Issuers' or any of their respective Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Issuers (other than
cash in lieu of fractional shares)) or to the direct or indirect holders of the
Issuers' or any of their respective Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable (a) in
additional Equity Interests (other than Disqualified Stock) of the Issuers or
(in the case of a dividend, other payment or distribution on account of the
Equity Interest of a Restricted Subsidiary) of such Restricted Subsidiary or
(b) to the Issuers or their Restricted Subsidiaries); (ii) purchase, redeem or
otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Issuers) any Equity
Interests of the Issuers or any direct or indirect parent of the Issuers; (iii)
make any Investment in any Unrestricted Subsidiary; (iv) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value any Indebtedness (other than the Notes) that is pari passu with or
subordinated to the Notes or the Note Guarantees, except a payment of interest
or principal at Stated Maturity; or (v) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (v) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) Foamex would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuers and their respective Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii), (viii), (x), (xi), (xii),
(xiii), (xiv), (xv), (xvi) and (xvii) of the next succeeding paragraph), is
less than the sum of (i) 50% of the Consolidated Net Income of Foamex for the
preceding four-quarter period, plus (ii) 100% of the aggregate net cash
proceeds received by Foamex from the issue or sale since the date of the
Indenture of Equity Interests of Foamex (other than Disqualified Stock) or of
Disqualified Stock or debt securities of Foamex that have been converted into
such Equity Interests (other than Equity Interests (or
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Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Issuers and other than Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock) or of capital contributions to the
Issuers, plus (iii) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash (less the cost of disposition, if any), or the cash return,
including, without limitation, any cash dividends or distributions, with
respect to such Restricted Investment or from any Unrestricted Subsidiary.
The foregoing provisions will not prohibit (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the provisions
of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any Pari Passu Debt, or subordinated Indebtedness or
Equity Interests of the Issuers or any Restricted Subsidiary in exchange for,
or out of the net cash proceeds of the substantially concurrent sale or
issuance (other than to a Restricted Subsidiary of the Issuers) of, Equity
Interests of the Issuers or any Restricted Subsidiary (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance
or other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
Pari Passu Debt or subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend or distribution by a Restricted Subsidiary of the Issuers to the
holders of its Equity Interests on a pro rata basis; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Issuers, any Restricted Subsidiary of the Issuers, or any direct or
indirect parent of the Issuers or their respective Restricted Subsidiaries held
by any member of the Issuers' (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement either (a) in effect as of the date of the Indenture; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $2.5 million in any twelve- month
period and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction or (b) upon the termination of such person's
employment; (vi) the advancement of payment or payment of distributions
pursuant to the Tax Sharing Agreement and the making of up to $17.0 million of
loans or advances pursuant to the Tax Advance Agreement dated as of December
11, 1996 between FJPS and Foamex as amended to the date of the Indenture; (vii)
the payment by Foamex of a management fee pursuant to the Management Services
Agreement in an amount not to exceed $3.0 million per annum; (viii)
distributions to Foamex International Inc. and its Subsidiaries which are
utilized to pay the debt service and other expenses of Foamex Aviation Corp.,
the aggregate amount of which shall not exceed $2.0 million in any twelve-month
period; (ix) additional payments in an aggregate amount not to exceed $25.0
million; (x) Contributions to a Restricted Subsidiary if such Subsidiary (a)
executes and delivers to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Restricted
Subsidiary shall guarantee all of the Obligations of the Issuers with respect
to the Indenture and the Notes and (b) delivers to the Trustee an Opinion of
Counsel reasonably satisfactory to the Trustee to the effect that such
supplemental indenture, has been duly executed and delivered by such Restricted
Subsidiary and is in compliance with the terms of the Indenture; (xi)
distributions, loans or advances to the holders of the Equity Interests of the
Issuers in an amount sufficient to pay all or a portion of the principal of,
interest or premium, if any, on the Foamex-JPS Automotive L.P. Senior Secured
Discount Debentures due 2004; (xii) distributions, loans or advances to holders
of the Equity Interests of the Issuers in an amount sufficient to enable Foamex
International Inc. to pay its reasonable, out of pocket operating and
administrative expenses, including without limitation, directors fees, legal
and audit expenses, SEC compliance expenses and corporate franchise and other
taxes; provided that no such expense payments shall be made to an Affiliate
(other than a director or officer of the Issuers whose status as an Affiliate
results solely from his position as a director or officer of the Issuers) of
Foamex International Inc.; (xiii) Investments received by the Issuers or any of
their Restricted Subsidiaries as non-cash consideration from Asset Sales to the
extent permitted by the covenant described under the caption "--Repurchase at
the Option of Holders--Asset Sales"; (xiv) the Closing Date Transactions; (xv)
payments made pursuant to the Great Western Note; (xvi) payments made to
purchase any Indebtedness subject to the Closing Date Transactions that is not
purchased pursuant to such Transaction; and (xvii) the issuance or sale of
Equity Interests of Foamex Latin America to key executives of Foamex Latin
America not to exceed 5% of the outstanding Equity Interests of Foamex Latin
America.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by any Subsidiary
Guarantor be transferred to or held by an Unrestricted Subsidiary. For purposes
of making such determination, all outstanding Investments by either Issuer and
their respective Restricted Subsidiaries (except to
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the extent repaid in cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will be included for
purposes of calculating the aggregate amount of Restricted Payments under
clause (c) of first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Issuers or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any individual or series of related non-cash
Restricted Payments (other than the Closing Date Transactions) shall be
determined by the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee, such determination to be based upon an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing, as applicable, if such fair market value exceeds
$1.0 million. In connection with each Restricted Payment, the Issuers shall
deliver to the Trustee, prior to or within 60 days of the making of such
Restricted Payment, an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, together with a
copy of any fairness opinion or appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Issuers will not, and will not permit any
of their respective Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Issuers and the Subsidiary
Guarantors will not issue any Disqualified Stock and the Issuers will not
permit any of their respective Subsidiaries which are not Subsidiary Guarantors
to issue any shares of preferred stock; provided, however, that the Issuers and
their Subsidiaries may incur Indebtedness (including Acquired Debt and
Indebtedness under the New Credit Facility) or issue shares of Disqualified
Stock or in the case of Subsidiaries which are not Subsidiary Guarantors, issue
preferred stock if: the Fixed Charge Coverage Ratio for Foamex's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred stock is issued would have
been at least 2.25 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock or preferred stock had been issued
and such net proceeds had been applied, as the case may be, at the beginning of
such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Issuers or any of their respective Subsidiaries
of term Indebtedness under the New Credit Facility; provided that the aggregate
principal amount of all term Indebtedness outstanding under the New Credit
Facility after giving effect to such incurrence, including all term
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (i), does not exceed an amount equal to $330.0
million less the aggregate amount of all Net Proceeds of Asset Sales that have
been applied since the date of the Indenture to repay such term Indebtedness
under the New Credit Facility and resulting in a permanent reduction of the
related commitments pursuant to the covenant described above under the caption
"Asset Sales";
(ii) the incurrence by the Issuers or any of their Subsidiaries of
revolving credit Indebtedness and letters of credit (with letters of credit
being deemed to have a principal amount, without duplication, equal to the
maximum potential liability of the Issuers and their Subsidiaries thereunder)
under the New Credit Facility; provided that the aggregate principal amount of
all revolving credit Indebtedness outstanding under the New Credit Facility
after giving effect to such incurrence, including all Indebtedness incurred to
refund, refinance or replace any other revolving Indebtedness incurred pursuant
to this clause (ii), does not exceed an amount equal to $150.0 million, less
the aggregate amount of all Net Proceeds of Asset Sales applied to repay such
revolving Indebtedness and resulting in a permanent reduction of the related
commitments pursuant to the covenant described above under the caption "--Asset
Sales"; provided, however, that notwithstanding anything to the contrary
contained in the Indenture, in no event shall the amount of Indebtedness which
the Issuers and their Subsidiaries may incur in the aggregate pursuant to
clause (i) and this clause (ii) be less than $150.0 million;
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(iii) the incurrence by the Issuers and their respective Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Issuers and the Subsidiary Guarantors of
Indebtedness represented by the Notes;
(v) the incurrence by the Issuers or any of their respective Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Issuers
or such Subsidiary, in an aggregate principal amount not to exceed $25.0
million at any time outstanding;
(vi) the incurrence by the Issuers or any of their respective Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness that was permitted
by the Indenture to be incurred;
(vii) the incurrence by the Issuers or any of their respective Restricted
Subsidiaries of intercompany Indebtedness between or among the Issuers and any
of their respective Restricted Subsidiaries; provided, however, that (i) if an
Issuer is the obligor on such Indebtedness and the payee is not a Subsidiary
Guarantor, such Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes and (ii)(A) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than an Issuer or a Restricted
Subsidiary and (B) any sale or other transfer of any such Indebtedness to a
Person that is not either an Issuer or a Restricted Subsidiary shall be deemed,
in each case, to constitute an incurrence of such Indebtedness by an Issuer or
such Restricted Subsidiary, as the case may be;
(viii) the incurrence by the Issuers or any of their respective
Subsidiaries of Hedging Obligations;
(ix) the Guarantee by the Issuers or any of their respective Subsidiaries
of Indebtedness of the Issuers or a Restricted Subsidiary of the Issuers that
was permitted to be incurred by another provision of this covenant;
(x) the incurrence by the Issuers' Unrestricted Subsidiaries of
Non-Recourse Debt and preferred stock, provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Issuers;
(xi) the incurrence by the Issuers or any of their respective Subsidiaries
of additional Indebtedness including, without limitation, pursuant to the New
Credit Facility, in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other Indebtedness
incurred pursuant to this clause (xi), not to exceed $45.0 million;
(xii) Acquired Debt of a Subsidiary in existence at the time of the
acquisition of such Subsidiary, if such Acquired Debt was not incurred in
contemplation of such acquisition and such Acquired Debt is Non- Recourse Debt
(except with respect to such acquired Subsidiary and its Subsidiaries);
(xiii) Indebtedness of Foamex Canada, Inc. and its Subsidiaries (which is
Non-Recourse Debt, except with respect to such entities) in an amount, at any
time outstanding not to exceed CND$15.0 million;
(xiv) Indebtedness of Foamex Latin America (which is Non-Recourse Debt,
except with respect to such entities) in an amount, at any time outstanding not
to exceed $12.0 million;
(xv) Assets Sales in the form of Receivables Transactions; and
(xvi) Indebtedness of Foamex Asia, Inc. and its Subsidiaries (which is
Non-Recourse Debt, except with respect to such entities) in an amount, at any
time outstanding not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xvi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Issuers shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Neither the accrual of interest, nor
the accretion of accreted value will be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
Liens
The Indenture provides that the Issuers will not and will not permit any
of their respective Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Issuers will not, and will not permit any
of their respective Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary which is not a
Subsidiary Guarantor to (i)(a) pay dividends or make any other distributions to
the Issuers or any of their respective Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Issuers or
any of their respective Restricted Subsidiaries, (ii) make loans or advances to
the Issuers or any of their respective Restricted Subsidiaries or (iii)
transfer any of its properties or assets to the Issuers or any of their
respective Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of the Indenture, (b) the New Credit Facility as in effect
as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the New Credit Facility as in
effect on the date of the Indenture, (c) the Indenture and the Notes, (d)
applicable law, (e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Issuers or any of their respective Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (f) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations for property acquired that impose restrictions of the nature
described in clause (iii) above on the property so acquired, (h) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, (i) any instrument or agreement governing Indebtedness
permitted to be incurred under the Indenture, which is secured by a Lien
permitted to be incurred under the Indenture, which encumbrance or restriction
is not applicable to any property or assets other than the property or assets
subject to such Lien, or (j) restrictions applicable to a Receivables
Subsidiary arising from a Receivables Transaction.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Issuers may not consolidate or merge with
or into (whether or not the Issuers are the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of their properties or assets in one or more related transactions, to
another corporation, Person or entity unless (i) such Issuer is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is organized and existing under the laws of the United States, any state
thereof or the District of Columbia provided that FCC may not consolidate or
merge with or into any entity other than a corporation satisfying such
requirements for so long as Foamex remains a partnership; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
such Issuer) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of such Issuer under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of an Issuer with or into one of its Wholly
Owned Restricted Subsidiaries, the Issuer or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Issuer), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of such Issuer
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock." In the case of a sale, assignment, lease,
transfer, conveyance or other disposition of all or substantially all of the
assets of an Issuer, upon the assumption provided for in clause (ii) above,
such Issuer shall be discharged from all further liability and obligation under
the Indenture.
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Transactions with Affiliates
The Indenture provides that the Issuers will not, and will not permit any
of their respective Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are no less favorable to the Issuers or the relevant Subsidiary than those
that would have been obtained in a comparable transaction by the Issuers or
such Subsidiary with an unrelated Person and (ii) the Issuers deliver to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of
the members of the Board of Directors and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing;
provided that (m) prepaid expenses and loans or advances to employees and
similar items in the ordinary course of business; (n) the advancement of
payment or payment of distributions pursuant to the Tax Sharing Agreement and
the making of loans or advances pursuant to the Tax Advance Agreement dated as
of December 11, 1996 between FJPS and Foamex, as amended to the date of the
Indenture; (o) the payment by Foamex of a management fee pursuant to the
Management Services Agreement in an amount not to exceed $3.0 million per
annum; (p) distributions to Foamex International Inc. and its Subsidiaries
which are utilized to pay the debt service and other expenses of Foamex
Aviation Corp., the aggregate amount of which shall not exceed $2.0 million in
any twelve-month period; (q) the issuance or sale of Equity Interests of Foamex
Latin America to key executives of Foamex Latin America, not to exceed 5% of
the outstanding Equity Interests of Foamex Latin America; (r) Investments in
the Trace Note not to exceed $5.0 million; (s) Investments in the Trace Global
Opportunity Fund not to exceed $5.0 million; (t) borrowings of up to $5.0
million by Trace Holdings from the Issuers and their respective Subsidiaries;
(u) the Closing Date Transactions; (v) transactions pursuant to the Supply
Agreement with Foamex International Inc., dated as of June 28, 1994; (w)
purchases (and sales) of inventory and services in the ordinary course of
business at a price not greater (less) than the price paid by (charged to)
purchasers of a similar quantity of inventory and services which are not
Affiliates of the Issuers, (x) any employment agreement entered into by the
Issuers or any of their respective Restricted Subsidiaries in the ordinary
course of business and consistent with the current market practice or the past
practice of the Issuers or such Restricted Subsidiary; (y) transactions between
or among the Issuers and/or its Restricted Subsidiaries; and (z) Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments," in each case, shall not be deemed
Affiliate Transactions.
Anti-Layering
The Indenture provides that (i) the Issuers will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is both
(a) subordinate or junior in right of payment to any Senior Debt and (b) senior
in any respect in right of payment to the Notes and (ii) no Subsidiary
Guarantor will incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is both (a) subordinate or junior in right of
payment to its Senior Debt and (b) senior in right of payment to its Note
Guarantee.
Sale and Leaseback Transactions
The Indenture provides that the Issuers will not, and will not permit any
of their respective Restricted Subsidiaries to, enter into any sale and
leaseback transaction; provided that the Issuers may enter into a sale and
leaseback transaction if (i) the Issuers could have (a) incurred Indebtedness
in an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the covenant described above under the caption
"--Incurrence of Additional Indebtedness and Issuance of Preferred Stock" and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "--Liens" and (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(in the case of gross cash proceeds in excess of $5.0 million as determined in
good faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction.
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Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries
The Indenture provides that the Issuers (i) will not, and will not permit
any Restricted Subsidiary of the Issuers to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Restricted Subsidiary of the
Issuers to any Person (other than the Issuers or a Restricted Subsidiary of the
Issuers), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Restricted Subsidiary and (b)
the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "--Asset Sales," and (ii) will not permit any Restricted Subsidiary
of the Issuers to issue any of its Equity Interests (other than, if necessary,
shares of its Capital Stock constituting directors' qualifying shares) to any
Person other than to the Issuers or a Restricted Subsidiary of the Issuers;
provided, however, the foregoing restrictions will not apply to (A) Investments
in the entities described under clause (o) of the definition of Permitted
Investments; (B) transfers, conveyances, sales, leases or other dispositions
(collectively "dispositions") of any Capital Stock of any Restricted Subsidiary
that have a fair market value at the time of such disposition of less than $1.0
million; or (C) a public offering of Equity Interests of Foamex Latin America
which results in the net proceeds to Foamex Latin America of at least $15.0
million.
Business Activities
The Indenture provides that the Issuers will not, and will not permit any
of their respective Restricted Subsidiaries to, engage in any business other
than Permitted Businesses, except to such extent as would not be material to
the Issuers and their respective Restricted Subsidiaries taken as a whole.
Payments for Consent
The Indenture provides that neither the Issuers nor any of their
respective Restricted Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid or is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Additional Guarantees
The Indenture provides that (i) if the Issuers or any of their respective
Restricted Subsidiaries shall, after the date of the Indenture, transfer or
cause to be transferred, including by way of any Investment, in one or a series
of transactions (whether or not related), any assets, businesses, divisions,
real property or equipment having an aggregate fair market value (as determined
in good faith by the Board of Directors) in excess of $1.0 million to any
Restricted Subsidiary that is not a Subsidiary Guarantor or a Foreign
Subsidiary, (ii) if Foamex or any of its Restricted Subsidiaries shall acquire
another Restricted Subsidiary other than a Foreign Subsidiary having total
assets with a fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million, or (iii) if any Restricted Subsidiary
other than a Foreign Subsidiary shall incur Acquired Debt in excess of $1.0
million, then the Issuers shall, at the time of such transfer, acquisition or
incurrence, (i) cause such transferee, acquired Restricted Subsidiary or
Restricted Subsidiary incurring Acquired Debt (if not then a Subsidiary
Guarantor) to execute a Note Guarantee of the Obligations of the Issuers under
the Notes in the form set forth in the Indenture and (ii) deliver to the
Trustee an Opinion of Counsel, in form reasonably satisfactory to the Trustee,
that such Note Guarantee is a valid, binding and enforceable obligation of such
transferee, acquired Restricted Subsidiary or Restricted Subsidiary incurring
Acquired Debt, subject to customary exceptions for bankruptcy, fraudulent
conveyance and equitable principles. Notwithstanding the foregoing, the Issuers
or any of their Restricted Subsidiaries may make a Restricted Investment in any
Wholly Owned Restricted Subsidiary of the Issuers without compliance with this
covenant provided that such Restricted Investment is permitted by the covenant
described under the caption, "Restricted Payments."
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Issuers will furnish to the Trustee and
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Issuers were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the
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financial condition and results of operations of the Issuers and their
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by Foamex's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Issuers were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Issuers will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, the Issuers have agreed that, for so long as any
Notes remain outstanding, they will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Certain Effects of the Covenants
Although the covenant described above under "Incurrence of Indebtedness
and Issuance of Preferred Stock" will restrict the incurrence of certain
additional Indebtedness by Foamex and its Subsidiaries, Foamex and its
Subsidiaries will nevertheless be able to incur Permitted Debt and additional
Indebtedness if the appropriate Fixed Charge Coverage Ratio is obtained (the
"Debt Test"). The Debt Test may have limited applicability in the event of a
leveraged buyout initiated or supported by Foamex, its management, or an
affiliate of either party. However, the Debt Test, together with other
covenants in the Indenture, including those relating to Restricted Payments,
Liens, and Transactions with Affiliates, may not afford holders of Notes
protection in all circumstances from the adverse aspects of a highly leveraged
or similar transaction. Neither Foamex nor the Trustee may waive such
covenants; however, such covenants, except for certain limited exceptions
related to payment and subordination, may be waived by the holders of a
majority of the outstanding principal amount of the Notes. See "Description of
Notes--Amendment, Supplement and Waiver."
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Issuers to
comply with the provisions described under the captions "--Change of Control,"
or to consummate a mandatory Offer to purchase pursuant to the covenant
described above under the caption "--Asset Sales," or "--Merger, Consolidation,
or Sale of Assets"; (iv) failure by the Issuers for 60 days after notice to
comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Issuers or any of their respective Restricted Subsidiaries (or
the payment of which is Guaranteed by the Issuers or any of their respective
Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of, interest or premium, if any, on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on
the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its Stated Maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the Stated Maturity of which has been so accelerated,
aggregates $20.0 million or more; (vi) failure by the Issuers or any of their
respective Restricted Subsidiaries to pay final judgments aggregating in excess
of $10.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days after entry thereof; and (vii) certain events of bankruptcy
or insolvency with respect to the Issuers or any of their respective
Significant Subsidiaries (as defined in the Indenture).
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately provided, however, that
if any Indebtedness or Obligation is outstanding pursuant to the New Credit
Facility, upon a declaration of acceleration by the holders of the Notes or the
Trustee, all principal and interest under the Indenture shall be due and
payable upon the earlier of (x) the day which five Business Days after the
provision to the Issuers, the Credit Agent and the Trustee of such written
notice of acceleration or (y) the date of acceleration of any Indebtedness
under the New Credit Facility; and provided, further, that in the event of an
acceleration based upon an Event of Default set forth in clause (v) above, such
declaration of acceleration shall be automatically annulled if the holders of
Indebtedness which is the subject of such failure to pay at maturity or
acceleration have rescinded their declaration of acceleration in respect of
such Indebtedness or such failure to pay at maturity shall have been cured or
waived
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within 30 days thereof and no other Event of Default has occurred during such
30-day period which has not been cured, paid or waived. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuers or any of their
respective Restricted Subsidiaries all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of either of the
Issuers with the intention of avoiding payment of the premium that the Issuers
would have had to pay if the Issuers then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the Notes. If an Event of Default
occurs by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Issuers with the intention of avoiding the prohibition on
redemption of the Notes prior to June 15, 2002, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees, Partners and
Stockholders
No director, officer, employee, partner, incorporator or stockholder of
the Issuers or any of their Restricted Subsidiaries, as such, shall have any
liability for any obligations of the Issuers or any Subsidiary Guarantor under
the Notes, the Indenture, the Note Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
Satisfaction and Discharge of the Indenture; Defeasance
The Indenture provides that the Issuers may terminate their Obligations
under the Indenture and the Obligations of the Subsidiary Guarantors under the
Note Guarantees at any time by delivering all outstanding Notes issued under
the Indenture to the Trustee for cancellation and paying all sums to be paid
pursuant to the terms of the Indenture. In addition, the Issuers are permitted
to terminate their Obligations under the Indenture and the Obligations of the
Subsidiary Guarantors under the Note Guarantees by irrevocably depositing with
the Trustee money or United States Government Obligations sufficient to pay
principal, interest and premium and Liquidated Damages, if any, on the Notes to
maturity or redemption, and all other sums payable pursuant to the terms of the
Indenture after complying with certain other procedures set forth therein.
Notwithstanding the foregoing, certain Obligations of the Issuers and the
Subsidiary Guarantors under the Indenture, the Notes and the Note Guarantees
shall survive until the Notes are no longer outstanding.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
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Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"), (iii) reduce the rate of or
change the time for payment of interest on any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium or Liquidated
Damages, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders") or (viii) make any change in the foregoing amendment and
waiver provisions. In addition, any amendment to the provisions of Article 10
or Article 12 of the Indenture (which relate to subordination) will require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement
the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption and discharge of the Issuers' and the
Subsidiary Guarantors' obligations to Holders of Notes in the case of a merger,
consolidation or sale of assets or Capital Stock, to make any change that would
provide any additional rights or benefits to the Holders of Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
to comply with requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act or to allow
any Subsidiary to Guarantee the Notes.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers or the Guarantor, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Book-Entry, Delivery and Form
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered notes in global form without coupons (each, a
"Global Note"). Upon issuance, each Global Note will be deposited with, or on
behalf of, The Depository Trust Company (the "Depositary") and registered in
the name of Cede & Co., as nominee of the Depositary.
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If a holder tendering Old Notes so requests, such holder's New Notes will
be issued as described below under "Certificated Securities" in registered form
without coupons (the "Certificated Securities").
The Depositary has advised the Issuers that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (iv) a "Clearing
Agency" registered pursuant to Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry charges to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. The Depositary's Participants include
securities brokers and dealers (including the Initial Purchaser), banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
The Issuers expect that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants who elect to exchange Old Notes with an interest in
the Global Note and (ii) ownership of the New Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depositary (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require
that certain persons take physical delivery of definitive form of securities
that they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
So long as the Depositary or its nominee is the registered owner of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the New Notes represented by the Global
Note for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Notes registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities, and will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any direction, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in New Notes represented by a Global Note to pledge such
interest to persons or entities that do not participate in the Depositary's
system, or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
The Issuers understand that under existing industry practice, in the event
the Issuers request any action of holders or an owner of a beneficial interest
in a Global Note desires to take any action that the Depositary, as the holder
of such Global Note, is entitled to take, the Depositary would authorize the
Participants to take such action and the Participant would authorize persons
owning through such Participants to take such action or would otherwise act
upon the instruction of such persons. Neither the Issuers nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of New Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such New
Notes.
Payments with respect to the principal of, premium, if any, interest and
Liquidated Damages, if any, on any New Notes represented by a Global Note
registered in the name of the Depositary or its nominee on the applicable
record date will be payable by the Trustee to or at the direction of the
Depositary or its nominee in its capacity as the registered holder of the
Global Note representing such New Notes under the Indenture. Under the terms of
the Indenture, the Issuers and the Trustee may treat the persons in whose names
the New Notes, including the Global Notes, are registered as the owners thereof
for the purpose of receiving such payment and for any and all other purposes
whatsoever. Consequently, neither the Issuers nor the Trustee have or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of New Notes (including principal, premium, if any, interest, and
Liquidated Damages, if any), or to immediately credit the accounts of the
relevant Participants with such payment, in amounts proportionate to their
respective holdings in principal amount of beneficial interest in the Global
Note as shown on the records of the Depositary. Payments by the Participants
and the Indirect Participants to the beneficial owners of New Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants or the Indirect Participants.
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Certificated Securities
If (i) the Issuers notify the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Issuers are unable to
locate a qualified successor within 90 days or (ii) the Issuers, at their
option, notify the Trustee in writing that they elect to cause the issuance of
New Notes in definitive form under the Indenture, then, upon surrender by the
Depositary of its Global Notes, Certificated Securities will be issued to each
person that the Depositary identifies as the beneficial owner of the New Notes
represented by the Global Note. In addition, any person having a beneficial
interest in a Global Note or any holder of Old Notes whose Old Notes have been
accepted for exchange may, upon request to the Trustee or the Exchange Agent,
as the case may be, exchange such beneficial interest or Old Notes for
Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Issuers nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the related New Notes and each such person may
conclusively rely on, and shall be protected in relying on, instructions from
the Depositary for all purposes (including with respect to the registration and
delivery, and the respective principal amounts, of the New Notes to be issued).
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person to the extent of the
fair market value of such asset where the Indebtedness so secured is not the
Indebtedness of such Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control. Notwithstanding the foregoing, as of the date of the
Indenture, Donaldson, Lufkin & Jenrette Securities Corporation will not be an
Affiliate of the Issuers.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (excluding any sale and leaseback transaction, the granting of a
Permitted Lien, and the transfer of cash and Cash Equivalents) other than sales
of inventory, licensing of intellectual property or sales of services, in each
case in the ordinary course of business, but including a Receivables
Transaction (provided that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Issuers and their Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Issuers or any of their respective Restricted Subsidiaries
of Equity Interests of any of the Issuers' Restricted Subsidiaries, in the case
of either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $10.0
million or (b) for Net Proceeds in excess of $10.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by either of the Issuers to a Restricted
Subsidiary or by a Restricted Subsidiary to either of the Issuers or to another
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted
Subsidiary to either of the Issuers or to another Restricted Subsidiary, (iii)
Hedging Obligations and (iv) a Restricted Payment that is permitted by the
covenant described above under the caption "--Restricted Payments" will not be
deemed to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale
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and leaseback transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Beneficial Owner" means "beneficial owner" as such terms is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act; provided, however, that (i) a
person shall not be deemed to have beneficial ownership of securities subject
to a stock purchase agreement, merger agreement, or similar agreement until the
consummation of the transactions contemplated by such agreement, and (ii) for
purposes of determining beneficial ownership of Voting Stock of Foamex,
stockholders of Foamex International Inc. shall be deemed to beneficially own a
percentage of Voting Stock of Foamex equal to their percentage beneficial
ownership of Voting Stock of Foamex International Inc. multiplied by Foamex
International Inc.'s beneficial ownership of Voting Stock of Foamex.
"Board of Directors" means the Board of Directors of the Managing General
Partner, on behalf of Foamex (or Foamex, if Foamex is a corporation), FCC, or
any Subsidiary Guarantor or any authorized committee of the Board of Directors.
"Business Day" means any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the corporate trust office of the Trustee,
on which banks are authorized to close.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States of America is pledged in support thereof), (iii) time
deposits and certificates of deposit, including eurodollar time deposits, of
any commercial bank organized in the United States having capital and surplus
in excess of $100,000,000 or a commercial bank organized under the laws of any
other country that is a member of the OECD having total assets in excess of
$100,000,000 with a maturity date not more than one year from the date of
acquisition, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (i) and (ii)
above entered into with any bank meeting the qualifications specified in clause
(iii) above, (v) direct obligations issued by any state of the United States of
America or any political subdivision of any state or any public instrumentality
thereof maturing within 90 days after the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor's Corporation nor Moody's Investors Service, Inc. (or,
if at any time neither Standard & Poor's Corporation nor Moody's Investors
Service, Inc. shall be rating such obligations, then from such other nationally
recognized rating service acceptable to the Trustee), (vi) commercial paper
issued by the parent corporation of any commercial bank organized in the United
States having capital and surplus in excess of $100,000,000 or a commercial
bank organized under the laws of any other country that is a member of the OECD
having total assets in excess of $100,000,000, and commercial paper issued by
others having one of the two highest ratings obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc. (or, if at any time
neither Standard & Poor's Corporation nor Moody's Investors Service, Inc. shall
be rating such obligations, then from such other nationally recognized rating
services acceptable to the Trustee) and in each case maturing within one year
after the date of acquisition, (vii) overnight bank deposits and bankers'
acceptances at any commercial bank organized in the United States having
capital and surplus in excess of $100,000,000 or a commercial bank organized
under the laws of any other country that is member of the OECD having total
assets in excess of $100,000,000, (viii) deposits available for withdrawal on
demand with commercial banks organized in the United States having capital and
surplus in excess of $50,000,000 or a commercial bank organized under the laws
of any other country that is a member of the OECD having total assets in excess
of $50,000,000 and (ix) investments in money market funds substantially all of
whose assets comprise securities of the types described in clauses (i) through
(viii).
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of
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all or substantially all of the assets of either of the Issuers and their
respective Restricted Subsidiaries taken as a whole to any "person" (as such
term is used in Section 13(d)(3) of the Exchange Act) other than the Principals
or their Related Parties (as defined below), (ii) the adoption of a plan
relating to the liquidation or dissolution of the Issuers, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the Beneficial
Owner of (A) more than 25% of the Voting Stock of either of the Issuers
(measured by voting power rather than by number of shares) and (B) a greater
percentage of the Voting Stock than the Principals and their Related Parties or
(iv) the first day on which a majority of the members of the Board of Directors
of either of the Issuers are not Continuing Directors.
"Closing Date Transactions" means the following transactions to be entered
into by Foamex in connection with the issuance of the Notes: (i) the
distribution to Foamex- JPS Automotive L.P. ("FJPS") and FMXI, Inc. of: (a) all
of the FJPS and Foamex-JPS Capital Corporation Senior Secured Discount
Debentures due 2004 purchased by Foamex on or prior to the date of the
Indenture; (b) the promissory note of FJPS payable to Foamex, dated June 28,
1994 and (c) the promissory note of Foamex International Inc. payable to
Foamex, dated December 8, 1995; (ii) a cash distribution to Trace Foam Company,
Inc. in an amount equal to one-ninety ninth (1/99) of the distribution in (i)
above; (iii) the amendment of the promissory note of Trace International
Holdings, Inc. payable to Foamex, dated July 7, 1996, which extends the
maturity of such obligation to 2001; and (iv) the Tender Offer and the
incurrence of borrowings under the New Credit Facility in connection with the
Refinancing Plan.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale or discontinued operations (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period (including, to the extent applicable, payments made pursuant to any tax
sharing agreements), to the extent that such provision for taxes was included
in computing such Consolidated Net Income, plus (iii) consolidated interest
expense of such Person and its Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings (whether or not accounted for by the Issuers and
their respective Subsidiaries as interest expense), and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles) and
other non-cash expenses of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income, minus (v) non-cash
items increasing such Consolidated Net Income for such period, in each case, on
a consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP (excluding, however, the effect of the Closing Date Transactions and
of any other extraordinary transaction in connection with the incurrence of the
Notes, and the consummation of the recapitalization of the Issuers in
connection therewith); provided that (i) the Net Income of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions with respect to current or prior years Net Income (if not
previously distributed or dividended) paid in cash to the referent Person or a
Restricted Subsidiary thereof; (ii) the Net Income of any Restricted Subsidiary
that is not a Subsidiary Guarantor shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders; (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded; (iv) the
cumulative effect of a change in accounting principles shall be excluded; and
(v) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Issuers or one of their respective
Subsidiaries except as set forth in (i).
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"Consolidated Net Worth" means, (A) with respect to any partnership, the
common and preferred partnership equity of such partnership and its
consolidated subsidiaries, as determined on a consolidated basis in accordance
with GAAP, and (B) with respect to any other Person as of any date, the sum of
(i) the consolidated equity of the common equityholders of such Person and its
consolidated Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with respect to any
series of preferred equity (other than Disqualified Stock) that by its terms is
not entitled to the payment of dividends unless such dividends may be declared
and paid only out of net earnings in respect of the year of such declaration
and payment, but only to the extent of any cash received by such Person upon
issuance of such preferred stock, less (x) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of tangible assets
of a going concern business made within 12 months after the acquisition of such
business) subsequent to the date of the Indenture in the book value of any
asset owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), plus (z)
all unamortized debt discount and expense and unamortized deferred charges as
of such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Issuers who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Contributions" means any loans, cash advances, capital contributions,
investments or other transfers of assets for less than fair value by the
Issuers or any of their respective Restricted Subsidiaries to any Subsidiary or
other Affiliate of the Issuers or any of their respective Restricted
Subsidiaries other than a Subsidiary Guarantor, other than loans and cash
advances to officers and directors made in the ordinary course of business not
to exceed $5.0 million.
"Credit Agent" means any of The Bank of Nova Scotia or Citicorp USA, Inc.,
in their respective capacity as Administrative Agents for the lenders party to
the New Credit Facility, or any successor thereto or any person otherwise
appointed.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
New Credit Facility and (ii) any other Senior Debt the principal amount of
which is $25.0 million or more and that has been designated by the Issuers as
Designated Senior Debt.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $14.1 million in aggregate principal
amount of Indebtedness of the Issuers and their respective Restricted
Subsidiaries (other than Indebtedness under the New Credit Facility plus
Indebtedness subject to the Closing Date Transactions that is not purchased
pursuant to such Transactions) in existence on the date of the Indenture,
including the Great Western Note, until all such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding the amortization of deferred financing costs) and
(ii) the consolidated interest expense of such Person and its Restricted
Subsidiaries that was capitalized during such period to the extent related to
Indebtedness, and (iii) any interest expense on Indebtedness of another Person
(other than such Person's Restricted
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Subsidiaries) that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon),
but only to the extent of the interest expense attributable to the lesser of
(a) the principal amount of such Indebtedness, or (b) the fair market value of
such asset and (iv) the product of (a) all dividend payments, whether or not in
cash, on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments to such Person or its Restricted
Subsidiaries and dividends on Equity Interests payable solely in Equity
Interests of the Issuers, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person and its Restricted
Subsidiaries, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Issuers or any of their respective Restricted Subsidiaries incurs, assumes,
Guarantees or redeems, repurchases or otherwise retires any Indebtedness (other
than revolving credit borrowings) or issues preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption, repurchase or retirement of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Issuers or any of their respective
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the four-
quarter reference period and Consolidated Cash Flow for such reference period
shall be calculated without giving effect to clause (iii) of the proviso set
forth in the definition of Consolidated Net Income, and (ii) the Consolidated
Cash Flow attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Foamex Latin America" means Foamex Latin America, Inc. and its direct and
indirect Subsidiaries.
"Foreign Subsidiary" means any Subsidiary of the Issuers either (a) which
is organized outside of the United States of America, (b) whose principal
activities are conducted outside of the United States of America or (c) whose
only material assets are Equity Interests in Subsidiaries which are Foreign
Subsidiaries.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Great Western Note" means the subordinated promissory note incurred in
connection with the acquisition of Great Western in the principal amount of
$7,014,864 that bears interest at a maximum rate of 6.0% per annum payable
semi-annually.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate or currency swap agreements, interest
rate or currency cap agreements, interest rate or currency collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against or expose such Person to fluctuations in interest rates and/or currency
exchange rates.
"Indebtedness" means, with respect to any Person, without duplication, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar
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instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property, except
any such balance that constitutes an accrued expense or trade payable, if and
to the extent any of the foregoing indebtedness (other than letters of credit)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a Lien
on any asset of such Person (whether or not such Indebtedness is assumed by
such Person) to the extent of the fair market value of such asset where the
Indebtedness so secured is not the Indebtedness of such Person and, to the
extent not otherwise included, the Guarantee by such Person of any Indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, to the extent such Indebtedness does
not require current payments of interest, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness. Notwithstanding anything in the
Indenture to the contrary, Hedging Obligations shall not constitute
Indebtedness, except to the extent they appear on the balance sheet of Foamex.
"Insolvency or Liquidation Proceedings" means (i) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding, relative to Foamex or FCC or to the
creditors of Foamex or FCC, as such, or to the assets of Foamex or FCC, or (ii)
any liquidation, dissolution, reorganization or winding up of Foamex or FCC,
whether voluntary or involuntary and involving insolvency or bankruptcy, or
(iii) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of Foamex or FCC.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP. If the Issuers or any Restricted
Subsidiary of the Issuers sells or otherwise disposes of any Equity Interests
of any direct or indirect Restricted Subsidiary of the Issuers such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of one of the Issuers, the Issuers shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "--Restricted Payments." A provision
in an agreement relating to the purchase or sale of any of the Issuers' or
their respective Restricted Subsidiaries' assets containing an "earn out" or
providing for an adjustment to the purchase or sale price based on a financial
statement relating to the assets purchased or sold shall not be deemed to be an
"Investment."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Services Agreement" means that management services agreement,
by and between Foamex and Trace Foam Company, Inc. as in effect on the date of
the Indenture.
"Managing General Partner" means FMXI, Inc., a Delaware corporation and
its successors.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (or loss
in the case of (a)), together with any related provision for taxes (including
pursuant to the Tax Sharing Agreement) on such gain (or loss in the case of
(a)), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions and
losses) or (b) the disposition of any securities other than Cash Equivalents by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any
extraordinary or nonrecurring gain (or loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (or loss),
excluding charges related to hyper-inflationary accounting pursuant to FASB 52
and interpretations by the Commission thereof.
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"Net Proceeds" means the aggregate cash proceeds received by the Issuers
or any of their respective Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, consent fees to facilitate such
Asset Sale and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain New Credit Facility, to be
entered into, by and among the Issuers and The Bank of Nova Scotia and Citicorp
USA, Inc., as Credit Agents, providing for up to $480.0 million of borrowings,
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time, and
after the Credit Agent has acknowledged in writing that the New Credit Facility
has been terminated and all then outstanding Indebtedness and obligations
thereunder with respect thereto have been repaid in full in cash and
discharged, any successors to or replacements of such New Credit Facility (as
designated by the Board of Directors as evidenced by a resolution), as such
successors or replacements may be amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither of the
Issuers nor any of their respective Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of either
of the Issuers or any of their respective Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders, except for lenders under instruments governing Acquired Debt (a) have
acknowledged that they do not have recourse to the holder of the Equity
Interest of the debtor or (b) have been notified in writing that they will not
have any recourse to the stock or assets of either of the Issuers or any of
their respective Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, expenses, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Pari Passu Debt" means any Indebtedness or the Issuers or any of their
Restricted Subsidiaries which, by its terms is pari passu in right of payment
to the Notes.
"Payment in Full" (together with any correlative phrases e.g. "paid in
full" and "pay in full") means (i) with respect to any Senior Debt other than
Senior Debt under or in respect of the New Credit Facility, payment in full
thereof or due provision for payment thereof (x) in accordance with the terms
of the agreement or instrument pursuant to which such Senior Debt was issued or
is governed or (y) otherwise to the reasonable satisfaction of the holders of
such Senior Debt, which shall include, in any Insolvency or Liquidation
Proceeding, approval by such holders individually or as a class, of the
provision for payment thereof, and (ii) with respect to Senior Debt under or in
respect of the New Credit Facility, payment in full thereof in cash or Cash
Equivalents.
"Permitted Business" means (i) the manufacture and distribution of
polyurethane and advanced polymer foam and activities related thereto, and (ii)
other businesses engaged in by the Issuers and their respective Restricted
Subsidiaries on the date of the Indenture and similar lines of businesses to
those engaged in by the Issuers on the date of the Indenture, including, but
not limited to, the manufacture and distribution of plastics and related
products.
"Permitted Investments" means (a) any Investment in either of the Issuers
or in a Wholly Owned Restricted Subsidiary of either of the Issuers and that is
engaged in a Permitted Business; (b) any Investment in Cash Equivalents; (c)
any Investment by either of the Issuers or any Restricted Subsidiary of either
of the Issuers in a Person, if as a result of such Investment (i) such Person
becomes a Wholly Owned Restricted Subsidiary of the Issuers or such Restricted
Subsidiary is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, either of the Issuers or a
Restricted Subsidiary of either of the Issuers that is engaged in a Permitted
Business; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made in compliance
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with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales"; (e) any Investment to the extent made in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Issuers
or a Subsidiary Guarantor; (f) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (f) that are at the
time outstanding, not to exceed the sum of (A) $15.0 million, and (B) the
aggregate net cash proceeds (or non-cash proceeds when converted into cash)
received by Foamex and its Restricted Subsidiaries from the sale or disposition
of investments existing as of the date of the Indenture or made pursuant to
this clause (f); (g) securities received in connection with any good faith
settlement or Insolvency or Liquidation Proceeding; (h) Hedging Obligations
entered into in the ordinary course of business in connection with the
operation of the business of the Issuers and their Restricted Subsidiaries or
as required by any Indebtedness issued in compliance with the Indenture; (i)
prepaid expenses and loans or advances to employees and similar items in the
ordinary course of business; (j) endorsements of negotiable instruments and
other similar negotiable documents; (k) transactions with Affiliates as
permitted under the Indenture; (l) Investments outstanding as of the date of
the Indenture, (m) Investments of up to $5.0 million in Trace Global
Opportunities Fund, (n) loans or advances of up to $5.0 million in Trace
Holdings, and (o) Investments in, including Contributions to, Foamex Latin
America, Foamex Asia or one or more Foreign Subsidiaries, provided that the
maximum amount of such Investments outstanding at any one time does not exceed
$50.0 million, plus the cash dividends and distributions received by the Issuer
and its Restricted Subsidiaries with respect to Investments pursuant to this
clause (o).
"Permitted Liens" means (i) Liens securing Indebtedness under the New
Credit Facility; (ii) Liens in favor of either of the Issuers or any Subsidiary
Guarantor; (iii) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Issuers or any Subsidiary of either of
the Issuers; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with either of the
Issuers; (iv) Liens on property existing at the time of acquisition thereof by
the Issuers or any Subsidiary of the Issuers, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (v) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) Liens on
assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (x) Liens incurred in the ordinary course of
business including, without limitation, judgment and attachment liens, of the
Issuers or any Subsidiary of the Issuers with respect to obligations that do
not exceed $25.0 million at any one time outstanding and that are not incurred
in connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business); (xi) Liens
in favor of the Trustee; (xii) Liens on Receivables in connection with
Receivables Transaction; (xiii) Liens incurred in connection with Permitted
Refinancing Indebtedness, but only if such Liens extend to no more assets than
the Liens securing the Indebtedness being refinanced; (xiv) Liens securing
Senior Debt; (xv) Liens for taxes, assessments, governmental charges or claims
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (xvi) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other
like Liens (including contractual landlords liens) arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor; (xvii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (xviii) Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (xix) Liens to secure Indebtedness of any
Restricted Subsidiary, that is a Foreign Subsidiary provided that such
Indebtedness is used by such Restricted Subsidiary to finance operations of
such Foreign Subsidiary outside the
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United States and Canada; (xx) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
not interfering in any material respect with the business of Foamex or any of
its Subsidiaries; and (xxi) Liens arising from filing Uniform Commercial Code
financing statements regarding leases (other than true leases and true
consignments).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuers
or any of their respective Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Issuers or any of their respective
Restricted Subsidiaries; provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount of (or accreted value, if applicable), plus
prepayment premium and accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either
by one of the Issuers or by the Restricted Subsidiary which is the obligor on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Post-Petition Interest" means all interest and expenses accrued or
accruing after the commencement of any Insolvency or Liquidation Proceeding in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument
creating, evidencing or governing any Senior Debt, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Principals" means Trace International Holdings, Inc. and Marshall S.
Cogan.
"Public Equity Offering" means a public offering of Equity Interests
(other than Disqualified Stock) of (i) Foamex or FCC; or (ii) Foamex
International, Inc. to the extent the net proceeds thereof are contributed to
one of the Issuers as a capital contribution, that, in each case, results in
the net proceeds to either of the Issuers of at least $25.0 million.
"Receivables" means, with respect to any Person or entity, all of the
following property and interests in property of such Person or entity, whether
now existing or existing in the future or hereafter acquired or arising: (i)
accounts, (ii) accounts receivable incurred in the ordinary course of business,
including without limitation, all rights to payment created by or arising from
sales of goods, leases of goods or the rendition of services no matter how
evidenced, whether or not earned by performance, (iii) all rights to any goods
or merchandise represented by any of the foregoing after creation of the
foregoing, including, without limitation, returned or repossessed goods, (iv)
all reserves and credit balances with respect to any such accounts receivable
or account debtors, (v) all letters of credit, security, or guarantees for any
of the foregoing, (vi) all insurance policies or reports relating to any of the
foregoing, (vii) all collection or deposit accounts relating to any of the
foregoing, (viii) all proceeds of the foregoing and (ix) all books and records
relating to any of the foregoing.
"Receivables Subsidiary" means an Unrestricted Subsidiary exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, that at no time shall the Issuers and their respective Subsidiaries
have more than one Receivables Subsidiary.
"Receivables Transaction" means (i) the sale or other disposition to a
third party of Receivables or an interest therein, or (ii) the sale or other
disposition of Receivables or an interest therein to a Receivables Subsidiary
followed by a financing transaction in connection with such sale or disposition
of such Receivables (whether such financing transaction is effected by such
Receivables Subsidiary or by a third party to whom such Receivables Subsidiary
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sells such Receivables or interests therein); provided that in each of the
foregoing, the Issuers or their Restricted Subsidiaries receive at least 80% of
the aggregate principal amount of any Receivables financed in such transaction.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (B) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (A) and this clause (B).
"Reorganization Securities" means securities distributed to the Holders of
the Notes in an Insolvency or Liquidation Proceeding pursuant to a plan of
reorganization consented to by each class of the Senior Debt, but only if all
of the terms and conditions of such securities (including, without limitation,
term, tenor, interest, amortization, subordination, standstills, covenants and
defaults), are at least as favorable (and provide the same relative benefits)
to the holders of Senior Debt and to the holders of any security distributed in
such Insolvency or Liquidation Proceeding on account of any such Senior Debt as
the terms and conditions of the Notes and the Indenture are, and provide to the
holders of Senior Debt.
"Representative" means the trustee, agent or representative for any Senior
Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means all Indebtedness and other Obligations specified below
payable directly or indirectly by either of the Issuers or any of their
respective Restricted Subsidiaries, whether outstanding on the date of the
Indenture or thereafter created, incurred or assumed by either of the Issuers
or any of their respective Restricted Subsidiaries: (i) the principal of,
interest on and all other Obligations related to the New Credit Facility
(including without limitation all loans, letters of credit and other extensions
of credit under the New Credit Facility, and all expenses, fees,
reimbursements, indemnities and other amounts owing pursuant to the New Credit
Facility); (ii) amounts payable in respect of any Hedging Obligations; (iii)
all Indebtedness not prohibited by the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant that is not expressly pari passu with or
subordinated to the Notes, and (iv) all permitted renewals, extensions,
refundings or refinancings thereof. All Post-Petition Interest on Senior Debt
shall constitute Senior Debt. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (i) Indebtedness of either of the
Issuers or any of their respective Restricted Subsidiaries to any other
Restricted Subsidiaries which is not a Subsidiary Guarantor, (ii) Indebtedness
of FCC to Foamex, (iii) any Indebtedness which by the express terms of the
agreement or instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Debt, (iv) any trade
payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business, or (v) Indebtedness incurred in
violation of the Indenture. To the extent any payment of Senior Debt (whether
by or on behalf of the Issuers or any of their respective Restricted
Subsidiaries, as proceeds or security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside, or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by
or paid over to, such trustee, receiver or other similar party, the Senior Debt
or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred. All Senior Debt
shall be and remain Senior Debt for all purposes of the Indenture, whether or
not subordinated in a bankruptcy, receivership, insolvency or similar
proceeding.
"Stated Maturity" means, with respect to any installment of interest,
accreted value or principal on any series of Indebtedness, the date on which
such payment of interest or principal is due or is scheduled to be paid in the
original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest,
accreted value or principal prior to the date originally scheduled for the
payment or accretion thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
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combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means General Felt Industries, Inc., Foamex
Fibers, Inc. and those Restricted Subsidiaries required to execute a Note
Guarantee pursuant to the provisions of the Indenture described under the
caption "Additional Guarantees" and any other Subsidiary that executes a Note
Guarantee.
"Tax Sharing Agreement" means the tax sharing agreement, as of the date of
the Indenture, among Foamex, Trace Foam Company, Inc., FMXI, Inc. and Foamex
International Inc. as in effect on the date of the Indenture.
"Trace Note" means the promissory note of Trace International Holdings,
Inc. dated July 7, 1996 payable to Foamex, as amended and restated as part of
the Closing Date Transactions.
"United States Government Obligations" means direct obligations of the
United States of America, or any agency or instrumentality thereof the payment
of which the full faith and credit of the United States of America is pledged.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors of either Issuer as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) on the date of such designation
is not party to any agreement, contract, arrangement or understanding with
either of the Issuers or any Restricted Subsidiary of either of the Issuers
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to such Issuer or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of such
Issuer; (c) is a Person with respect to which neither of the Issuers nor any of
their respective Restricted Subsidiaries has any direct or indirect obligation
(x) to subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of either
of the Issuers or any of their respective Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of either of the Issuers or any of their respective
Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of either of the Issuers or any of their
respective Restricted Subsidiaries. Any such designation by the Board of
Directors of either Issuer shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments." If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
such Issuer as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock," the Issuers
shall be in default of such covenant). The Board of Directors of either of the
Issuers may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of such Issuer of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the
covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
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"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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DESCRIPTION OF THE PARTNERSHIP AGREEMENT
Set forth below is a summary of certain material terms of the Fourth
Amended and Restated Agreement of Limited Partnership of Foamex dated as of
December 14, 1993 and amended as of June 28, 1994 and June 12, 1997 (the
"Partnership Agreement"). A complete copy of such agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part and
is available in the manner described in "Additional Information."
Organization and Duration
Foamex is a Delaware limited partnership. FMXI, a wholly-owned subsidiary
of Foamex International, serves as the managing general partner of Foamex and
has a 1.0% interest therein. Trace Foam is a non-managing general partner of
Foamex and has a 1.0% interest therein. Foamex International is a limited
partner of Foamex and has a 98.0% interest therein. Foamex will continue its
existence until December 14, 2033, unless terminated earlier in accordance with
the terms of the Partnership Agreement. See "--Dissolution" below.
Management
The business and affairs of Foamex are managed by FMXI as the managing
general partner. The Partnership Agreement authorizes FMXI to designate
officers of Foamex who are responsible for implementing the decisions of FMXI
and for conducting the ordinary and usual business and affairs of Foamex. See
"Management--Executive Officers of Foamex and FCC; Directors and Executive
Officers of FMXI."
Assignment of Partnership Interests
No partner of Foamex may sell or otherwise encumber or dispose of, whether
voluntarily or by operation of law (each, a "transfer"), any part or all of its
interest in Foamex without the written consent of the other partners and any
attempt to do so will be void.
A person or entity will not be admitted as a substitute general partner of
Foamex or a substitute limited partner of Foamex until such time as such person
or equity (i) executes a counterpart of the Partnership Agreement or an
amendment to the Partnership Agreement agreeing to be bound by the terms and
conditions of the Partnership Agreement and (ii) is listed as a general partner
or a limited partner, as the case may be, on the books and records of Foamex.
No partner may withdraw from Foamex or otherwise assign its partnership
interest other than pursuant to the Partnership Agreement.
Amendment of the Partnership Agreement
The Partnership Agreement may not be amended except by an instrument in
writing signed by partners holding more than 50% of the partnership interests
in Foamex at such time; provided, however, no amendment affecting the rights of
Trace Foam in respect of allocations, distributions, assignments,
indemnification or capital contributions shall be made without the approval of
Trace Foam.
Dissolution
The partnership existence of Foamex shall continue until December 14, 2033
and then dissolve unless extended by mutual written consent of all partners,
unless any of the following events occur which shall require a dissolution of
Foamex: (i) any event of withdrawal of a general partner that causes a general
partner to cease to be general partner of Foamex under the Delaware Revised
Uniform Limited Partnership Act (the "Partnership Act"), except that Foamex
shall not be dissolved if (a) at the time of such event all remaining general
partners agree to carry on the business of Foamex without dissolution upon such
an event or (b) within 90 days after such event all partners of Foamex agree in
writing to continue the business of Foamex and to the appointment, effective as
of the date of such event, of one or more general partners of Foamex or (ii)
the entry of a decree of judicial dissolution under the Partnership Act.
Notwithstanding the foregoing, except to the extent required by applicable
law, Foamex may not be dissolved until 90 days after Scotiabank, and Citicorp
USA, Inc. as Administrative Agents (or any successor agent as Administrative
Agent) of the New Credit Facility, shall have received written notice of such
impending or proposed dissolution. See "Description of Certain Debt
Instruments--New Credit Facility."
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Indemnification
The Partnership Agreement provides that, to the fullest extent permitted
by law, Foamex will indemnify the partners, their respective affiliates,
officers, directors, stockholders, employees and agents, and any employee,
agent and officer of Foamex, against all expenses actually and reasonably
incurred by it or them in connection with any threatened, pending or completed
action, suit or proceeding against it or them or by, against or in the right of
Foamex to which it or them is or was a party, or is threatened to be made a
party, involving an alleged cause of action for damages arising out of, or in
any way related to or connected with, the business or internal affairs of
Foamex, if, in the transaction giving rise to such action, suit, or proceeding,
such person acted in good faith, without gross negligence or willful misconduct
or the willful breach of the Partnership Agreement and in a manner such person
reasonably believed to be within the scope of its authority under the
Partnership Agreement.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain United States federal income
tax consequences of the acquisition, ownership and disposition of the Notes to
a U.S. Holder. For this purpose, a "U.S. Holder" is a person who is, for United
States federal income tax purposes, (i) a citizen or resident of the United
States; (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or of any political subdivision thereof;
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source; or (iv) a trust if a court within the U.S.
is able to exercise primary supervision over the administration of the trust
and one or more U.S. fiduciaries have the authority to control all substantial
decisions of the trust. Although the following discussion does not purport to
describe all of the tax considerations that may be relevant to a prospective
purchaser of the Notes, such discussion summarizes the material United States
federal income tax consequences to a U.S. Holder that purchases the Notes
pursuant to their original issue and that holds the Notes as a capital asset
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code").
The statements regarding United States tax laws and practices set forth
below are based on the Code, administrative pronouncements, judicial decisions
and existing and proposed Treasury regulations in force and as applied in
practice on the date of this Prospectus and are subject to changes to those
laws and practices, and any relevant judicial decisions, subsequent to the date
of this Prospectus, which changes may be retroactive.
This discussion does not deal with persons that are subject to special tax
rules, such as dealers in securities, financial institutions, life insurance
companies, tax-exempt entities, persons holding the Notes as a part of a
hedging or conversion transaction or a straddle or persons whose "functional
currency" is not the United States dollar.
PROSPECTIVE PURCHASERS OF NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE UNITED STATES TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE NOTES, INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAX
LAWS.
The Exchange Offer
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should be treated as a continuation of the corresponding Old Notes because the
terms of the New Notes are not materially different from the terms of the Old
Notes. Accordingly, such exchange should not constitute a taxable event to U.S.
Holders and, therefore, (i) no gain or loss should be realized by U.S. Holders
upon receipt of a New Note, (ii) the holding period of the New Note should
include the holding period of the Old Note exchanged therefor and (iii) the
adjusted tax basis of the New Note should be the same as the adjusted tax basis
of the Old Note exchanged therefor immediately before the exchange.
Stated Interest
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. Foamex expects that the Notes will not be considered to be
issued with original issue discount ("OID") for federal income tax purposes.
Payments Upon Registration Default
The occurrence of a Registration Default as described under "Description
of Notes--Registration Rights; Liquidated Damages" will cause Liquidated
Damages to be payable to the holders of the Notes in the manner described
therein. The treatment of such feature of the Notes is not entirely clear.
However, Foamex intends to take the position that the mere possibility that
such Liquidated Damages may become payable on the Notes will not affect the
amount of interest income includible by a U.S. Holder of a Note and will not
cause the Notes to be issued with OID. If such Liquidated Damages in fact
become payable on the Notes, then such Liquidated Damages should be includible
in income by the U.S. Holders of Notes currently as paid or accrued, in
accordance with such U.S. Holder's regular method of accounting for tax
purposes.
Sale, Exchange or Retirement of the Notes
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or
retirement of a Note in an amount equal to the difference between the amount
realized on the sale, exchange or retirement and the tax basis of the Note.
Gain or loss recognized on the sale, exchange
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or retirement of a Note (excluding amounts received in respect of accrued
interest, which will be taxable as ordinary interest income) generally will be
capital gain or loss and will be long-term capital gain or loss if the Note was
held for more than one year.
Backup Withholding
Under certain circumstances a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof. This withholding generally
applies if the U.S. Holder fails to furnish his or her social security number
or other taxpayer identification number ("TIN") in the specified manner and in
certain other circumstances. Any amount withheld from a payment to a U.S.
Holder under the backup withholding rules is allowable as a credit against such
U.S. Holder's federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service. Corporations and
certain other entities described in the Code and Treasury regulations are
exempt from backup withholding if their exempt status is properly established.
PLAN OF DISTRIBUTION
Each Holder desiring to participate in the Exchange Offer will be required
to represent, among other things, that (A) it is not an "affiliate" (as defined
in Rule 405 of the Securities Act) of the Issuers, (ii) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Notes, and (iii) it is
acquiring the New Notes in the ordinary course of its business (a holder unable
to make the foregoing representations is referred to herein as a "Restricted
Holder"). A Restricted Holder will not be able to participate in the Exchange
Offer, and may only sell its Old Notes pursuant to a registration statement
containing the selling securityholder information required by Item 507 of
Regulation S-K of the Securities Act, or pursuant to an exemption from the
registration requirement of the Securities Act.
Each Participating Broker-Dealer is required to acknowledge in the Letter
of Transmittal that it acquired the Old Notes as a result of market-making
activities or other trading activities and that it will deliver a prospectus in
connection with the resale of such New Notes. Based upon interpretations by the
staff of the Commission, the Issuers believe that New Notes issued pursuant to
the Exchange Offer to Participating Broker-Dealers may be offered for resale,
resold, and otherwise transferred by a Participating Broker-Dealer (other than
a Restricted Holder) upon compliance with the prospectus delivery requirements,
but without compliance with the registration requirements, of the Securities
Act. The Issuers have agreed that for a period of 120 days following
consummation of the Exchange Offer, they will make this Prospectus available to
Participating Broker-Dealers for use in connection with any such resale. During
such period of time, delivery of this Prospectus, as it may be amended or
supplemented, will satisfy the prospectus delivery requirements of a
Participating Broker-Dealer engaged in market making or other trading
activities.
Based upon interpretations by the staff of the Commission, the Issuers
believe that New Notes issued pursuant to the Exchange Offer may be offered for
resale, resold, and otherwise transferred by a Holder thereof (other than a
Restricted Holder or a Participating Broker-Dealer) without compliance with the
registration and prospectus delivery requirements of the Securities act.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Issuers as set forth in "The Exchange Offer--Purpose and Effect of the
Exchange Offer." In addition, each Participating Broker-Dealer will be required
to acknowledge that it will deliver a prospectus in connection with any resale
by it of such New Notes.
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by Participating Broker-Dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such Participating Broker-Dealer and/or the purchasers of any such New
Notes. Any Participating Broker-Dealer that resells New Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of New Notes and
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any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Issuers has agreed to pay all expenses incidental to the Exchange
Offer other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act, as set forth in
the Registration Rights Agreement.
LEGAL MATTERS
Certain legal matters in connection with the New Notes offered hereby will
be passed upon for the Issuers and Subsidiary Guarantors by Willkie Farr &
Gallagher, New York, New York.
EXPERTS
The (i) consolidated financial statements of Foamex as of December 31,
1995 and December 29, 1996 and for each of the three years in the period ended
December 29, 1996, (ii) balance sheets of Foamex Capital Corporation as of
December 31, 1995 and December 29, 1996, (iii) consolidated financial
statements of General Felt Industries, Inc. as of December 31, 1995 and
December 29, 1996 and for each of the three years in the period ended December
29, 1996 and (iv) financial statements of Foamex Fibers, Inc. as of December
31, 1995 and December 29, 1996 and for the period from April 13, 1995 to
December 31, 1995 and for the year ended December 29, 1996 and the combined
financial statements of GS Industries, Inc. and Pontotoc Fibers, Inc. for the
year ended December 31, 1994 and for the period from January 1, 1995 to April
12, 1995, included in the Registration Statement have been included in reliance
upon the reports of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
In connection with certain forward-looking statements contained in this
Prospectus, Foamex notes that there are various factors that could cause actual
results to differ materially from those set forth in any such forward-looking
statements, such as raw material price increases, general economic conditions,
the implementation and estimated annualized savings of the operations plan and
changes in environmental legislation and environmental conditions. The
forward-looking statements contained in this Prospectus were prepared by
management and are qualified by, and subject to, significant business,
economic, competitive, regulatory and other uncertainties and contingencies,
all of which are difficult or impossible to predict and many of which are
beyond the control of Foamex. Accordingly, there can be no assurance that the
forward-looking statements contained in this Prospectus will be realized or
that actual results will not be significantly higher or lower. The
forward-looking statements have not been audited by, examined by, compiled by
or subjected to agreed-upon procedures by independent accountants, and no
third-party has independently verified or reviewed such statements. Readers of
this Prospectus should consider these facts in evaluating the information
contained herein. In addition, the business and operations of Foamex are
subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Prospectus. The inclusion of
forward-looking statements contained in this Prospectus should not be regarded
as a representation by Foamex or any other person that the forward-looking
statements contained herein will be achieved. In light of the foregoing,
readers of this Prospectus are cautioned not to place undue reliance on the
forward-looking statements contained herein.
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FOAMEX L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Foamex L.P.
Report of Independent Accountants ...................................................... F-3
Consolidated Balance Sheets as of December 31, 1995 and December 29, 1996 ............... F-4
Consolidated Statements of Operations for the years ended 1994, 1995 and 1996 ............ F-6
Consolidated Statements of Cash Flows for the years ended 1994, 1995 and 1996 ............ F-7
Consolidated Statements of Partners' Equity (Deficit) for the years ended 1994,
1995 and 1996 ........................................................................... F-8
Notes to Consolidated Financial Statements ............................................. F-9
Condensed Consolidated Balance Sheets as of December 29, 1996 and June
29, 1997 (unaudited) .................................................................... F-28
Condensed Consolidated Statements of Operations--Twenty-Six Week Periods Ended June 30,
1996 and June 29, 1997 (unaudited) .................................................. F-29
Condensed Consolidated Statements of Cash Flows--Twenty-Six Week Periods Ended June 30,
1996 and June 29, 1997 (unaudited) ................................................... F-30
Notes to Condensed Consolidated Financial Statements (unaudited) ........................ F-31
Foamex Capital Corporation
Report of Independent Accountants ...................................................... F-39
Balance Sheets as of December 31, 1995 and December 29, 1996 ........................... F-40
Notes to Balance Sheets ............................................................... F-41
Balance Sheets as of December 29, 1996 and June 29, 1997 (unaudited) ..................... F-42
Notes to Balance Sheets (unaudited) ...................................................... F-43
General Felt Industries, Inc.
Report of Independent Accountants ...................................................... F-45
Consolidated Balance Sheets as of December 31, 1995 and December 29, 1996 ............... F-46
Consolidated Statements of Operations for the years ended 1994, 1995 and 1996 ............ F-48
Consolidated Statements of Cash Flows for the years ended 1994, 1995 and 1996 ............ F-49
Consolidated Statements of Stockholder's Equity for the years ended 1994, 1995 and 1996 .. F-50
Notes to Consolidated Financial Statements ............................................. F-51
Condensed Consolidated Balance Sheets as of December 29, 1996 and
June 29, 1997 (unaudited) ............................................................... F-61
Condensed Consolidated Statements of Operations-- Twenty-Six Week Periods Ended June 30,
1996 and June 29, 1997 (unaudited) ...................................................... F-62
Condensed Consolidated Statements of Cash Flows--Twenty-Six Week Periods Ended June 30,
1996 and June 29, 1997 (unaudited) ...................................................... F-63
Notes to Condensed Consolidated Financial Statements (unaudited) ........................ F-64
</TABLE>
F-1
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Foamex Fibers, Inc.
Report of Independent Accountants ...................................................... F-66
Balance Sheets as of December 31, 1995 and December 29, 1996 ........................... F-67
Statements of Operations for the year ended December 31, 1994, for the period from
January 1, 1995 to April 12, 1995 (Predecessor Company), for the period from
April 13, 1995 to December 31, 1995 and for the year ended December 29, 1996 ............ F-68
Statements of Cash Flows for the year ended December 31, 1994, for the period from
January 1, 1995 to April 12, 1995 (Predecessor Company), for the period from April 13,
1995 to December 31, 1995 and for the year ended December 29, 1996 ................... F-69
Statements of Stockholder's Equity for the year ended December 31, 1994, for the period
from January 1, 1995 to April 12, 1995 (Predecessor Company), for the period from
April 13, 1995 to December 31, 1995 and for the year ended December 29, 1996 ............ F-70
Notes to Financial Statements ......................................................... F-71
Condensed Balance Sheets as of December 29, 1996 and
June 29, 1997 (unaudited) ............................................................... F-75
Condensed Statements of Operations--Twenty-Six Week Periods Ended June 30, 1996 and June
29, 1997 (unaudited) .................................................................... F-76
Condensed Statements of Cash Flows--Twenty-Six Week Periods Ended June 30, 1996 and
June 29, 1997 (unaudited) ............................................................... F-77
Notes to Condensed Financial Statements (unaudited) .................................... F-78
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Foamex L.P.:
We have audited the accompanying consolidated balance sheets of Foamex L.P. and
subsidiaries ("Foamex L.P.") as of December 31, 1995 and December 29, 1996, and
the related consolidated statements of operations, cash flows and partners'
equity (deficit) for each of the three years in the period ended December 29,
1996. These financial statements are the responsibility of Foamex L.P.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Foamex L.P. and
subsidiaries as of December 31, 1995 and December 29, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 29, 1996 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1997
F-3
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- ------------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents .................................... $ 638 $ 20,968
Restricted cash ............................................. -- 12,143
Accounts receivable, net of allowance for doubtful accounts of
$9,138 and $6,328............................................. 113,583 125,847
Inventories ................................................ 89,952 102,610
Deferred income taxes ....................................... -- 6,720
Due from related parties .................................... 1,569 1,791
Other current assets ....................................... 19,784 18,841
--------- --------------
Total current assets ....................................... 225,526 288,920
--------- --------------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements ................................. 4,632 9,674
Buildings and leasehold improvements ........................ 78,169 78,082
Machinery, equipment and furnishings ........................ 176,019 185,348
Construction in progress .................................... 7,985 20,784
--------- --------------
Total ...................................................... 266,805 293,888
Less accumulated depreciation and amortization ............... (97,739) (111,461)
--------- ----------------
Property, plant and equipment, net ........................... 169,066 182,427
COST IN EXCESS OF ASSETS ACQUIRED, NET ........................ 91,165 83,991
DEBT ISSUANCE COSTS, NET ....................................... 18,703 14,902
NET ASSETS OF DISCONTINUED OPERATIONS ........................ 85,073 --
OTHER ASSETS ................................................... 16,359 15,917
--------- --------------
TOTAL ASSETS ................................................... $ 605,892 $ 586,157
========= ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(Continued)
(thousands)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Short-term borrowings .................................... $ 2,199 $ 3,692
Current portion of long-term debt--unrelated parties ...... 8,511 13,735
Accounts payable .......................................... 67,658 75,621
Accounts payable to related parties ........................ 11,731 8,803
Accrued employee compensation .............................. 8,116 7,302
Accrued interest .......................................... 9,591 8,871
Accrued restructuring charges .............................. 15,882 6,300
Other accrued liabilities ................................. 30,516 27,506
--------- ---------
Total current liabilities ................................. 154,204 151,830
LONG-TERM DEBT--UNRELATED PARTIES ........................... 428,416 386,800
LONG-TERM DEBT--RELATED PARTIES .............................. 5,540 5,817
DEFERRED INCOME TAXES ....................................... 1,394 4,663
ACCRUED RESTRUCTURING CHARGES ................................. 3,773 4,043
OTHER LIABILITIES ............................................. 25,169 20,172
--------- ---------
Total liabilities ....................................... 618,496 573,325
--------- ---------
COMMITMENTS AND CONTINGENCIES .............................. -- --
--------- ---------
PARTNERS' EQUITY (DEFICIT)
General partners .......................................... 404 632
Limited partners .......................................... 46,036 57,654
Note receivable from partner .............................. (44,444) (33,180)
Other ...................................................... (14,600) (12,274)
--------- ---------
Total partners' equity (deficit) ........................ (12,604) 12,832
--------- ---------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) ............ $ 605,892 $ 586,157
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
January 1, December 31, December 29,
1995 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
NET SALES .............................. $833,660 $ 862,834 $ 926,351
COST OF GOODS SOLD ..................... 691,265 762,085 773,119
--------- --------- ---------
GROSS PROFIT ........................... 142,395 100,749 153,232
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES .............................. 57,059 63,466 56,778
RESTRUCTURING AND OTHER CHARGES
(CREDITS) .............................. -- 39,249 (6,415)
--------- --------- ---------
INCOME (LOSS) FROM OPERATIONS ............ 85,336 (1,966) 102,869
INTEREST AND DEBT ISSUANCE EXPENSE ...... 41,532 44,550 43,211
OTHER INCOME (EXPENSE), NET ............ 732 (205) 1,705
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE PROVISION FOR
INCOME TAXES ........................... 44,536 (46,721) 61,363
PROVISION FOR INCOME TAXES ............... 6,525 1,405 7,702
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS .............................. 38,011 (48,126) 53,661
--------- --------- ---------
DISCONTINUED OPERATIONS:
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES ......... 1,230 (5,117) (230)
LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS, INCLUDING PROVISIONS
FOR OPERATING LOSSES DURING THE
PHASE-OUT PERIOD, NET OF INCOME
TAXES ................................. -- -- (41,820)
--------- --------- ---------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES ......... 1,230 (5,117) (42,050)
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS .................................... 39,241 (53,243) 11,611
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT .................. -- -- (1,912)
--------- --------- ---------
NET INCOME (LOSS) ........................ $ 39,241 $ (53,243) $ 9,699
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
January 1, December 31, December 29,
1995 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................................. $ 39,241 $ (53,243) $ 9,699
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization ................................. 22,108 22,905 21,132
Amortization of debt issuance costs and debt discount ......... 2,116 2,729 2,919
Net loss on disposal of discontinued operations ............... -- -- 40,551
Net (income) loss from discontinued operations ............... (1,230) 5,117 1,499
Asset writedowns and other charges (credits) .................. -- 16,677 (7,364)
Extraordinary loss on early extinguishment of debt ............ -- -- 1,217
Provision for uncollectible accounts ........................ 878 4,627 704
Deferred income taxes ....................................... 5,520 659 6,010
Other, net ................................................... 6 (706) (5,804)
Changes in operating assets and liabilities, net of acquisitions
and discontinued operations:
Accounts receivable .......................................... (24,677) (1,472) (13,130)
Inventories ................................................... (21,790) 14,146 (13,078)
Accounts payable and accounts payable related parties ......... 28,491 823 5,035
Accrued restructuring charges ................................. (3,469) 16,834 (7,000)
Other assets and liabilities ................................. 3,414 7,415 (5,724)
--------- --------- ---------
Net cash provided by continuing operations .................. 50,608 36,511 36,666
Net cash used for discontinued operations .................. (323) (9,175) (486)
--------- --------- ---------
Net cash provided by operating activities .................. 50,285 27,336 36,180
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures .......................................... (21,201) (19,348) (23,344)
Acquisitions, net of cash acquired ........................... -- (7,272) (841)
Proceeds from sale of discontinued operations .................. -- -- 42,650
Purchase of note from related party ........................... -- (2,000) --
Repayment of (purchase of) note from partner .................. (35,300) -- 18,623
Increase in restricted cash .................................... -- -- (12,143)
Capital expenditures for discontinued operations ............... (6,565) (4,429) (919)
Other investing activities .................................... (1,412) 2,495 (1,276)
--------- --------- ---------
Net cash provided by (used for) investing activities ......... (64,478) (30,554) 22,750
--------- --------- ---------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings ...... 537 (1,685) 1,493
Net proceeds from (repayments of) revolving loans ............ 3,000 (3,000) --
Proceeds from long-term debt--unrelated parties ............... 40,000 -- 1,500
Repayments of long-term debt--unrelated parties ............... (3,256) (9,099) (38,116)
Distributions and redemptions to partners ..................... (3,257) (2,379) (3,487)
Debt issuance costs .......................................... (4,816) -- --
Other financing activities .................................... (1,974) -- 10
--------- --------- ---------
Net cash provided by (used for) financing activities ......... 30,234 (16,163) (38,600)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ............ 16,041 (19,381) 20,330
Cash and cash equivalents at beginning of period ............... 3,978 20,019 638
--------- --------- ---------
Cash and cash equivalents at end of period ..................... $ 20,019 $ 638 $ 20,968
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
Note
General Limited Receivable
Partners Partners from Partner Other Total
----------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balances at January 2, 1994 ..................... $ 11,338 $ 45,199 $ -- $ (7,151) $ 49,386
Net income ....................................... 1,377 37,864 -- -- 39,241
Distributions .................................... (117) (4,487) -- -- (4,604)
Note receivable from partner ..................... -- -- (35,300) -- (35,300)
Accretion of note receivable from partner ...... 58 2,809 (2,867) -- --
Transfer of partnership interests ............... (11,208) 11,208 -- -- --
Contribution of Foamex Latin America, Inc. ...... -- 5,093 -- (453) 4,640
Additional pension liability ..................... -- -- -- 168 168
Foreign currency translation adjustment ......... -- -- -- (983) (983)
--------- --------- --------- --------- ---------
Balances at January 1, 1995 ..................... 1,448 97,686 (38,167) (8,419) 52,548
Net loss ....................................... (1,044) (52,199) -- -- (53,243)
Distributions .................................... (125) (5,603) -- -- (5,728)
Purchase of note receivable from
Foamex International ........................... -- -- -- (2,000) (2,000)
Increase in note receivable from Trace Holdings -- -- -- (1,373) (1,373)
Accretion of note receivable from partner ...... 125 6,152 (6,277) -- --
Additional pension liability ..................... -- -- -- (3,290) (3,290)
Foreign currency translation adjustment ......... -- -- -- 482 482
--------- --------- --------- --------- ---------
Balances at December 31, 1995 .................. 404 46,036 (44,444) (14,600) (12,604)
Net income ....................................... 184 9,515 -- -- 9,699
Distributions .................................... (104) (5,108) -- -- (5,212)
Accretion of note receivable from partner ...... 144 7,031 (7,175) -- --
Repayment of note receivable from partner ...... -- -- 18,439 -- 18,439
Repayment premium on note receivable from partner 4 180 -- -- 184
Additional pension liability ..................... -- -- -- 2,372 2,372
Foreign currency translation adjustment ......... -- -- -- (46) (46)
--------- --------- --------- --------- ---------
Balances at December 29, 1996 .................. $ 632 $ 57,654 $ (33,180) $ (12,274) $ 12,832
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex L.P., a Delaware limited partnership, is an indirect,
majority-owned subsidiary of Foamex International Inc. ("Foamex
International"). Foamex L.P. is a significant manufacturer and marketer of
flexible polyurethane foam and foam products in North America. Foamex L.P.'s
products include (i) foam for carpet cushion and other carpet products, (ii)
cushioning foams for furniture, bedding, packaging and health care, (iii) foams
for automotive trim and accessories and (iv) technical foams for filtration,
consumer products and packaging.
During 1996, Foamex L.P. sold Perfect Fit Industries, Inc. ("Perfect Fit")
which comprised the home comfort products segment of Foamex L.P. The
consolidated financial statements of Foamex L.P. have been restated for
discontinued operations and include a net loss of $41.8 million (net of $1.2
million income tax benefit) on the disposal of this business segment which
includes provisions for operating losses during the phase-out period. (See Note
3 for further discussion.) In addition, during April 1996 Foamex International
contributed the foam products operations of Foamex Latin America, Inc. ("Foamex
Mexico") to Foamex L.P. The contribution was accounted for in a manner similar
to a pooling of interests since the entities were under common control.
Accordingly, all prior periods presented have been restated to reflect the
results of operations and financial position of Foamex Mexico.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of Foamex L.P.
and all subsidiaries that Foamex L.P. directly or indirectly controls, either
through majority ownership or otherwise, other than the home comfort products
segment which is accounted for as discontinued operations. Intercompany
accounts and transactions for continuing operations have been eliminated in
consolidation.
The consolidated financial statements have been restated for discontinued
operations. The accompanying notes present amounts related only to continuing
operations.
Fiscal Year
Foamex L.P.'s fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal years 1994, 1995 and 1996 were composed of fifty-two
weeks and ended on January 1, 1995, December 31, 1995 and December 29, 1996,
respectively.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. (See Notes 4, 9, 10, 15, 16 and 17 and Cost in Excess of Net Assets
Acquired below.)
Revenue Recognition
Revenue from sales is recognized when products are shipped.
Discounts and Billing Adjustments
A reduction in sales revenue is recognized for sales discounts when
product is invoiced or for other billing adjustments when authorized.
Cash and Cash Equivalents
Foamex L.P. considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents. On
December 29, 1996, cash and cash equivalents included $18.4 million of
repurchase agreements collateralized by U.S. Government securities.
F-9
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Restricted Cash
As of December 29, 1996, Foamex L.P. had restricted cash of approximately
$12.1 million. This cash was derived from the net sales proceeds relating to
the sale of Perfect Fit and is restricted by Foamex L.P.'s debt agreements. As
of February 26, 1997, Foamex L.P. has used approximately $8.4 million of the
restricted cash to repurchase approximately $8.0 million of outstanding
indebtedness.
Inventories
Inventories are stated at the lower of cost or market. The cost of the
inventories is determined on a first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings is generally twenty to
thirty-five years and the range for machinery, equipment and furnishings is
five to twelve years. Leasehold improvements are amortized over the shorter of
the terms of the respective leases or the estimated useful lives of the
leasehold improvements. Depreciation expense for the years ended 1994, 1995 and
1996 was $16.8 million, $18.7 million and $17.9 million, respectively. For
income tax purposes, Foamex L.P. uses accelerated depreciation methods.
Cost of maintenance and repairs is charged to expense as incurred.
Renewals and improvements are capitalized. Upon retirement or other disposition
of items of plant and equipment, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
Debt Issuance Costs
Debt issuance costs consist of amounts incurred in obtaining long-term
financing. These costs are being amortized over the term of the related debt
using the interest method. Accumulated amortization as of December 31, 1995 and
December 29, 1996 was approximately $5.7 million and $7.5 million,
respectively.
Cost in Excess of Net Assets Acquired
The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for as purchases is amortized using
the straight-line method over a forty year period. At each balance sheet date
Foamex L.P. evaluates the recoverability of cost in excess of net assets
acquired using certain financial indicators such as historical and future
ability to generate income from operations based on a going concern basis.
Accumulated amortization as of December 31, 1995 and December 29, 1996 was
approximately $9.1 million and $11.6 million, respectively.
Environmental Matters
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the costs
can be reasonably estimated.
Postretirement and Postemployment Benefits
Foamex L.P. accrues postretirement benefits throughout the employees'
active service periods until they attain full eligibility for those benefits.
Also, Foamex L.P. accrues postemployment benefits when it becomes probable that
such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid.
Foreign Currency Accounting
The financial statements of foreign subsidiaries, except in countries
treated as highly inflationary, have been translated into U.S. dollars by using
the year end exchange rates for assets and liabilities and average exchange
F-10
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
rates for the statements of operations. Currency translation adjustments are
included in other partners' equity (deficit) until the entity is substantially
sold or liquidated. For operations in countries treated as highly inflationary,
certain financial statement amounts are translated at historical exchange
rates, with all other assets and liabilities translated at year end exchange
rates. These translation adjustments are reflected in the results of operations
and are insignificant for all periods presented. Also, foreign currency
transaction gains and losses are insignificant for all periods presented. The
effect of foreign currency exchange rates on cash flows is not material.
Interest Rate Swap Agreement
The differential to be paid or received under an interest rate swap
agreement is recognized as an adjustment to interest and debt issuance expense
in the current period as interest rates change.
Income Taxes
Income taxes are accounted for under the liability method, in which
deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of assets and liabilities using the
income tax rates, under existing legislation, expected to be in effect at the
date such temporary differences are expected to reverse.
Foamex L.P., as a limited partnership, is not subject to federal income
taxes; therefore no current or deferred provision has been provided for such
taxes. However, Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries which are subject
to federal and state income taxes. The partners will provide for their
respective shares of income or loss in their federal or applicable state income
tax returns. Foamex L.P. has a tax sharing agreement that provides for the
payment of distributions to the partners for amounts that would be required to
be paid if Foamex L.P. was a corporation filing separate tax returns. The
ability of Foamex L.P. to make such distributions is limited by the terms of
its credit agreements and indentures. (See Note 8).
Reclassifications
Certain amounts in the 1994 and 1995 consolidated financial statements
have been reclassified to conform with the current year's presentation.
3. DISCONTINUED OPERATIONS
During 1996, Foamex L.P. finalized the sale of the outstanding common
stock of Perfect Fit, a wholly-owned subsidiary, for an adjusted sale price of
approximately $44.2 million. The sale included all of the net assets of Foamex
L.P.'s home comfort products segment. Actual and estimated transaction expenses
related to the sale totaled approximately $1.5 million. Foamex L.P. has
recorded a net loss on the sale of Perfect Fit of approximately $41.8 million,
which includes the loss on disposal and a net loss of $1.3 million (net of $1.2
million income tax benefit) relating to operating losses during the phase-out
period. Interest and debt issuance expense was allocated to discontinued
operations based on the estimated debt to be retired from the net proceeds of
the sale. A valuation allowance has been provided for the capital loss relating
to the sale of Perfect Fit since future capital gain taxable income is not
likely to be sufficient to recognize the deferred tax asset relating to the
capital loss carryforward.
F-11
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. DISCONTINUED OPERATIONS (continued)
Foamex L.P.'s financial statements have been restated to reflect the
discontinuation of the home comfort products segment. A summary of the
operating results for the discontinued operations is as follows:
<TABLE>
<CAPTION>
1994 1995 1996(1)
--------- ------------ -----------
(thousands)
<S> <C> <C> <C>
Net Sales ....................................... $95,381 $ 98,464 $ 50,097
Gross profit .................................... 18,200 14,946 8,065
Income (loss) from operations .................. 4,170 (3,058) 1,123
Interest and debt issuance expense ............ 3,671 4,699 2,384
Other expense ................................. -- -- 348
Income (loss) from discontinued operations before
income taxes ................................. 499 (7,757) (1,609)
Provision (benefit) for income taxes ............ (731) (2,640) (1,379)
Income (loss) from discontinued operations, net of
income taxes ................................. 1,230 (5,117) (230)
</TABLE>
(1) Foamex L.P.'s discontinued operations includes the operations of Perfect
Fit through June 1996.
Net assets of discontinued operations (excluding intercompany net assets)
at December 31, 1995 were as follows:
1995
------------
(thousands)
Current assets .............................. $31,925
Property, plant and equipment, net ......... 21,672
Cost in excess of assets acquired, net ...... 40,333
Other assets ................................. 2,219
--------
Total assets .............................. 96,149
--------
Current liabilities ........................ 11,076
--------
Total liabilities ........................... 11,076
--------
Net assets ................................. $85,073
========
4. RESTRUCTURING AND OTHER CHARGES (CREDITS)
In 1995, Foamex L.P. approved a restructuring plan (the "1995
restructuring plan") to consolidate thirteen foam production, fabrication or
branch locations, to concentrate resources as a result of industry conditions
and to better position itself to achieve its strategic growth objectives.
Foamex L.P. recorded restructuring and other charges of $39.2 million which was
comprised of $35.6 million associated with the consolidation of the foam
production, fabrication or branch locations, $2.2 million associated with the
completion of a 1993 restructuring plan and $1.4 million associated with merger
and acquisition activities of Foamex L.P. The components of the $35.6 million
restructuring charge include: $16.7 million for fixed asset writedowns (net of
estimated sale proceeds), $15.1 million for plant closure and operating lease
obligations and $3.8 million for personnel reductions. The $3.8 million cost
for personnel reductions primarily represents severance and employee benefit
costs associated with the elimination of manufacturing and administrative
personnel.
In 1996, Foamex L.P. determined to continue to operate one of the
facilities originally identified for closure in the 1995 restructuring plan
because of improved economics and the lack of synergy to be achieved from
relocating the manufacturing process. In addition, Foamex L.P. has approved a
plan to close two facilities that were not originally identified in the 1995
restructuring plan. As a result of these changes to the 1995 restructuring plan
and the favorable termination of certain lease agreements and other matters,
Foamex L.P. recorded a $6.4 million net restructuring credit which included a
restructuring credit of $11.3 million associated with Foamex L.P.'s decision
not to close the facility
F-12
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)
identified as part of the 1995 restructuring plan and $1.7 million of
restructuring credits relating primarily to the favorable termination of
certain lease agreements and other matters relating to the 1995 restructuring
plan, offset by $6.6 million of restructuring charges relating to the closure
of the two facilities during 1997 (the "1996 restructuring plan").
Generally, the 1995 restructuring plan has been implemented as originally
contemplated. The following table sets forth the components of Foamex L.P.'s
restructuring and other charges:
<TABLE>
<CAPTION>
Asset Plant Closure Personnel
Total Writedowns and Leases Reductions Other
---------- ------------ --------------- ------------ ----------
(millions)
<S> <C> <C> <C> <C> <C>
1995 restructuring charge ........................ $ 39.2 $ 16.7 $ 15.1 $ 3.8 $ 3.6
Asset writeoff/writedowns ........................ (23.3) (20.9) -- -- (2.4)
Cash spending .................................... (0.4) -- (0.3) (0.1) --
------- ------- ------- ------- -------
Balances at December 31, 1995 .................. 15.5 (4.2) 14.8 3.7 1.2
Cash spending .................................... (9.7) -- (6.6) (2.0) (1.1)
Cash proceeds .................................... 1.0 1.0 -- -- --
1996 restructuring charge ........................ 6.6 2.4 4.1 0.1 --
Restructuring credits ........................... (13.0) (9.7) (2.8) (0.4) (0.1)
Asset adjustment for restructuring credits ...... 8.1 8.7 (0.6) -- --
------- ------- ------- ------- -------
Balances at December 29, 1996 .................. $ 8.5 $ (1.8) $ 8.9 $ 1.4 $ --
======= ======= ======= ======= =======
</TABLE>
As indicated in the table above, the accrued restructuring balance at
December 29, 1996 will be used for payments relating to plant closure and
leases including rundown costs at the facilities. The $1.8 million of asset
writedowns relates to estimated proceeds and is included in noncurrent assets.
Foamex L.P. expects to incur approximately $6.3 million of charges during 1997
with the remaining $4.0 million to be incurred through 2001. As of December 29,
1996, Foamex L.P. has terminated approximately 270 employees and notified
approximately 40 employees in the manufacturing and administrative areas of
their impending termination in connection with the 1995 and 1996 restructuring
plans.
5. ACQUISITIONS
In April 1995, Foamex L.P. acquired certain assets and assumed certain
liabilities of manufacturers of synthetic fabrics for the carpet and furniture
industries for aggregate consideration of approximately $8.0 million, including
related fees and expenses of approximately $0.3 million, with an initial cash
payment of $7.2 million. The excess of the purchase price over the estimated
fair value of the net assets acquired was approximately $3.9 million. The
acquisition was accounted for as a purchase and the operations of the acquired
company are included in the consolidated statements of operations and cash
flows from the date of its acquisition. The excess of the purchase price over
the estimated fair value of the net assets acquired is being amortized using
the straight-line method over forty years.
F-13
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. INVENTORIES
Inventories consists of:
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
Raw materials and supplies ...... $ 49,963 $ 61,559
Work in process .................. 14,451 13,453
Finished goods .................. 25,538 27,598
--------- ---------
Total ........................... $ 89,952 $102,610
========= =========
7. SHORT-TERM BORROWINGS
Short-term borrowings include borrowings outstanding under a line of
credit facility for Foamex Canada Inc. ("Foamex Canada") bearing interest at
the bank's prime rate (4.75% at December 29, 1996) plus 1/2%. The weighted
average interest rates on Foamex Canada's short-term borrowings outstanding for
1994, 1995 and 1996 were 7.3%, 8.0% and 5.9%, respectively. Borrowings under
Foamex Canada's credit facility are due on demand and are collateralized by
accounts receivable, property and inventories of Foamex Canada having an
approximate net carrying value of $17.1 million as of December 29, 1996. The
unused amount under this line of credit totaled $0.7 million as of December 29,
1996.
Long-term debt consists of:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
<S> <C> <C>
Unrelated parties:
9-1/2% Senior secured notes due 2000 ............................. $116,667 $106,793
11-1/4% Senior notes due 2002 ................................... 150,000 141,400
11-7/8% Senior subordinated debentures due 2004 (net of unamortized
debt discount of $827 and $769) ................................. 125,173 125,056
11-7/8% Senior subordinated debentures due 2004, Series B ........ 7,000 7,000
Industrial revenue bonds .......................................... 7,000 7,000
Foamex L.P. term loan (8.54% interest rate as of December 29, 1996) 30,000 11,000
Other ............................................................ 1,087 2,286
--------- ---------
Total ............................................................ 436,927 400,535
Less current portion ............................................. 8,511 13,735
--------- ---------
Long-term debt--unrelated parties ................................. $428,416 $386,800
========= =========
Related parties:
Subordinated note payable (net of unamortized debt discount of
$1,475 and $1,198 ................................................. $ 5,540 $ 5,817
========= =========
</TABLE>
9-1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")
The Senior Secured Notes were issued on June 3, 1993 and bear interest at
the rate of 9-1/2% payable semiannually on each June 1 and December 1. The
Senior Secured Notes mature on June 1, 2000. The Senior Secured Notes are
collateralized by a first-priority lien on substantially all of the assets of
Foamex L.P. except for receivables, real estate and fixtures. The Senior
Secured Notes may be redeemed at the option of Foamex L.P., in whole or in
part, at any time on or after June 1, 1998, initially at 101.583% of their
principal amount, plus accrued interest, and declining to 100% on or after June
1, 1999. The Senior Secured Notes have been guaranteed, on a senior secured
basis by General Felt Industries, Inc. ("General Felt") and on a senior
unsecured basis by Foamex International. During 1996, Foamex L.P. repurchased
$9.9 million of Senior Secured Notes with the net proceeds from the sale of
Perfect Fit (see Note 11).
F-14
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. LONG-TERM DEBT (continued)
11-1/4% Senior Notes due 2002 ("Senior Notes")
The Senior Notes bear interest at the rate of 11-1/4% payable semiannually
on each April 1 and October 1. The Senior Notes mature on October 1, 2002. The
Senior Notes may be redeemed at the option of Foamex L.P., in whole or in part,
at any time on or after October 1, 1997, initially at 104.219% of their
principal amount, plus accrued interest, and declining to 100% on or after
October 1, 2000. In October 1994, Foamex L.P. provided certain real property as
collateral for the Senior Notes, with a net book value of $37.8 million at
December 29, 1996. The Senior Notes have been guaranteed, on a senior basis, by
General Felt and Foamex International. During 1996, Foamex L.P. repurchased
$8.6 million of Senior Notes with the net proceeds from the sale of Perfect Fit
(see Note 11).
11-7/8% Senior Subordinated Debentures ("Subordinated Debentures")
The Subordinated Debentures bear interest at the rate of 11-7/8% payable
semiannually on each April 1 and October 1. The Subordinated Debentures mature
on October 1, 2004. The Subordinated Debentures may be redeemed at the option
of Foamex L.P., in whole or in part, at any time on or after October 1, 1997,
initially at 105.938% of their principal amount, plus accrued interest, and
declining to 100% on or after October 1, 2002. The Subordinated Debentures are
subordinated in right of payment to all senior indebtedness, including the
Senior Secured Notes and the Senior Notes. The Subordinated Debentures have
been guaranteed, on a senior subordinated basis, by General Felt and Foamex
International. During 1996, Foamex L.P. repurchased $0.1 million of
Subordinated Debentures with the net proceeds from the sale of Perfect Fit (see
Note 11).
11-7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")
The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in
connection with the acquisition of General Felt on March 23, 1993. The Series B
Debentures have terms substantially similar to the Subordinated Debentures,
except that holders of the Series B Debentures are entitled to receive proceeds
from an asset sale only if any proceeds remain after an offer to repurchase has
been made to the holders of the Subordinated Debentures. The Series B
Debentures have been guaranteed on a senior subordinated basis by General Felt.
Industrial Revenue Bonds ("IRBs")
Two bond issues in the principal amount of $1.0 million and $6.0 million,
maturing in 2005 and 2013, respectively, are collateralized by certain
properties which have an approximate net carrying value of $11.3 million at
December 29, 1996 and letters of credit approximating $7.3 million. The IRBs
bear interest at a variable rate with options available to Foamex L.P. to
convert to a fixed rate. The interest rates on the IRBs were 4.85% and 4.0% at
December 29, 1996 for the $6.0 million and $1.0 million bond issues,
respectively. The interest rate on the $6.0 million bond issue varies weekly
based on an interest rate that is indicative of current bidside yields on high
quality short-term, tax-exempt obligations, or if such interest rate is not
available, 70.0% of the interest rate for thirteen week United States Treasury
Bills. The maximum interest rate for either of the IRBs is 15.0% per annum. At
the time of a conversion to a fixed interest rate and upon appropriate notice,
the IRBs are redeemable at the option of the bondholders.
Term and Revolving Loans
Foamex L.P. has a credit agreement (the "Foamex L.P. Credit Facility")
with a group of banks that provide for loans of up to $85.0 million of which up
to $40.0 million was available as a term loan payable in twenty equal quarterly
installments commencing October 1994 and up to $45.0 million is available under
a revolving line of credit which expires in June 1999. In 1994, Foamex L.P. and
General Felt entered into a $40.0 million term loan under the Foamex L.P.
Credit Facility; no further term loan borrowings are available thereunder.
During 1996, Foamex L.P. and General Felt used $12.0 million of net proceeds
from the Perfect Fit sale to repay term loan borrowings. Borrowings under the
Foamex L.P. Credit Facility are collateralized by the accounts receivable of
F-15
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. LONG-TERM DEBT (continued)
Foamex L.P. and General Felt. Pursuant to the terms of the Foamex L.P. Credit
Facility, borrowed funds will bear interest at a floating rate equal to 1.0%
per annum plus the highest of (i) the base rate of The Bank of Nova Scotia, as
in effect from time to time, (ii) a rate that is, generally, 0.5% per annum
plus a fluctuating rate generally equal to the rate on three month certificates
of deposit, subject to certain adjustments, plus a fluctuating rate generally
equal to the annual assessment rate paid by The Bank of Nova Scotia to the
Federal Deposit Insurance Corporation or (iii) 0.5% per annum plus the federal
funds rate in effect from time to time. At the option of Foamex L.P., portions
of the outstanding loan under the Foamex L.P. Credit Facility will be
convertible into Eurodollar rate loans bearing interest at a rate generally
equal to 3.0% per annum above the average LIBOR rate of Citibank, N.A. and The
Bank of Nova Scotia. As of December 29, 1996, there was approximately $11.7
million in letters of credit outstanding under the Foamex L.P. Credit Facility.
As of December 29, 1996, there was unused availability of approximately $33.3
million under the Foamex L.P. Credit Facility.
Subordinated Note Payable
This note payable was issued to John Rallis ("Rallis"), the Chief
Operating Officer of Foamex International, on May 6, 1993 by Foamex L.P. in
connection with the acquisition of Great Western Foam Products Corporation and
certain related entities and assets (collectively, "Great Western"). The note
bears interest at a maximum rate of 6% per annum and the principal amount is
payable in three equal annual installments beginning May 6, 1999.
Other
As of December 29, 1996, other debt is comprised primarily of capital
lease obligations and borrowings by Foamex Mexico.
Interest Rate Swap Agreements
Foamex L.P. enters into interest rate swaps to lower funding costs and/or
to manage interest costs and exposure to changing interest rates. Foamex L.P.
does not hold or issue financial instruments for trading purposes. Foamex L.P.
has an interest rate swap agreement, as amended, with a notional amount of
$150.0 million through December 2001. Under the swap agreement, Foamex L.P. has
made variable payments based on LIBOR through December 1996 and is obligated to
make fixed payments at 5.30% per annum for the twelve months ended in December
1997 and variable payments based on LIBOR for the remainder of the agreement,
in exchange for fixed payments by the swap partner at 5.81% per annum through
December 1996, and 6.50% per annum for the remainder of the agreement, payable
semiannually in arrears. The swap partner has the ability to terminate the swap
agreement after the December 1997 payment if the LIBOR rate Foamex L.P. is to
pay for any period thereafter is equal to or less than 4.50% per annum.
Interest expense will be subject to fluctuations in LIBOR during the term of
the swap agreement except during 1997. Foamex L.P. is exposed to credit loss in
the event of nonperformance by the swap partner; however, the occurrence of
this event is not anticipated.
Also, Foamex L.P. has an interest rate swap agreement, as amended, for a
notional amount of $150.0 million through December 2001. Under this swap
agreement, Foamex L.P. has made variable payments based on LIBOR with a cap of
5.50% per annum and a floor of 4.75% per annum for the six months ended in June
1995, variable payments based on LIBOR with a floor of 4.75% per annum for the
six months ended in December 1995, fixed payments at a rate of 5.81% per annum
for the twelve months ended in December 1996 and is obligated to make fixed
payments at a rate of 5.30% per annum for the twelve months in December 1997
and variable payments based on LIBOR for the remainder of the agreement, in
exchange for variable payments by the swap partner at the rate of LIBOR plus
0.80% per annum for the six months ended in June 1995, LIBOR plus 0.72% per
annum for the six months ended in December 1995, LIBOR plus 2.45% per annum for
the six months ended in June 1996, LIBOR plus 2.39% per annum for the six
months ended in December 1996 and fixed payments at 6.50% per annum for the
remainder of the term of the agreement, payable semiannually in arrears. The
swap partner has the ability to terminate the swap agreement after the December
1997 payment if the LIBOR rate Foamex L.P. is to pay for any
F-16
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. LONG-TERM DEBT (continued)
period thereafter is equal to or less than 4.50% per annum. Foamex L.P. is
exposed to credit loss in the event of nonperformance by the swap partner;
however, the occurrence of this event is not anticipated. Interest expense will
be subject to fluctuations in LIBOR during the term of the swap agreement
except during 1997. The effect of the two interest rate swaps described above
was a favorable adjustment to interest expense of $3.0 million, $1.4 million
and $3.7 million for 1994, 1995 and 1996, respectively.
Debt Restrictions and Covenants
The indentures, credit agreement and other indebtedness agreements contain
various covenants, including restrictions on payments of distributions by
Foamex L.P. to its partners, the incurrence of additional indebtedness, the
sale of assets, mergers and consolidations and transactions with affiliates. In
addition, certain agreements contain a provision that, in the event of a
defined change of control, the indebtedness must be repaid, in certain cases at
the option of the holder. Also, Foamex L.P. is required under certain of these
agreements to maintain specified financial ratios of which the most restrictive
is the maintenance of net worth and interest coverage ratios, as defined. Under
the most restrictive of the distribution restrictions, approximately $0.7
million was available to be paid by Foamex L.P. to its partners at December 29,
1996.
As of December 29, 1996, Foamex L.P. was in compliance with the covenants
of the indentures, credit agreements and other indebtedness agreements and
expects to be in compliance with these covenants for the foreseeable future.
Future Obligations on Long-Term Debt
Scheduled maturities of long-term debt are shown below:
Year Ended Long-Term Debt
---------- ---------------
(thousands)
1997 ........................... $ 13,490
1998 ........................... 4,000
1999 ........................... 5,338
2000 ........................... 106,631
2001 ........................... 2,339
Thereafter ..................... 275,735
---------
Total ........................ 407,533
Less unamortized discount ...... 1,967
---------
Total ........................... $405,566
=========
In addition, Foamex L.P. has approximately $0.8 million of total capital
lease obligations that are payable in 1997 through 2000 in annual amounts of
approximately $0.2 million.
9. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans
Foamex L.P. maintains noncontributory defined benefit pension plans for
salaried and certain hourly employees. The salaried plan provides benefits that
are based principally on years of credited service and level of compensation.
The hourly plans provide benefits that are based principally on stated amounts
for each year of credited service.
F-17
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. EMPLOYEE BENEFIT PLANS (continued)
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ------------ -----------
(thousands)
<S> <C> <C> <C>
Service cost ........................ $ 2,452 $ 2,087 $ 2,471
Interest cost ..................... 3,541 3,742 3,997
Actual return on plan assets ...... 624 (5,682) (8,841)
Net amortization and deferral ...... (4,649) 1,807 4,643
-------- -------- --------
Total .............................. $ 1,968 $ 1,954 $ 2,270
======== ======== ========
</TABLE>
Foamex L.P.'s funding policy is to contribute annually an amount that both
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and does not exceed the full funding limitations of the
Internal Revenue Code of 1986, as amended (the "Code"). Plan investments
consist primarily of corporate equity and debt securities, mutual life
insurance funds and cash equivalents. During 1996, the discount rate was
adjusted to 7.50%. The following table sets forth the funded status of Foamex
L.P.'s underfunded plans and the amounts recognized in the accompanying
consolidated balance sheets as of December 31, 1995 and December 29, 1996:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested benefits ............................................. $ 52,762 $ 55,336
Nonvested benefits .......................................... 1,916 2,137
--------- ---------
Accumulated benefit obligations .............................. $ 54,678 $ 57,473
========= =========
Total projected benefit obligations ........................ $ 55,810 $ 58,775
Fair value of plan assets .................................... 44,441 53,734
--------- ---------
Projected benefit obligations in excess of plan assets ...... (11,369) (5,041)
Unrecognized net loss from past experience difference from that
assumed and effect of changes in assumptions ............... 6,394 1,099
Additional minimum liability ................................. (5,265) (2,694)
--------- ---------
Accrued pension cost ....................................... $ (10,240) $ (6,636)
========= =========
</TABLE>
Significant assumptions used in determining the plans' funded status are
as follows:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
Expected long-term rates of return on plan assets ............... 9.00% 9.50%
Discount rates on projected benefit obligations .................. 7.25% 7.50%
Rates of increase in compensation levels (where applicable) ...... 4.00% 4.00%
</TABLE>
Defined Contribution Plan
Foamex L.P. maintains a defined contribution plan which is qualified under
Section 401(k) of the Code and is available for eligible employees who elect to
participate in the plan. Employee contributions are voluntary and subject to
certain limitations as imposed by the Code. During 1995 and 1996, Foamex L.P.
provided contributions amounting to a 25% match of employees' contributions up
to 4% of eligible compensation. Foamex L.P. also provides an additional 25%
match of employees' contributions up to 4% of eligible compensation made to a
fund which invests in Foamex International common stock. In addition, Foamex
L.P. may make discretionary contributions amounting to a 25% match of
employees' contributions up to 4% of eligible compensation. Prior to 1995,
employer contributions were discretionary and provided a 50% match of
employees' contributions up to 3%
F-18
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. EMPLOYEE BENEFIT PLANS (continued)
of eligible compensation. The expense for these contributions for 1994, 1995
and 1996 was approximately $0.4 million, $0.7 million and $0.8 million,
respectively.
Postretirement Benefits
In addition to providing pension benefits, Foamex L.P. provides
postretirement health care and life insurance for eligible employees. During
1995, changes were made to postretirement benefits offered to certain employees
which resulted in a curtailment loss of $0.6 million. During 1996, certain
employees accepted an early retirement program resulting in a special
termination loss of $0.6 million. These plans are unfunded and Foamex L.P.
retains the right, subject to existing agreements, to modify or eliminate these
benefits.
The components of 1994, 1995 and 1996 expense for postretirement benefits
are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------------ --------
(thousands)
<S> <C> <C> <C>
Service costs for benefits earned ............ $172 $ 24 $ 12
Interest cost on liability ..................... 192 83 67
Net amortization and deferral .................. 134 (13) (53)
Special termination/curtailment loss ......... -- 619 576
----- ----- -----
Net periodic postretirement benefit cost ...... $498 $ 713 $ 602
===== ===== =====
</TABLE>
The accumulated postretirement benefit obligation at December 31, 1995 and
December 29, 1996 resulted in an unfunded obligation of $1.6 million and $2.1
million, respectively.
A 10% and 9% annual rate of increase in the per capita costs of covered
health care benefits was assumed for each of 1995 and 1996, respectively. This
rate was assumed to gradually decrease to 5% by the year 2000. Increasing the
weighted average assumed health care cost trend rates by one percentage point
would have an insignificant impact on the accumulated postretirement benefit
obligation and service and interest cost. The discount rate used was 7.25% and
7.50% as of December 31, 1995 and December 29, 1996, respectively.
Postemployment Benefits
Foamex L.P. provides certain postemployment benefits to former or inactive
employees and their dependents during the time period following employment but
before retirement. At December 31, 1995 and December 29, 1996, Foamex L.P.'s
liability for postemployment benefits was insignificant for each period.
Other
In December 1994, Foamex L.P. changed its method of compensating certain
employees for vacation which increased income from operations by $4.3 million
for 1994.
10. INCOME TAXES
Income (loss) from continuing operations before provision for income taxes
consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ------------ --------
(thousands)
<S> <C> <C> <C>
United States .............................. $42,610 $ (45,738) $58,277
Foreign .................................... 1,926 (983) 3,086
-------- --------- --------
Income (loss) from continuing operations before
provision (benefit) for income taxes ...... $44,536 $ (46,721) $61,363
======== ========= ========
</TABLE>
F-19
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. INCOME TAXES (continued)
The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------------ -----------
(thousands)
<S> <C> <C> <C>
Continuing operations ........................... $6,525 $ 1,405 $ 7,702
Discontinued operations ........................ (731) (2,640) (2,606)
------ -------- --------
Total consolidated provision (benefit) for income
taxes ....................................... $5,794 $ (1,235) $ 5,096
====== ======== ========
</TABLE>
The total consolidated provision (benefit) for income taxes is summarized
as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------------ -------
(thousands)
<S> <C> <C> <C>
Current:
Federal ....................................... $ -- $ -- $ 220
State .......................................... 172 266 686
Foreign ....................................... 833 480 786
------ -------- -------
Total current ................................. 1,005 746 1,692
------ -------- -------
Deferred:
Federal ....................................... 3,598 (1,424) 1,665
State .......................................... 1,212 (268) 1,248
Foreign ....................................... (21) (289) 491
------ -------- -------
Total deferred ................................. 4,789 (1,981) 3,404
------ -------- -------
Total consolidated provision (benefit) for income
taxes ....................................... $5,794 $ (1,235) $5,096
====== ======== =======
</TABLE>
The tax effects of the temporary differences that give rise to significant
deferred tax assets and liabilities are:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
<S> <C> <C>
Deferred tax assets:
Inventory basis differences ........................... $ 861 $ 415
Employee benefit accruals .............................. 976 714
Allowances and contingent liabilities .................. 2,427 2,548
Restructuring and plant closing accruals ............... 7,644 3,632
Other ................................................... 77 221
Net operating loss carryforwards ........................ 8,975 5,154
Capital loss carryforwards .............................. -- 14,193
Valuation allowance for deferred tax assets ............ (13,473) (15,988)
--------- ---------
Deferred tax assets .................................... 7,487 10,889
--------- ---------
Deferred tax liabilities:
Basis difference in property, plant and equipment ...... 8,507 7,644
Other ................................................... 374 1,188
--------- ---------
Deferred tax liabilities .............................. 8,881 8,832
--------- ---------
Net deferred tax assets (liabilities) .................. $ (1,394) $ 2,057
========= =========
</TABLE>
F-20
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. INCOME TAXES (continued)
Foamex L.P. has determined that taxable capital gains in the foreseeable
future for a subsidiary that files a separate federal income tax return will
likely not be sufficient to recognize the deferred tax asset associated with
the capital loss carryforward of that subsidiary. Accordingly, a valuation
allowance has been provided for the deferred tax asset associated with the
capital loss carryforward and certain other deferred tax assets. During 1996,
the valuation allowance for deferred tax assets increased by $2.5 million which
included a $14.2 million increase for the capital loss carryforward, offset by
$6.9 million decrease due to reversal of General Felt preacquisition temporary
differences and $4.8 million for reversal of General Felt postacquisition
temporary differences which is reflected in the consolidated statement of
operations. The $6.9 million reversal of preacquisition temporary differences
was used to reduce cost in excess of assets acquired. As of December 29, 1996,
approximately $1.8 million of deferred tax assets are related to preacquisition
activities and if utilized will further reduce cost in excess of assets
acquired. At December 29, 1996, General Felt has $14.7 million of regular tax
net operating loss carryforwards for federal income tax purposes expiring from
2003 to 2010 of which $7.0 million was acquired in 1993 and is subject to
limitations. In addition, General Felt has $40.6 million of capital loss
carryforwards that expire in 2001.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on continuing operations is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
(thousands)
<S> <C> <C> <C>
Statutory income taxes .............................. $ 15,588 $ (16,352) $ 21,477
State income taxes, net of federal .................. 900 266 1,288
Permanent difference on partnership income ......... (11,009) 12,233 (11,714)
Limitation on the utilization of tax benefits ...... -- 4,929 --
Valuation allowance ................................. (452) -- (4,823)
Cost in excess of assets acquired .................. 525 554 551
Other ............................................. 973 (225) 923
--------- --------- ---------
Total ............................................. $ 6,525 $ 1,405 $ 7,702
========= ========= =========
</TABLE>
11. EXTRAORDINARY LOSS
During 1996, Foamex L.P. used $31.3 million of the net proceeds from the
sale of Perfect Fit to extinguish debt of $30.6 million and redemption premiums
of $0.6 million. Foamex L.P. wrote off $1.2 million of debt issuance costs
associated with the early extinguishment of debt and incurred transaction costs
of $0.1 million. The early extinguishment of debt resulted in an extraordinary
loss of $1.9 million.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
Foamex L.P. is obligated under various noncancelable lease agreements for
rental of facilities, vehicles and other equipment. Many of the leases contain
renewal options with varying terms and escalation clauses that provide for
increased rentals based upon increases in the Consumer Price Index, real estate
taxes and lessors' operating expenses. Total minimum rental commitments
(excluding commitments accrued as part of the 1995 and 1996 restructuring
plans) required under operating leases at December 29, 1996 are:
F-21
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. COMMITMENTS AND CONTINGENCIES (continued)
Third Party Related Party
Leases Leases
------------ ---------------
(thousands)
1997 ............ $ 7,874 $ 1,767
1998 ............ 6,164 1,823
1999 ............ 4,866 1,823
2000 ............ 3,812 1,823
2001 ............ 2,883 2,265
Thereafter ...... 4,122 5,800
-------- --------
Total ......... $29,721 $15,301
======== ========
Rental expense charged to operations under operating leases approximated
$9.7 million, $10.1 million and $9.6 million for 1994, 1995 and 1996,
respectively. Substantially all such rental expense represented the minimum
rental payments under operating leases. In addition, Foamex L.P. incurred
rental expense of approximately $3.9 million, $3.5 million and $1.7 million for
1994, 1995 and 1996, respectively, under leases with related parties.
13. RELATED PARTY TRANSACTIONS AND BALANCES
Foamex L.P. regularly enters into transactions with its affiliates in the
ordinary course of business.
During April 1996, Foamex International contributed the foam products
operations of Foamex Mexico to Foamex L.P. The contribution was accounted for
in a manner similar to a pooling of interests since the entities were under
common control. Accordingly, all prior periods presented have been restated to
reflect the results of operations and financial position of Foamex Mexico. The
restatement of prior periods was insignificant to the consolidated financial
statements.
During 1996, Foamex L.P. chartered an aircraft (which is owned by a
wholly-owned subsidiary of Foamex International) through a third party and
incurred costs of approximately $1.4 million.
In December 1995, Foamex L.P. entered into a $2.0 million promissory note
with Foamex International. The note bears interest at a rate per annum equal to
six months LIBOR plus 4.0% and is payable semiannually in June and December.
The note matures in December 1997. The note has been classified in the other
component of partners' equity (deficit).
On July 7, 1996, Trace International Holdings, Inc. ("Trace Holdings")
issued to Foamex L.P. a promissory note for $4.4 million in principal amount
plus accrued interest of $0.4 million, which is an extension of a promissory
note of Trace Holdings that was due in July 1996. The promissory note is due
and payable on demand or, if no demand is made, July 7, 1997, and bears
interest at 9.5%, payable quarterly in arrears commencing October 1, 1996. The
promissory note is included in other partners' equity (deficit).
In connection with the acquisition of Great Western, Foamex L.P. issued a
promissory note to Rallis (see Note 8) and entered into lease agreements (see
Note 12) with Rallis and an affiliate of Rallis, for the rental of former Great
Western manufacturing facilities located in Orange, Ontario and Hayward,
California and a warehouse facility in Tigard, Oregon. Foamex L.P. has the
option to purchase each of these properties from Rallis or such affiliate.
Foamex L.P. was party to a lease agreement for an airplane with Trace
Aviation Corp. ("Trace Aviation"), a subsidiary of Trace Holdings. During 1994
and 1995, Foamex L.P. paid Trace Aviation $2.7 million and $1.6 million,
respectively, pursuant to the lease agreement. The lease agreement also
provided for the use of the airplane by Trace Holdings with remuneration to
Foamex L.P. based on actual usage of the plane. During 1994 and 1995, Trace
Holdings paid to Foamex L.P. $0.5 million and $0.6 million, respectively,
pursuant to the agreement. During August 1995, Foamex Aviation Inc.
("Aviation"), a wholly-owned subsidiary of Foamex International, acquired the
aircraft
F-22
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. RELATED PARTY TRANSACTIONS AND BALANCES (continued)
from Trace Holdings for $3.0 million in cash and the assumption of $11.7
million of related debt. In connection with the acquisition of the aircraft,
the Foamex L.P. lease and other agreements were terminated.
Foamex L.P. has a management service agreement with Trace Foam Company,
Inc. ("Trace Foam"), a wholly-owned subsidiary of Trace Holdings, pursuant to
which Trace Foam provides general managerial services of a financial,
technical, legal, commercial, administrative and/or advisory nature to Foamex
L.P. for an annual fee of $1.75 million and reimbursement of expenses incurred.
Trace Holdings rents approximately 5,900 square feet of general, executive, and
administrative office space in New York, New York from Foamex L.P. on
substantially the same terms as Foamex L.P. leases such space from a third
party lessor.
During 1994 and 1995, Foamex L.P. purchased approximately $11.9 million
and $2.5 million, respectively, of scrap material from Recticel Foam
Corporation ("RFC"), a former partner of Foamex L.P. and whose chairman is a
director of Foamex International, under a minimum annual volume agreement which
expired in June 1995.
On June 28, 1994, Foamex L.P. purchased an $87.9 million principal amount
note due 2006 from its 98% limited partner Foamex-JPS Automotive L.P. ("FJPS")
for $35.3 million (the "FJPS Note"). The FJPS Note will not pay interest until
July 2000. Instead, principal will accrete (from the initial purchase price of
$35.3 million) on a daily basis and compound semiannually at the rate of 15.50%
per annum through June 1996; 15.75% per annum thereafter through June 1997; and
16.00% per annum thereafter through June 2000. Interest will be due
semiannually in cash at 16.00% per annum from July 2000 through the maturity
date. In December 1996 in exchange for certain waivers and amendment of the
FJPS Note, FJPS repaid $18.4 million of the FJPS Note and a waiver payment of
$0.2 million using a portion of the proceeds from the sale of its partnership
interest in JPS Automotive L.P. FJPS has the right to reborrow such amount,
subject to limitations in the Foamex L.P. Credit Facility, solely for the
purpose of funding a purchase price adjustment payment, if any, in connection
with the JPS Automotive L.P. sale. The FJPS Note has been classified in
partners' equity (deficit) and the accreted principal of $16.3 million for the
period from June 28, 1994 to December 29, 1996 has been included in the FJPS
Note. The FJPS Note may be redeemed at the option of FJPS, in whole or in part,
at any time at the redemption prices (expressed as percentages of the Accreted
Value (as defined) if on or prior to July 1, 2000, and thereafter, expressed as
percentages of the principal amount) initially equal to 108% for the
twelve-month period commencing July 1, 1994 declining to 100% on or after July
1, 2005. If FJPS does not repay the indebtedness with at least 85% of the net
proceeds of any Equity Offering (as defined), the rate at which the FJPS Note
accretes and the interest rate on the FJPS Note will increase.
In June 1994, Foamex L.P. also entered into a supply agreement with Foamex
International (the "Supply Agreement"). Pursuant to the terms of the Supply
Agreement, at the option of Foamex L.P., Foamex International will purchase
certain raw materials which are necessary for the manufacture of Foamex L.P.'s
products, and resell such materials to Foamex L.P. at a price equal to net cost
plus reasonable out of pocket expenses. Management believes that the terms of
the Supply Agreement are no less favorable than those which Foamex L.P. could
have obtained from an unaffiliated third party. During 1995 and 1996, Foamex
L.P. made $105.1 million and $129.7 million, respectively, of purchases
relating to the Supply Agreement.
As of December 31, 1995 and December 29, 1996, due to related parties
amounted to $11.7 million and $8.8 million, respectively, and represents the
net amounts payable to Foamex International and subsidiaries for purchases
under the Supply Agreement and other matters.
Foamex L.P. made charitable contributions to the Trace International
Holdings, Inc. Foundation of approximately $0.2 million in each of 1994, 1995
and 1996.
On December 11, 1996, Foamex L.P. entered into a Tax Distribution Advance
Agreement with FJPS, pursuant to which FJPS is entitled to obtain advances, in
the aggregate not to exceed $17.0 million, against future distributions under
Foamex L.P.'s tax distribution agreement. As of December 29, 1996, there were
no advances under this agreement.
F-23
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. PARTNERS' EQUITY (DEFICIT)
Foamex L.P. was formed as a Delaware limited partnership on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a
limited partnership agreement as amended through June 1994. In connection with
a June 1994 amendment, the ownership of Foamex L.P. changed as follows: (i)
FMXI, a wholly-owned subsidiary of Foamex International, bifurcated its 4%
managing general partnership interest into a 1% managing general partnership
interest and a 3% limited partnership interest and distributed the limited
partnership interest to Foamex International, (ii) Foamex International
contributed its 95% limited partnership interest and the 3% limited partnership
interest received from FMXI to FJPS and withdrew as a partner of Foamex L.P.
and (iii) FJPS was admitted as a partner of Foamex L.P. with a 98% limited
partnership interest. The partners also consented to the pledge by FJPS of a
43.44% limited partnership interest in Foamex L.P. to secure the repayment of
certain of FJPS's indebtedness incurred in connection with the acquisition of
JPS Automotive L.P. by Foamex International. As of December 31, 1995 and
December 29, 1996, the partnership interests of FMXI, Inc. ("FMXI"), Trace
Foam, and FJPS were 1.0%, 1.0% and 98.0%, respectively.
Cash distributions for 1994, 1995 and 1996 were paid (received) as
follows:
1994 1995 1996
-------- -------- ---------
(thousands)
FMXI ..................... $ 59 $ 12 $ (35)
Trace Foam ............... 29 -- 45
Foamex International ...... 653 -- --
FJPS ..................... 2,516 2,367 3,477
------- ------- ------
Total ..................... $3,257 $2,379 $3,487
======= ======= ======
Other
The other component of partners' equity (deficit) consists of the
following:
<TABLE>
<CAPTION>
January 1, December 31, December 29,
1995 1995 1996
------------ -------------- -------------
(thousands)
<S> <C> <C> <C>
Foreign currency translation adjustment ......... $ 3,930 $ 3,448 $ 3,494
Additional pension liability .................. 1,489 4,779 2,407
Note receivable from Trace Holdings ............ 3,000 4,373 4,373
Note receivable from Foamex International ...... -- 2,000 2,000
-------- -------- --------
$ 8,419 $14,600 $12,274
======== ======== ========
</TABLE>
15. ENVIRONMENTAL MATTERS
Foamex L.P. is subject to extensive and changing federal, state, local and
foreign environmental laws and regulations, including those relating to the
use, handling, storage, discharge and disposal of hazardous substances and the
remediation of environmental contamination, and as a result, is from time to
time involved in administrative and judicial proceedings and inquiries relating
to environmental matters. During 1996, expenditures in connection with Foamex
L.P.'s compliance with federal, state, local and foreign environmental laws and
regulations did not have a material adverse effect on Foamex L.P.'s operations,
financial position, capital expenditures or competitive position. As of
December 29, 1996, Foamex L.P. has environmental accruals of approximately $4.1
million for environmental matters. In addition, as of December 29, 1996 Foamex
L.P. has net receivables of approximately $0.9 million relating to
indemnification for environmental liabilities, net of an allowance of
approximately $1.0 million relating to potential disagreements regarding the
scope of the indemnification. Foamex L.P. believes that realization of the net
receivables established for indemnification is probable.
The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments") provide
for the establishment of federal emission standards for hazardous air
pollutants including methylene chloride and TDI, principal raw
F-24
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. ENVIRONMENTAL MATTERS (continued)
materials used in the manufacturing of foam. Foamex L.P. completely eliminated
the use of chlorofluorocarbons and methylchloroform by the end of 1995. The
1990 CAA Amendments also may result in the imposition of more stringent
standards regulating air emissions from the use of these chemicals by
polyurethane foam manufacturers, but these standards have not yet been
promulgated.
Foamex L.P. has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
facilities and soil contamination in excess of state standards at three other
facilities. Foamex L.P. has begun remediation and is conducting further
investigations into the extent of the contamination at these facilities and,
accordingly, the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such remediation cannot be predicted with
any degree of certainty at this time. As of December 29, 1996, Foamex L.P. has
environmental accruals of approximately $3.2 million for the remaining
potential remediation costs for these facilities based on engineering
estimates.
Federal regulations require that by the end of 1998 all underground
storage tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. Foamex L.P. has six USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. Foamex
L.P. has accrued $0.4 million for the estimated removal and remediation, if
any, associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. Foamex L.P. believes that its USTs do not
pose a significant risk of environmental liability because of Foamex L.P.'s
monitoring practices for USTs and conditional approval for the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.
Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the United States Environmental Protection Agency (the "EPA") with respect
to thirteen sites, with an estimated total liability to Foamex L.P. for the
thirteen sites of less than approximately $0.5 million. Estimates of total
cleanup costs and fractional allocations of liability are generally provided by
the EPA or the committee of PRP's with respect to the specified site. In each
case, the participation of Foamex L.P. is considered to be immaterial.
Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on Foamex L.P.'s
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be material.
16. LITIGATION
As of February 26, 1997, Foamex L.P. and Trace Holdings were two of
multiple defendants in actions filed on behalf of approximately 5,000
recipients of breast implants in various United States federal and state courts
and one Canadian provincial court, some of which allege substantial damages,
but most of which allege unspecified damages for personal injuries of various
types. Five of these cases seek to allege claims on behalf of all breast
implant recipients or other allegedly affected parties, but no class has been
approved or certified by the court. In addition, three cases have been filed
alleging claims on behalf of approximately 700 residents of Australia, New
Zealand, England, and Ireland. During 1995, Foamex L.P. and Trace Holdings were
granted summary judgments and dismissed as defendants from all cases in the
federal courts of the United States and the state courts of California. Appeals
for these decisions were withdrawn and the decisions are final. In addition,
two of the cases filed on behalf of 903 foreign plaintiffs were dismissed on
the grounds that the cases could not be brought in the United States courts.
This decision is subject to appeal. Foamex L.P. believes that the number of
suits and claimants may increase.
F-25
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. LITIGATION (continued)
Although breast implants do not contain foam, certain silicone gel implants
were produced using a polyurethane foam covering fabricated by independent
distributors or fabricators from bulk foam purchased from Foamex L.P. or Trace
Holdings. Neither Foamex L.P. nor Trace Holdings recommended, authorized or
approved the use of its foam for these purposes. While it is not feasible to
predict or determine the outcome of these actions, based on management's
present assessment of the merits of pending claims, after consultation with the
general counsel of Trace Holdings, and without taking into account potential
indemnity from the manufacturers of polyurethane covered breast implants,
management believes that the disposition of matters that are pending or that
may reasonably be anticipated to be asserted should not have a material adverse
effect on either Foamex L.P.'s or Trace Holdings' consolidated financial
position or results of operations. In addition, Foamex L.P. is also indemnified
by Trace Holdings for any such liabilities relating to foam manufactured prior
to October 1990. Although Trace Holdings has paid Foamex L.P.'s litigation
expenses to date pursuant to such indemnification and management believes Trace
Holdings likely will be in a position to continue to pay such expenses, there
can be no absolute assurance that Trace Holdings will be able to provide such
indemnification. Based on information available at this time with respect to
the potential liability, and without taking into account the indemnification
provided by Trace Holdings and the coverage provided by Trace Holdings' and
Foamex L.P.'s liability insurance, Foamex L.P. believes that the proceedings
should not ultimately result in any liability that would have a material
adverse effect on the financial position or results of operations of Foamex
L.P. If management's assessment of Foamex L.P.'s liability with respect to
these actions is incorrect, such actions could have a material adverse effect
on Foamex L.P.
Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex
L.P.'s liability with respect to these actions is incorrect, such actions could
have a material adverse effect on Foamex L.P.'s consolidated financial
position.
17. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Interest Rate Swap Agreements
Foamex L.P. has two interest rate swap agreements involving the exchange
of fixed and floating interest payment obligations without the exchange of the
underlying principal amounts. At December 29, 1996, the total notional
principal amount of these interest rate swap agreements was $300.0 million. The
counterparty to these agreements is a large international financial
institution. The interest rate swap agreements subject Foamex L.P. to financial
risk that will vary during the life of these agreements in relation to market
interest rates.
Concentration of Credit Risk
Financial instruments which potentially subject Foamex L.P. to significant
concentrations of credit risk consist primarily of cash and cash equivalents
and trade accounts receivable. Foamex L.P. maintains cash and cash equivalents
and certain other financial instruments with various large financial
institutions. Foamex L.P.'s periodic evaluation of these financial institutions
is considered in Foamex L.P.'s investment strategy.
Foamex L.P. sells foam products to the automotive, carpet, cushioning and
other industries. Foamex L.P. performs ongoing credit evaluations of its
customers and generally does not require collateral. Foamex L.P. maintains
allowance accounts for potential credit losses and such losses have been within
management's expectations.
Disclosure about Fair Value of Financial Instruments
The following disclosures of the estimated fair value amounts have been
determined based on Foamex L.P.'s assessment of available market information
and appropriate valuation methodologies.
F-26
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK (continued)
The estimated fair values of Foamex L.P.'s financial instruments as of
December 29, 1996 are as follows:
Carrying Amount Fair Value
----------------- -----------
(thousands)
Liabilities:
Long-term debt ............ $406,352 $427,862
========= =========
Interest rate swaps ...... $ -- $ 3,160
========= =========
Carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities
and short-term borrowings approximates fair value due to the short-term nature
of these instruments.
The fair value of long-term debt is estimated using quoted market prices,
where available, or discounted cash flows.
The fair value of interest rate swaps is based on the amount at which
Foamex L.P. would pay if the swaps were settled, as determined by estimates
obtained from dealers.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instruments. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
18. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
1994 1995 1996
--------- ------------ --------
(thousands)
Cash paid for interest ............ $42,734 $47,282 $43,378
======== ======== ========
Cash paid for income taxes ......... $ 1,757 $ 634 $ 1,533
======== ======== ========
Noncash capital expenditures ...... $ -- $ 378 $ 165
======== ======== ========
F-27
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands)
<TABLE>
<CAPTION>
December 29, June 29,
1996 1997
ASSETS: -------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 20,968 $ 4,508
Accounts receivable, net .............................. 125,847 136,211
Inventories .......................................... 102,610 106,723
Other current assets ................................. 39,495 45,483
--------- ----------
Total current assets ................................. 288,920 292,925
PROPERTY, PLANT AND EQUIPMENT, NET ..................... 182,427 190,631
COST IN EXCESS OF ASSETS ACQUIRED, NET .................. 83,991 82,732
DEBT ISSUANCE COSTS, NET .............................. 14,902 18,428
OTHER ASSETS .......................................... 15,917 15,978
--------- ----------
TOTAL ASSETS .......................................... $ 586,157 $ 600,694
========= ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Short-term borrowings ................................. $ 3,692 $ 3,960
Current portion of long-term debt ..................... 13,735 8,351
Accounts payable ....................................... 75,621 67,659
Accounts payable to related parties .................. 8,803 12,347
Accrued interest ....................................... 8,871 3,172
Other accrued liabilities .............................. 41,108 47,588
--------- ----------
Total current liabilities ........................... 151,830 143,077
--------- ----------
LONG-TERM DEBT .......................................... 392,617 537,951
--------- ----------
OTHER LIABILITIES ....................................... 28,878 37,883
--------- ----------
COMMITMENTS AND CONTINGENCIES -- --
PARTNERS' EQUITY (DEFICIT):
Partners' capital accounts ........................... 58,286 (107,774)
Note receivable from partner ........................... (33,180) --
Other ................................................ (12,274) (10,443)
--------- ----------
Total partners' equity (deficit) ..................... 12,832 (118,217)
--------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT) ...... $ 586,157 $ 600,694
========= ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-28
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Week Periods Ended
----------------------------
June 30, June 29,
1996 1997
------------- ------------
<S> <C> <C>
NET SALES .............................. $ 459,578 $ 469,007
COST OF GOODS SOLD ..................... 385,380 381,430
--------- ---------
GROSS PROFIT ........................... 74,198 87,577
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ............... 27,127 31,331
--------- ---------
INCOME FROM OPERATIONS .................. 47,071 56,246
INTEREST AND DEBT ISSUANCE EXPENSE ...... 20,724 21,509
OTHER INCOME, NET ........................ 537 1,122
--------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES ...... 26,884 35,859
PROVISION FOR INCOME TAXES ............... 3,718 3,259
--------- ---------
INCOME FROM CONTINUING OPERATIONS ...... 23,166 32,600
LOSS FROM DISCONTINUED OPERATIONS ...... (39,527) --
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT .................. -- (45,538)
--------- ---------
NET INCOME (LOSS) ........................ $ (16,361) $ (12,938)
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-29
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Week Periods Ended
-----------------------------
June 30, June 29,
1996 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................................. $ (16,361) $ (12,938)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .............................. 10,711 10,301
Amortization of debt issuance costs and debt discount ...... 1,433 1,370
Extraordinary loss on extinguishment of debt ............... -- 45,538
Loss from discontinued operations ........................... 39,527 --
Other operating activities ................................. (597) 798
Changes in operating assets and liabilities .................. (19,815) (47,256)
---------- -----------
Net cash provided by (used for) continuing operations ...... 14,898 (2,187)
Net cash used for discontinued operations .................. (1,017) --
---------- -----------
Net cash provided by (used for) operating activities ...... 13,881 (2,187)
---------- -----------
INVESTING ACTIVITIES:
Capital expenditures ....................................... (7,798) (16,369)
Purchase of FJPS senior secured discount debentures ......... -- (105,829)
Decrease in restricted cash ................................. -- 12,143
Other investing activities ................................. 1,399 35
Discontinued operations investing activities ............... (900) --
---------- -----------
Net cash used for investing activities ..................... (7,299) (110,020)
---------- -----------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings ..................... 1,976 256
Proceeds from revolving loans .............................. -- 49,000
Proceeds from long-term debt ................................. -- 453,500
Repayment of long-term debt ................................. (4,272) (363,392)
Premiums and costs associated with debt extinguishment ...... -- (22,918)
Debt issuance costs .......................................... -- (14,746)
Distributions to partners .................................... (2,478) (5,949)
Other financing activities ................................. (8) (4)
---------- -----------
Net cash provided by (used for) financing activities ...... (4,782) 95,747
---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................ 1,800 (16,460)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ....................................... 638 20,968
---------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ............................................. $ 2,438 $ 4,508
========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-30
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex L.P.'s condensed consolidated balance sheet as of December 29, 1996
has been condensed from the audited consolidated balance sheet at that date.
The condensed consolidated balance sheet as of June 29, 1997 and the condensed
consolidated statements of operations and the condensed consolidated statements
of cash flows for the twenty-six week periods ended June 30, 1996 and June 29,
1997 have been prepared by Foamex L.P. and subsidiaries and have not been
audited by Foamex L.P.'s independent accountants. Also, the condensed
consolidated statement of operations for and the condensed consolidated
statement of cash flows for the twenty-six week period ended June 30, 1996 have
been restated for discontinued operations (see Note 2 below). In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows have been included.
On June 12, 1997, Foamex International Inc. ("Foamex International")
substantially completed a refinancing plan (the "Refinancing Plan") that
included the refinancing of certain long-term indebtedness to reduce Foamex
International's interest expense and improve financing flexibility. In
connection with the Refinancing Plan, Foamex L.P. purchased approximately
$342.3 million of aggregate principal amount of its public debt and
approximately $116.7 million of aggregate principal amount of Foamex-JPS
Automotive L.P.'s ("FJPS") senior secured discount debentures due 2004 (the
"Discount Debentures") and repaid $5.2 million of term loan borrowings under
its old credit facility. Foamex L.P. incurred an extraordinary loss on the
early extinguishment of debt associated with the Refinancing Plan of
approximately $44.5 million. (See Note 5 below for further discussion.) The
Refinancing Plan was funded by $347.0 million of borrowings under a new $480.0
million credit facility (the "New Credit Facility") and the net proceeds from
the issuance of $150.0 million of 9-7/8% senior subordinated notes due 2007.
In addition, Foamex L.P. has called for redemption on October 1, 1997
approximately $26.0 million of the approximately $30.0 million of its
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded from the New Credit Facility. In
connection with this redemption, Foamex L.P. is expected to incur an
extraordinary loss on the early extinguishment of debt of approximately $2.6
million in the fourth quarter of 1997.
Upon consummation of the Refinancing Plan on June 12, 1997, FJPS was
merged into Foamex International, which thus became a 98% limited partner of
Foamex L.P. FMXI, Inc. ("FMXI") is a 1% managing general partner of Foamex L.P.
and Trace Foam Company, Inc. ("Trace Foam") is a 1% non-managing general
partner of Foamex L.P. FMXI is a wholly-owned subsidiary of Foamex
International.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with Foamex
L.P.'s 1996 consolidated financial statements and notes thereto as set forth
elsewhere in this Prospectus.
2. DISCONTINUED OPERATIONS
During 1996, Foamex L.P. sold the outstanding common stock of Perfect Fit
Industries, Inc. ("Perfect Fit"), a wholly-owned subsidiary, for an adjusted
sale price of approximately $44.2 million. The sale included the net assets of
Foamex L.P.'s home comfort products business segment.
F-31
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. DISCONTINUED OPERATIONS (continued)
Foamex L.P.'s condensed consolidated financial statements have been
restated to reflect the discontinuation of the home comfort products business
segment. A summary of the operating results for the discontinued operations is
as follows:
26 Week Period Ended
June 30, 1996
---------------------
(thousands)
-----------
Net sales ............................. $ 50,097
Gross profit .......................... 8,065
Income (loss) from operations .......... 1,123
Interest and debt issuance expense ..... 2,384
Other expense .......................... 348
Loss on disposal of discontinued
operations ........................... (39,297)
Loss from discontinued operations
before (benefit) from income taxes ... (40,906)
Benefit for income taxes................ (1,379)
Loss from discontinued operations,
net of income taxes................... (39,527)
3. INVENTORIES
The components of inventories consist of:
December 29, June 29,
1996 1997
-------------- ---------
(thousands)
Raw materials and supplies ...... $ 61,559 $ 59,070
Work-in-process .................. 13,453 17,305
Finished goods .................. 27,598 30,348
--------- ---------
Total ........................... $102,610 $106,723
========= =========
4. RELATED PARTY TRANSACTIONS
In connection with the Refinancing Plan, Foamex L.P. purchased
approximately $116.7 million of aggregate principal amount of Discount
Debentures for approximately $105.8 million including transaction costs of
approximately $0.8 million. Foamex L.P. subsequently distributed the Discount
Debentures to FJPS and FMXI.
On June 12, 1997, Foamex L.P. distributed its $2.0 million aggregate
principal amount promissory note due from Foamex International to FJPS and
FMXI.
Also on June 12, 1997, Foamex L.P. distributed its $56.2 million aggregate
principal amount note, as amended, due 2006 (the "FJPS Note") from FJPS with an
accreted value as of June 12, 1997 of $35.6 million to FJPS and FMXI. The
accretion of the original issue discount of $3.5 million and $2.4 million for
the twenty-six week periods ended June 30, 1996 and June 29, 1997,
respectively, was reflected as a direct increase in the FJPS Note and partners'
capital account, and thereby excluded from the condensed consolidated
statements of operations.
In connection with the Refinancing Plan, Foamex L.P. made a cash
distribution of approximately $1.5 million to Trace Foam as a result of Foamex
L.P.'s distribution to FJPS and FMXI of the Discount Debentures, the FJPS Note
and the $2.0 million aggregate principal amount promissory note due from Foamex
International.
F-32
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. RELATED PARTY TRANSACTIONS (continued)
On June 12, 1997, a promissory note issued to Foamex L.P. by Trace
International Holdings, Inc. ("Trace Holdings") was amended. The amended
promissory note is an extension of a promissory note of Trace Holdings that was
due in July 1997. The aggregate principal amount of the amended promissory note
was increased to approximately $4.9 million and the maturity of the promissory
note was extended. The promissory note is due and payable on demand or, if no
demand is made, on July 7, 2001, and bears interest at 2 3/8% plus three-month
LIBOR, as defined, per annum payable quarterly in arrears. The promissory note
is included in the other component of partners' equity (deficit).
In connection with the Refinancing Plan, on July 1, 1997 Trace
International borrowed an additional $5.0 million on terms and conditions
substantially similar to the existing promissory note, and the tax distribution
advance agreement was amended to increase the permitted advances to Foamex
International from $17.0 million to $25.0 million.
During June 1997, Foamex L.P. and Trace Foam amended their management
services agreement to increase the annual fee from $1.75 million to $3.0
million, plus reimbursement of expenses incurred.
Foamex L.P. has a supply agreement (the "Supply Agreement") with Foamex
International pursuant to which, at the option of Foamex L.P., Foamex
International will purchase certain raw materials, which are necessary for the
manufacture of Foamex L.P.'s products, and resell such materials to Foamex L.P.
at a price equal to net cost plus reasonable out of pocket expenses. Management
believes that the terms of the Supply Agreement are no less favorable than
those which Foamex L.P. could have obtained from an unaffiliated third party.
During the twenty-six week periods ended June 30, 1996 and June 29, 1997,
Foamex L.P. purchased approximately $54.1 million and $63.0 million,
respectively, of raw materials under the Supply Agreement. As of December 29,
1996 and June 29,1997, Foamex L.P. had accounts payable to Foamex International
of approximately $8.8 million and $12.3 million, respectively, associated with
the Supply Agreement.
Foamex L.P. chartered an aircraft (which is owned by a wholly-owned
subsidiary of Foamex International) through a third party and incurred costs of
approximately $0.5 million and $0.6 million for the twenty-six week periods
ended June 30, 1996 and June 29, 1997, respectively.
5. LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
December 29, June 29,
1996 1997
-------------- ----------
(thousands)
<S> <C> <C>
9-7/8% senior subordinated notes due 2007(1) .................... $ -- $150,000
Foamex L.P. term loan facilities (7.95% interest rate at
June 29, 1997)(2)................................................ -- 298,000
Foamex L.P. revolving loan (7.65% interest rate at
June 29, 1997)(3)................................................ -- 49,000
9-1/2% senior secured notes due 2000(4) ......................... 106,793 4,523
11-1/4% senior notes due 2002(4) ................................ 141,400 5,825
11-7/8% senior subordinated debentures due 2004
(net of unamortized debt discount of $769 and $119)(4) .......... 125,056 20,224
11-7/8% senior subordinated debentures due 2004, Series B(5) ..... 7,000 45
Industrial revenue bonds(6) ..................................... 7,000 7,000
</TABLE>
F-33
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT (continued)
<TABLE>
<CAPTION>
December 29, June 29,
1996 1997
------------- ----------
<S> <C> <C>
Foamex L.P. term loan (8.54% interest rate as of
December 29, 1996)(6) ......................................... 11,000 --
Subordinated note (net of debt discount of $1,198 and $1,047)(6) . 5,817 5,968
Other ............................................................ 2,286 5,717
--------- ---------
406,352 546,302
Less current portion ............................................. 13,735 8,351
--------- ---------
Long-term debt ................................................... $392,617 $537,951
========= =========
</TABLE>
- ---------------
(1) Debt of Foamex L.P. and Foamex Capital Corporation ("FCC") (together the
"Issuers") and guaranteed by General Felt Industries, Inc. ("General
Felt"), Foamex Fibers, Inc. ("Foamex Fibers") and all other future domestic
subsidiaries of the Issuers.
(2) Debt of Foamex L.P. and guaranteed by Foamex International, General Felt
and Foamex Fibers.
(3) Debt of Foamex L.P. and General Felt and guaranteed by Foamex International
and Foamex Fibers.
(4) Debt of the Issuers and guaranteed by Foamex International and General
Felt.
(5) Debt of the Issuers and guaranteed by General Felt.
(6) Debt of Foamex L.P.
Term Loans and Revolving Loan
On June 12, 1997, Foamex L.P. entered into the New Credit Facility with a
group of banks that provides for term loans of up to $330.0 million which
expire from June 2003 to June 2006 and up to $150.0 million under a revolving
line of credit which expires in June 2003. In connection with the Refinancing
Plan, Foamex L.P. entered into term loans of $298.0 million and borrowed $49.0
million under the revolving line of credit.
The term loans are comprised of a (i) term A loan ("Term A") which
provides up to $120.0 million of borrowings of which Foamex L.P. borrowed $88.0
million in connection with the Refinancing Plan, (ii) term B loan ("Term B") of
$110.0 million and (iii) term C loan ("Term C") of $100.0 million. The
remaining $32.0 million available under the Term A is restricted and can only
be used by Foamex L.P. to retire its public debt not tendered in connection
with the Refinancing Plan with such unused availability terminating June 15,
1998.
Borrowings under the New Credit Facility are collateralized by
substantially all of the assets of Foamex L.P., General Felt and Foamex Fibers
on a pari passu basis with the 9 1/2% senior secured notes due 2000, the 11-1/4%
senior notes due 2002 and the industrial revenue bonds (collectively, the
"Notes"); however, the rights of the holders of the applicable issue of Notes
to receive payment upon the disposition of the collateral securing such issue
of Notes has been preserved.
Pursuant to the terms of the New Credit Facility, borrowed funds will bear
interest at a floating rate equal to an applicable margin, as defined, plus the
higher of (i) the base rate of The Bank of Nova Scotia, in effect from time to
time, or (ii) a rate that is equal to 0.5% per annum plus the federal funds
rate in effect from time to time. The applicable margin is determined by a
calculation of the total net debt to EBDAIT ratio, as defined, and can range
from no margin up to 1.125% per annum for Term A and revolving loans, from
0.875% per annum to 1.375% per annum for Term B and from 1.125% per annum to
1.625% per annum for Term C. At the option of Foamex L.P., portions of the
outstanding loans under the New Credit Facility are convertible into LIBOR
based loans which bear
F-34
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT (continued)
interest at a floating rate equal to an applicable margin for LIBOR based
loans, as defined, plus the average LIBOR, as defined. The applicable margin
for LIBOR based loans is a rate that will generally equal the applicable margin
(discussed above) plus 1.0% per annum.
9-7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9 7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June
15, 2002, initially at 104.938% of their principal amount, plus accrued
interest and liquidated damages, as defined, if any, thereon to the date of
redemption and declining to 100.0% on or after June 15, 2005. In addition, at
any time prior to June 15, 2000, Foamex L.P. may on one or more occasions
redeem up to 35.0% of the initially outstanding principal amount of the Senior
Subordinated Notes at a redemption price equal to 109.875% of the principal
amount, plus accrued interest and liquidated damages, if any, thereon to the
date of redemption with the cash proceeds of one or more Public Equity
Offerings, as defined; provided, that, in each case, at least 65% of the
initially outstanding aggregate principal amount of Notes remains outstanding
immediately after the occurrence of such redemption. Upon the occurrence of a
change of control, as defined, each holder of Senior Subordinated Notes will
have the right to require Foamex L.P. to repurchase the Senior Subordinated
Notes at a price equal to 101.0% of the principal amount, plus accrued interest
and liquidated damages, if any, to the date of redemption. The Senior
Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to two issues of senior
subordinated debentures due 2004 and the subordinated note. The Senior
Subordinated Notes contain certain covenants that limit, among other things,
the ability of Foamex L.P. (i) to pay distributions or redeem partnership
interests, (ii) to make certain restrictive payments or investments, (iii) to
incur additional indebtedness or issue Preferred Equity Interest, as defined,
(iv) to merge, consolidate or sell all or substantially all of its assets, or
(vi) to enter into certain transactions with affiliates or related persons. The
Senior Subordinated Notes are guaranteed by General Felt and Foamex Fibers and
all other future domestic subsidiaries of the Issuers.
Foamex L.P. and FCC have filed a registration statement relating to an
exchange offer in which Foamex L.P. and FCC will offer to exchange the Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the
Senior Subordinated Notes, except that the new notes will be transferable by
holders thereof without further registration under the Securities Act of 1933,
as amended (except in the case of Senior Subordinated Notes held by affiliates
of the Issuers and for certain other holders), and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended.
The exchange offer is expected to be consummated during the third quarter of
1997.
Principal payments on Foamex L.P.'s long-term debt for the remainder of
1997 and for the next five years are as follows: 1997--$4.2 million;
1998--$11.9 million; 1999--$20.9 million; 2000--$31.3 million; 2001--$31.3
million; 2002--$32.7 million; and thereafter--$415.2 million. Such principal
payment obligation may be accelerated in whole or in part in connection with
certain asset sales, upon certain transactions constituting a "change of
control" as defined under the applicable debt instrument, upon certain debt or
equity offerings, as a result of certain excess cash flows, and upon the
occurrence of an "event of default" as defined under the applicable debt
instrument. See "Description of Certain Debt Instruments--New Credit
Facility."
Early Extinguishment of Debt--Refinancing Plan
In connection with the Refinancing Plan, Foamex L.P. incurred an
extraordinary loss on the early extinguishment of debt of approximately $44.5
million. The extraordinary loss is comprised of approximately $20.2 million for
premium and consent fee payments, approximately $12.6 million for the write-off
of debt issuance costs
F-35
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT (continued)
and debt discount, approximately $8.2 million for the loss associated with the
effective termination and amendment of the interest rate swap agreements and
approximately $3.5 million of professional fees and other costs. In connection
with the Refinancing Plan, Foamex L.P. repaid $5.2 million in term loan
borrowings under its old credit facility and purchased approximately $459.0
million of aggregate principal amount of public debt comprised of:
[bullet] $99.8 million of aggregate principal amount of its 9-1/2% senior
secured notes due 2000 for an aggregate consideration of 104.193% of
principal plus accrued interest, comprised of a tender price of
102.193% and a consent fee of 2.0%;
[bullet] $130.1 million of aggregate principal amount of its 11-1/4% senior
notes due 2002 for an aggregate consideration of 105.709% of principal
plus accrued interest, comprised of a tender price of 103.709% and a
consent fee of 2.0%;
[bullet] $105.5 million of aggregate principal amount of its 11-7/8% senior
subordinated debentures due 2004 for an aggregate consideration of
107.586% of principal plus accrued interest, comprised of a tender
price of 105.586% and a consent fee of 2.0%;
[bullet] $6.9 million of aggregate principal amount of its 11-7/8% senior
subordinated debentures, series B due 2004 for an aggregate
consideration of 107.586% of principal plus accrued interest,
comprised of a tender price of 105.586% and a consent fee of 2.0%; and
[bullet] $116.7 million of aggregate principal amount of the Discount
Debentures for an aggregate consideration of 90.0% of principal amount,
which represents approximately 121.9% of the accreted book value as of
June 12, 1997, comprised of a tender price of 88.0% of principal amount
and a consent fee of 2.0%.
In addition, Foamex L.P. has called for redemption on October 1, 1997
approximately $26.0 million of the approximately $30.0 million of its
outstanding public debt that was not tendered as part of the Refinancing Plan.
The redemption is expected to be funded with borrowings under the New Credit
Facility. In connection with the redemption, Foamex L.P. is expected to incur
an extraordinary loss on the early extinguishment of debt of approximately $2.6
million in the fourth quarter of 1997.
Early Extinguishment of Debt--Other
In addition, during 1997 Foamex L.P. incurred extraordinary losses of
approximately $1.0 million associated with the early extinguishment of
approximately $11.8 million of long-term debt funded with approximately $12.1
million of the remaining net proceeds from the sale of Perfect Fit. The
extraordinary loss is comprised of approximately $0.4 million of premium
payments and approximately $0.6 million for the write-off of debt issuance
costs. The long-term debt was comprised of:
[bullet] $2.5 million of aggregate principal amount of its 9-1/2% senior
secured notes due 2000.
[bullet] $5.5 million of aggregate principal amount of its 11-1/4% senior
notes due 2002.
[bullet] Bank term loan borrowings of $3.8 million under its old credit
facility.
Interest Rate Swaps
Foamex L.P. uses derivative financial instruments to manage interest
expense. All derivative financial instruments are classified as "held for
purposes other than trading". Foamex L.P. does not use derivatives for
speculative purposes.
Interest rate swap agreements are used to manage interest expense by
changing the interest rate characteristics of certain debt instruments to
approximate current market conditions. The amended interest rate swap agreement
matures in June 2007 which is consistent with the underlying debt. The
differential paid or received on interest rate swap agreements is recognized on
an accrual basis as an adjustment to interest and debt issuance expense. Gains
F-36
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT (continued)
and losses on terminated interest rate swap agreements are amortized and
reflected in interest and debt issuance expense over the remaining term of the
underlying debt.
In connection with the Refinancing Plan, Foamex L.P.'s existing interest
rate swap agreements with a notional amount of $300.0 million were considered
to be effectively terminated since the underlying debt was extinguished. These
interest rate swap agreements had an estimated fair value liability of $8.2
million at the date of the Refinancing Plan which is included in the
extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the estimated fair value of the existing interest rate swap
agreements, Foamex L.P. entered into an amendment of the existing interest rate
swap agreements resulting in one interest rate swap agreement with a notional
amount of $150.0 million through June 2007. Accordingly, the $8.2 million fair
value liability has been recorded as a deferred credit which will be amortized
as a reduction in interest and debt issuance expense on a straight-line basis
over the life of the amended interest rate swap agreement. Under the amended
interest rate swap agreement, Foamex L.P. is obligated to make fixed payments
of 5.75% per annum through December 1997 and variable payments based on the
higher of LIBOR at the beginning of the period or the end of the period for the
remainder of the agreement, in exchange for fixed payments by the swap partner
at 6.44% per annum for the life of the agreement, payable semiannually in
arrears. The amended interest rate swap agreement can be terminated by either
party in June 2002, and annually thereafter, for a cash settlement based on the
fair market value of the amended interest rate swap agreement. Interest and
debt issuance expense is subject to fluctuations in LIBOR during the term of
the swap agreement except during 1997. Foamex L.P. is exposed to credit loss in
the event of nonperformance by the swap partner; however, the occurrence of
this event is not anticipated. The effect of the interest rate swaps described
above was a favorable adjustment to interest and debt issuance expense of $1.9
million and $1.7 million for the twenty-six week periods ended June 30, 1996
and June 29, 1997, respectively.
6. ENVIRONMENTAL MATTERS
As of June 29, 1997, Foamex L.P. has accruals of approximately $4.2
million for environmental matters. In addition, as of June 29, 1997, Foamex
L.P. has net receivables of approximately $1.0 million relating to
indemnification for environmental liabilities, net of an allowance of
approximately $1.0 million relating to potential disagreements regarding the
scope of the indemnification. Foamex L.P. believes that realization of the net
receivables established for indemnification is probable.
On May 5, 1997, there was an accidental chemical spill at one of Foamex
L.P.'s manufacturing facilities that was contained on site. Foamex L.P. is in
the process of disposing of the contaminated soil which is estimated to cost
approximately $0.4 million. The actual cost and the timetable for the clean-up
of the site cannot be predicted with any degree of certainty at this time;
therefore, there can be no assurance that the clean-up of the site will not
result in a more significant environmental liability in the future.
Foamex L.P. has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at four
additional facilities and soil contamination in excess of state standards at
three other facilities. Foamex L.P. has begun remediation and is conducting
further investigations into the extent of the contamination at these facilities
and, accordingly, the extent of the remediation that may ultimately be
required. The actual cost and the timetable of any such remediation cannot be
predicted with any degree of certainty at this time. As of June 29, 1997,
Foamex L.P. has environmental accruals of approximately $3.0 million for the
remaining potential remediation costs for these facilities based on engineering
estimates.
Federal regulations require that by 1998 all underground storage tanks
("USTs") be removed or upgraded in most states to meet applicable standards.
Foamex L.P. has six USTs that will require removal or permanent in-place
closure by the end of 1998. Due to the age of these tanks, leakage may have
occurred resulting in soil and possibly groundwater contamination. Foamex L.P.
has accrued approximately $0.3 million for the estimated removal and
remediation, if any, associated with the USTs. However, the full extent of
contamination and, accordingly, the actual cost of such remediation cannot be
predicted with any degree of certainty at this time. Foamex L.P. believes that
F-37
<PAGE>
FOAMEX L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. ENVIRONMENTAL MATTERS (continued)
its USTs do not pose a significant risk of environmental liability because of
Foamex L.P.'s monitoring practices for USTs and conditional approval for
permanent in-place closure for certain USTs. However, there can be no assurance
that such USTs will not result in significant environmental liability in the
future.
Foamex L.P. has been designated as a Potentially Responsible Party ("PRP")
by the United States Environmental Protection Agency (the "EPA") with respect
to thirteen sites, with an estimated total liability to Foamex L.P. for the
thirteen sites of less than approximately $0.5 million. Estimates of total
cleanup costs and fractional allocations of liability are generally provided by
the EPA or the committee of PRP's with respect to the specified site. In each
case, the participation of Foamex L.P. is considered to be immaterial.
Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential exposure relating to all pending
environmental matters, management believes that, based upon all currently
available information, the resolution of such environmental matters will not
have a material adverse effect on Foamex L.P.'s operations, financial position,
capital expenditures or competitive position. The possibility exists, however,
that new environmental legislation and/or environmental regulations may be
adopted, or other environmental conditions may be found to exist, that may
require expenditures not currently anticipated and that may be material.
7. LITIGATION
As of August 8, 1997, Foamex L.P. and Trace Holdings were two of multiple
defendants in actions filed on behalf of approximately 5,000 recipients of
breast implants in various United States federal and state courts and one
Canadian provincial court. Some of these actions allege substantial damages,
but most of these actions allege unspecified damages for personal injuries of
various types. Three of these cases seek to allege claims on behalf of all
breast implant recipients or other allegedly affected parties, but no class has
been approved or certified by the court. In addition, three cases have been
filed alleging claims on behalf of approximately 700 residents of Australia and
New Zealand. Foamex L.P. believes that the number of suits and claimants may
increase.
During 1995, Foamex L.P. and Trace Holdings were granted summary judgments
and dismissed as defendants from all cases in the federal courts of the United
States and the state courts of California. Appeals for these decisions were
withdrawn and the decisions are final.
Although breast implants do not contain foam, certain silicone gel
implants were produced using a polyurethane foam covering fabricated by
independent distributors or fabricators from bulk foam purchased from Foamex
L.P. or Trace Holdings. Neither Foamex L.P. nor Trace Holdings recommended,
authorized or approved the use of its foam for these purposes. Foamex L.P. is
indemnified by Trace Holdings for any such liabilities relating to foam
manufactured prior to the capitalization of Foamex L.P. in October 1990.
Although Trace Holdings has paid Foamex L.P.'s litigation expenses to date
pursuant to such indemnification, and Foamex L.P. believes Trace Holdings will
likely be in a position to continue to pay such expenses, there can be no
assurance that Trace Holdings will be able to continue to provide such
indemnification. While it is not feasible to predict or determine the outcome
of these actions, based on present assessment of the merits of pending claims,
after consultation with the general counsel of Trace Holdings, and without
taking into account the indemnification provided by Trace Holdings, the
coverage provided by Trace Holdings' and Foamex L.P.'s liability insurance, and
the potential indemnity from the manufacturers of polyurethane covered breast
implants, Foamex L.P. believes that the disposition of matters that are pending
or that may reasonably be anticipated to be asserted should not have a material
adverse effect on either Foamex L.P.'s or Trace Holdings' consolidated
financial position or results of operations. If Foamex L.P.'s assessment of
Foamex L.P.'s liability with respect to these actions is incorrect, such
actions could have a material adverse effect on Foamex L.P.
Foamex L.P. is party to various other lawsuits, both as defendant and
plaintiff, arising in the normal course of business. It is the opinion of
management that the disposition of these lawsuits will not individually or in
the aggregate, have a material adverse effect on the financial position or
results of operations of Foamex L.P. If management's assessment of Foamex
L.P.'s ability with respect to these actions is incorrect, such actions could
have a material adverse effect on Foamex L.P's consolidated financial position.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Foamex Capital Corporation
Wilmington, Delaware
We have audited the accompanying balance sheets of Foamex Capital Corporation
("FCC") (a wholly-owned subsidiary of Foamex L.P.) as of December 31, 1995 and
December 29, 1996. These balance sheets are the responsibility of FCC's
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of FCC at December 31, 1995 and
December 29, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1997
F-39
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
ASSETS
CASH ................................................ $ 1,000 $ 1,000
========= =========
COMMITMENTS AND CONTINGENCIES ..................... $ -- $ --
--------- ---------
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share; 1,000 shares
authorized, issued and outstanding ............... 10 10
Additional paid-in capital ........................ 990 990
--------- ---------
TOTAL STOCKHOLDER'S EQUITY ........................ $ 1,000 $ 1,000
========= =========
</TABLE>
The accompanying notes are an integral part of the balance sheets.
F-40
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS
1. ORGANIZATION
Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed on July 20, 1992 and initially capitalized on July 23, 1992,
for the sole purpose of obtaining financing from external sources.
2. COMMITMENTS AND CONTINGENCIES
FCC is a joint obligor on the following borrowings of Foamex L.P.:
9-1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")
The Senior Secured Notes were issued on June 3, 1993 and bear interest at
the rate of 9-1/2% payable semiannually on each June 1 and December 1. The
Senior Secured Notes mature on June 1, 2000. The Senior Secured Notes are
collateralized by a first-priority lien on substantially all of the assets of
Foamex L.P. except for receivables, real estate and fixtures. The Senior
Secured Notes may be redeemed at the option of Foamex L.P., in whole or in
part, at any time on or after June 1, 1998, initially at 101.583% of their
principal amount, plus accrued interest, and declining to 100% on or after June
1, 1999. The Senior Secured Notes have been guaranteed, on a senior secured
basis by General Felt Industries, Inc. (General Felt) and on a senior unsecured
basis by Foamex International Inc. (Foamex International). During 1996, Foamex
L.P. repurchased $9.9 million of Senior Secured Notes.
11-1/4% Senior Notes due 2002 ("Senior Notes")
The Senior Notes bear interest at the rate of 11-1/4% payable semiannually
on each April 1 and October 1. The Senior Notes mature on October 1, 2002. The
Senior Notes may be redeemed at the option of Foamex L.P., in whole or in part,
at any time on or after October 1, 1997, initially at 104.219% of their
principal amount, plus accrued interest, and declining to 100% on or after
October 1, 2000. In October 1994, Foamex L.P. provided certain real property as
collateral for the Senior Notes, with a net book value of $37.8 million at
December 29, 1996. The Senior Notes have been guaranteed, on a senior basis, by
General Felt and Foamex International. During 1996, Foamex L.P. repurchased
$8.6 million of Senior Notes.
11-7/8% Senior Subordinated Debentures ("Subordinated Debentures")
The Subordinated Debentures bear interest at the rate of 11-7/8% payable
semiannually on each April 1 and October 1. The Subordinated Debentures mature
on October 1, 2004. The Subordinated Debentures may be redeemed at the option
of Foamex L.P., in whole or in part, at any time on or after October 1, 1997,
initially at 105.938% of their principal amount, plus accrued interest, and
declining to 100% on or after October 1, 2002. The Subordinated Debentures are
subordinated in right of payment to all senior indebtedness, including the
Senior Secured Notes and the Senior Notes. The Subordinated Debentures have
been guaranteed, on a senior subordinated basis, by General Felt and Foamex
International. During 1996, Foamex L.P. repurchased $0.1 million of
Subordinated Debentures.
11-7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")
The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in
connection with the acquisition of General Felt on March 23, 1993. The Series B
Debentures have terms substantially similar to the Subordinated Debentures,
except that holders of the Series B Debentures are entitled to receive proceeds
from an asset sale only if any proceeds remain after an offer to repurchase has
been made to the holders of the Subordinated Debentures. The Series B
Debentures have been guaranteed on a senior subordinated basis by General Felt.
F-41
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
December 29, June 29,
1996 1997
-------------- ---------
<S> <C> <C>
ASSETS
CASH ................................................ $1,000 $1,000
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
COMMITMENTS AND CONTINGENCIES ..................... $ -- $ --
------- -------
STOCKHOLDER'S EQUITY:
Common stock, par value $.01 per share; 1,000 shares
authorized, issued and outstanding ............... 10 10
Additional paid-in capital ........................ 990 990
------- -------
TOTAL STOCKHOLDER'S EQUITY ........................ $1,000 $1,000
======= =======
</TABLE>
The accompanying notes are an integral part of the balance sheets.
F-42
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
1. ORGANIZATION
Foamex Capital Corporation ("FCC"), a wholly-owned subsidiary of Foamex
L.P., was formed for the sole purpose of obtaining financing from external
sources.
2. COMMITMENTS AND CONTINGENCIES
FCC is a joint obligor on the following borrowings of Foamex L.P.:
9-7/8% Senior Subordinated Notes due 2007 ("Senior Subordinated Notes")
The Senior Subordinated Notes were issued by Foamex L.P. and FCC in a
private placement under Rule 144A of the Securities Act of 1933, as amended, on
June 12, 1997 in connection with the Refinancing Plan. The Senior Subordinated
Notes bear interest at the rate of 9-7/8% per annum payable semiannually on each
June 15 and December 15, commencing December 15, 1997. The Senior Subordinated
Notes mature on June 15, 2007. The Senior Subordinated Notes may be redeemed at
the option of Foamex L.P., in whole or in part, at any time on or after June
15, 2002, initially at 104.938% of their principal amount, plus accrued
interest and liquidated damages, as defined, if any, thereon to the date of
redemption and declining to 100.0% on or after June 15, 2005. In addition, at
any time prior to June 15, 2000, Foamex L.P. may on one or more occasions
redeem up to 35.0% of the initially outstanding principal amount of the Senior
Subordinated Notes at a redemption price equal to 109.875% of the principal
amount, plus accrued interest and liquidated damages, if any, thereon to the
date of redemption with the cash proceeds of one or more Public Equity
Offerings, as defined; provided, that, in each case, at least 65% of the
initially outstanding aggregate principal amount of Notes remains outstanding
immediately after the occurrence of such redemption. Upon the occurrence of a
change of control, as defined, each holder of Senior Subordinated Notes will
have the right to require Foamex L.P. to repurchase the Senior Subordinated
Notes at a price equal to 101.0% of the principal amount, plus accrued interest
and liquidated damages, if any, to the date of redemption. The Senior
Subordinated Notes are subordinated in right of payment to all senior
indebtedness and are pari passu in right of payment to two issues of senior
subordinated debentures due 2004 and the subordinated note. The Senior
Subordinated Notes contain certain covenants that limit, among other things,
the ability of Foamex L.P. (i) to pay distributions or redeem partnership
interests, (ii) to make certain restrictive payments or investments, (iii) to
incur additional indebtedness or issue Preferred Equity Interest, as defined,
(iv) to merge, consolidate or sell all or substantially all of its assets, or
(vi) to enter into certain transactions with affiliates or related persons. The
Senior Subordinated Notes are guaranteed by General Felt and Foamex Fibers and
all other future domestic subsidiaries of Foamex L.P. and FCC.
Foamex L.P. and FCC have filed a registration statement relating to an
exchange offer in which Foamex L.P. will offer to exchange the Senior
Subordinated Notes issued in the private placement for new notes. The terms of
the new notes will be substantially identical in all respects (including
principal amount, interest rate, maturity and ranking) to the terms of the
Senior Subordinated Notes, except that the new notes will be transferable by
holders thereof without further registration under the Securities Act of 1933,
as amended (except in the case of Senior Subordinated Notes held by affiliates
of the issuers and for certain other holders), and are not subject to any
covenant regarding registration under the Securities Act of 1933, as amended.
The exchange offer is expected to be consummated during the third quarter of
1997.
9-1/2% Senior Secured Notes due 2000 ("Senior Secured Notes")
The Senior Secured Notes were issued on June 3, 1993 and bear interest at
the rate of 9-1/2% per annum payable semiannually on each June 1 and December 1.
The Senior Secured Notes mature on June 1, 2000. The Senior Secured Notes are
collateralized by a first-priority lien on substantially all of the assets of
Foamex L.P. except for receivables, real estate and fixtures. The Senior
Secured Notes may be redeemed at the option of Foamex L.P., in whole or in
part, at any time on or after June 1, 1998, initially at 101.583% of their
principal amount, plus accrued interest, and declining to 100.0% on or after
June 1, 1999. The Senior Secured Notes have been guaranteed, on a senior
secured basis by General Felt and on a senior unsecured basis by Foamex
International. During 1996 and 1997, Foamex L.P. repurchased $9.9 million and
$102.3 million, respectively, aggregate principal amount of Senior Secured
Notes.
F-43
<PAGE>
FOAMEX CAPITAL CORPORATION
(A Wholly-Owned Subsidiary of Foamex L.P.)
NOTES TO BALANCE SHEETS (unaudited)
2. COMMITMENTS AND CONTINGENCIES (continued)
11-1/4% Senior Notes due 2002 ("Senior Notes")
The Senior Notes bear interest at the rate of 11-1/4% per annum payable
semiannually on each April 1 and October 1. The Senior Notes mature on October
1, 2002. The Senior Notes may be redeemed at the option of Foamex L.P., in
whole or in part, at any time on or after October 1, 1997, initially at
104.219% of their principal amount, plus accrued interest, and declining to
100.0% on or after October 1, 2000. In October 1994, Foamex L.P. provided
certain real property as collateral for the Senior Notes, with a net book value
of $37.8 million at December 29, 1996. The Senior Notes have been guaranteed,
on a senior basis, by General Felt. During 1996 and 1997, Foamex L.P.
repurchased $8.6 million and $135.6 million, respectively, aggregate principal
amount of Senior Notes. Foamex L.P. intends to redeem all of the outstanding
Senior Notes on October 1, 1997.
11-7/8% Senior Subordinated Debentures ("Subordinated Debentures")
The Subordinated Debentures bear interest at the rate of 11-7/8% per annum
payable semiannually on each April 1 and October 1. The Subordinated Debentures
mature on October 1, 2004. The Subordinated Debentures may be redeemed at the
option of Foamex L.P., in whole or in part, at any time on or after October 1,
1997, initially at 105.938% of their principal amount, plus accrued interest,
and declining to 100.0% on or after October 1, 2002. The Subordinated
Debentures are subordinated in right of payment to all senior indebtedness,
including the Senior Secured Notes and the Senior Notes. The Subordinated
Debentures have been guaranteed, on a senior subordinated basis, by General
Felt and rank pari passu in right of payment to the Senior Subordinated Notes.
During 1996 and 1997, Foamex L.P. repurchased $0.1 million and $104.9 million,
respectively, aggregate principal amount of Subordinated Debentures. Foamex
L.P. intends to redeem all of the outstanding Subordinated Debentures on
October 1, 1997.
11-7/8% Senior Subordinated Debentures, Series B ("Series B Debentures")
The Series B Debentures were issued July 30, 1993, by Foamex L.P. in an
exchange offer to holders of senior subordinated debentures issued in
connection with the acquisition of General Felt on March 23, 1993. The Series B
Debentures have terms substantially similar to the Subordinated Debentures,
except that holders of the Series B Debentures are entitled to receive proceeds
from an asset sale only if any proceeds remain after an offer to repurchase has
been made to the holders of the Subordinated Debentures. The Series B
Debentures have been guaranteed on a senior subordinated basis by General Felt.
During 1997, Foamex L.P. repurchased $6.9 million of Series B Debentures.
Foamex L.P. intends to redeem all of the outstanding Series B Debentures on
October 1, 1997.
F-44
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
General Felt Industries, Inc.:
We have audited the accompanying consolidated balance sheets of General Felt
Industries, Inc. and subsidiaries ("General Felt") as of December 31, 1995 and
December 29, 1996, and the related consolidated statements of operations, cash
flows and stockholder's equity for each of the three years in the period ended
December 29, 1996. These financial statements are the responsibility of General
Felt's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of General Felt as
of December 31, 1995 and December 29, 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 29, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 26, 1997
F-45
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash ................................................... $ 538 $ 336
Restricted cash .......................................... -- 12,143
Accounts receivable, net of allowance for doubtful accounts
of $5,986 and $4,453 .................................... 35,532 44,973
Inventories ............................................. 18,485 25,314
Deferred income taxes .................................... -- 6,342
Other current assets .................................... 3,574 3,093
-------- --------
Total current assets .................................... 58,129 92,201
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements .............................. 600 3,491
Buildings and leasehold improvements ..................... 5,579 5,896
Machinery, equipment and furnishings ..................... 23,426 29,354
Construction in progress ................................. 803 1,957
-------- --------
Total ................................................... 30,408 40,698
Less accumulated depreciation and amortization ......... (5,322) (8,950)
-------- --------
Property, plant and equipment, net ........................ 25,086 31,748
COST IN EXCESS OF ASSETS ACQUIRED, NET ..................... 58,964 50,574
NET ASSETS OF DISCONTINUED OPERATIONS ..................... 11,689 --
OTHER ASSETS ................................................ 1,629 3,158
-------- --------
TOTAL ASSETS ................................................ $155,497 $177,681
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-46
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(Continued)
(thousands)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY:
CURRENT LIABILITIES:
Current portion of long-term debt--unrelated parties ...... $ 3,000 $ --
Current portion of long-term debt--related party ......... -- 12,143
Accounts payable .......................................... 10,697 13,719
Accounts payable to related party ........................ 13,000 17,987
Accrued employee compensation .............................. 2,133 1,434
Accrued restructuring charges .............................. 4,308 2,279
Other accrued liabilities ................................. 10,780 14,210
--------- ---------
Total current liabilities ................................. 43,918 61,772
LONG-TERM DEBT--UNRELATED PARTIES ........................... 8,250 --
LONG-TERM DEBT--RELATED PARTY .............................. 48,306 9,260
DEFERRED INCOME TAXES ....................................... -- 3,273
ACCRUED RESTRUCTURING--NONCURRENT ........................... -- 2,308
OTHER LIABILITIES .......................................... 5,514 4,049
--------- ---------
Total liabilities ....................................... 105,988 80,662
--------- ---------
COMMITMENTS AND CONTINGENCIES .............................. -- --
--------- ---------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; authorized, issued and
outstanding 1,000 shares ................................. -- --
Additional paid-in capital ................................. 69,194 143,965
Retained earnings (accumulated deficit) .................. (19,685) (46,946)
--------- ---------
Total stockholder's equity .............................. 49,509 97,019
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY .................. $ 155,497 $ 177,681
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-47
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
January 1, December 31, December 29,
1995 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
NET SALES ................................. $290,577 $ 279,123 $ 302,648
COST OF GOODS SOLD ........................ 251,120 252,591 263,316
-------- --------- ---------
GROSS PROFIT .............................. 39,457 26,532 39,332
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ................................. 24,392 22,312 18,819
RESTRUCTURING CHARGES (CREDITS) ......... -- 14,156 (5,460)
-------- --------- ---------
INCOME (LOSS) FROM OPERATIONS ............ 15,065 (9,936) 25,973
INTEREST EXPENSE ........................ 1,178 1,164 2,179
OTHER INCOME, NET ........................ 90 52 1,015
-------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES ...... 13,977 (11,048) 24,809
PROVISION FOR INCOME TAXES ............... 5,587 962 6,344
-------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS . 8,390 (12,010) 18,465
-------- --------- ---------
DISCONTINUED OPERATIONS:
OPERATING LOSS FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAXES ......... (2,293) (11,040) (3,389)
LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS INCLUDING PROVISION FOR
OPERATING LOSSES DURING THE PHASE-
OUT PERIOD, NET OF INCOME TAXES ......... -- -- (42,337)
-------- --------- ---------
LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAXES ........................... (2,293) (11,040) (45,726)
-------- --------- ---------
NET INCOME (LOSS) ........................ $ 6,097 $ (23,050) $ (27,261)
======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-48
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
January 1, December 31, December 29,
1995 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) .......................................... $ 6,097 $ (23,050) $ (27,261)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization .............................. 4,054 4,476 4,564
Net loss on disposal of discontinued operations ............ -- -- 40,551
Net loss from discontinued operations ..................... 2,293 11,040 5,175
Asset writedowns and other charges (credits) ............... -- 8,505 (6,769)
Provision for uncollectible accounts ..................... 607 2,992 967
Deferred income taxes .................................... 5,541 962 5,519
Changes in operating assets and liabilities, net of
acquisitions and discontinued operations: ..................
Accounts receivable ....................................... (4,512) 721 (10,358)
Inventories ................................................ 254 157 (6,829)
Accounts payable and accounts payable to related party 6,039 (6,309) 8,009
Accrued restructuring charges .............................. (566) 3,424 280
Other assets and liabilities .............................. (7,961) (2,328) (1,813)
--------- --------- ---------
Net cash provided by continued operations .................. 11,846 590 12,035
Net cash used for discontinued operations .................. (969) (12,617) (524)
--------- --------- ---------
Net cash provided by (used for) operating activities ...... 10,877 (12,027) 11,511
--------- --------- ---------
INVESTING ACTIVITIES:
Capital expenditures ....................................... (3,391) (1,604) (2,442)
Proceeds from sale of subsidiary ........................... -- -- 42,650
Acquisition, net of cash acquired ........................ -- (7,272) --
Increase in restricted cash .............................. -- --- (12,143)
Capital expenditures for discontinued operations ......... (6,565) (4,429) (919)
Other investing activities ................................. 1,016 10 (2,149)
--------- --------- ---------
Net cash provided by (used for) investing activities ...... (8,940) (13,295) 24,997
--------- --------- ---------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) revolving loans ......... 3,000 (3,000) --
Net proceeds from (repayments of) Foamex L.P. notes
payable ................................................... (26,734) 14,742 (26,903)
Proceeds from long-term debt--unrelated party ............ 15,000 -- --
Payments on long-term debt--unrelated party ............... (750) (3,000) (11,250)
Net financing activities of discontinued operations ...... 7,534 17,046 1,443
--------- --------- ---------
Net cash provided by (used for) financing activities ...... (1,950) 25,788 (36,710)
--------- --------- ---------
Net increase (decrease) in cash .............................. (13) 466 (202)
Cash at beginning of period ................................. 85 72 538
--------- --------- ---------
Cash at end of period ....................................... $ 72 $ 538 $ 336
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-49
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended 1994, 1995 and 1996
(thousands)
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
--------------------- Paid-In (Accumulated
Shares Amount Capital Deficit)
--------- --------- ------------ -------------
<S> <C> <C> <C> <C>
Balances at January 2, 1994 ............... 1 -- $ 67,036 $ (2,732)
Net income ................................. -- -- -- 6,097
-------- -------- --------- ---------
Balances at January 1, 1995 ............... 1 -- 67,036 3,365
Assumption of pension liability by
Foamex L.P. .............................. -- -- 2,158 --
Net loss .................................... -- -- -- (23,050)
-------- -------- --------- ---------
Balances at December 31, 1995 ............... 1 -- 69,194 (19,685)
Net loss .................................... -- -- -- (27,261)
Contribution by Foamex L.P. of
intercompany notes in connection with
sale of Perfect Fit Industries, Inc. ...... -- -- 74,771 --
-------- -------- --------- ---------
Balances at December 29, 1996 ............... 1 -- $143,965 $ (46,946)
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-50
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
General Felt Industries, Inc. and subsidiaries ("General Felt") is one of
the largest distributors and manufacturers of carpet cushion in North America.
In addition, Foamex Fibers, Inc. ("Foamex Fibers"), a wholly-owned subsidiary,
manufactures various nonwoven textile fiber products used primarily for carpet
padding and in the furniture industry.
General Felt is a wholly-owned subsidiary of Foamex L.P. which in turn is
a 99% owned subsidiary of Foamex International Inc. ("Foamex International").
During 1996, General Felt sold Perfect Fit Industries, Inc. ("Perfect
Fit") which comprised the home comfort products segment of General Felt. The
consolidated financial statements of General Felt have been restated for
discontinued operations and include a net loss of $42.3 million, which includes
the loss on disposal and a net loss of $1.8 million (net of $1.2 million income
tax benefit) relating to operating losses during the phase-out period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include the accounts of General
Felt, other than the home comfort products segment, which is accounted for as
discontinued operations. Intercompany accounts and transactions for continuing
operations have been eliminated in consolidation.
The consolidated financial statements have been restated for discontinued
operations. The accompanying notes present amounts related only to continuing
operations.
Fiscal Year
General Felt's fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal years 1994, 1995 and 1996 were composed of fifty-two
weeks and ended on January 1, 1995, December 31, 1995 and December 29, 1996,
respectively.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
(See Notes 4, 10, 11 and 14 and Cost in Excess of Net Assets Acquired below).
Revenue Recognition
Revenue from sales is recognized when products are shipped.
Discounts and Billing Adjustments
A reduction in sales revenue is recognized for sales discounts when
product is invoiced or for other billing adjustments when authorized.
Cash Management
General Felt's cash management system operates such that checks processed
by General Felt but not yet presented to the bank are not considered reductions
of cash or accounts payable. Checks presented to the bank for payment are
provided for by a draw on the revolving notes with Foamex L.P. Cash receipts
are used to reduce the outstanding borrowings under the Foamex L.P. revolving
notes. As of December 31, 1995 and December 29, 1996, $0.4 million and $0.4
million, respectively, of processed checks have not been presented to the bank
and are included in accounts payable.
Restricted Cash
As of December 29, 1996, General Felt had restricted cash of approximately
$12.1 million. This cash was derived from the net sales proceeds relating to
the sale of Perfect Fit and is restricted by Foamex L.P.'s debt agreements.
This restricted cash will be used to reduce long-term debt--related party with
Foamex L.P. during 1997;
F-51
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
accordingly, a corresponding amount of long-term debt--related party has been
classified as current in the accompanying consolidated balance sheets.
Inventories
Inventories are stated at the lower of cost or market. The cost of
inventories is determined on a first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over the estimated useful lives of the assets. The
range of useful lives estimated for buildings and building improvements is
generally ten to forty years and the range for machinery, equipment and
furnishings is five to twelve years. Leasehold improvements are amortized over
the shorter of the terms of the respective lease or the estimated useful life
of the improvement, whichever is shorter. Depreciation expense for the years
ended 1994, 1995 and 1996 was $2.6 million, $2.8 million and $3.0 million,
respectively. For income tax purposes, General Felt uses accelerated
depreciation methods.
Cost of maintenance and repairs is charged to expense as incurred.
Renewals and improvements are capitalized. Upon retirement or other disposition
of items of plant and equipment, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
During 1994, General Felt sold equipment with a net book value of approximately
$1.0 million to a related party. There was no gain or loss on the sale.
Cost in Excess of Net Assets Acquired
The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for by the purchase method is
amortized using the straight-line method over a forty year period. At each
balance sheet date General Felt evaluates the recoverability of cost in excess
of net assets acquired using certain financial indicators such as historical
and future ability to generate income from operations based on a going concern
basis. Accumulated amortization as of December 31, 1995 and December 29, 1996
is approximately $4.3 million and $5.9 million, respectively.
Environmental Matters
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the cost
can be reasonably estimated.
Income Taxes
Income taxes are accounted for under the liability method in which
deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of assets and liabilities using the
income tax rates, under existing legislation, expected to be in effect at the
date such temporary differences are expected to reverse.
Reclassifications
Certain amounts in the 1994 and 1995 consolidated financial statements
have been reclassified to conform with the current year's presentation.
3. DISCONTINUED OPERATIONS
During 1996, General Felt finalized the sale of the outstanding common
stock of Perfect Fit, a wholly-owned subsidiary, for an adjusted sale price of
approximately $44.2 million. The sale included all of the net assets of the
home comfort products segment with an adjusted net book value of approximately
$84.5 million after Foamex L.P.
F-52
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. DISCONTINUED OPERATIONS (continued)
contributed Perfect Fit's intercompany notes receivable and accrued interest
thereon with Foamex L.P. to General Felt. Actual and estimated transaction
expenses related to the sale totaled approximately $1.5 million. General Felt
has recorded a loss for discontinued operations of approximately $42.3 million,
which includes the loss on disposal and a net loss of $1.8 million (net of $1.2
million income tax benefit) relating to operating losses during the phase-out
period. A valuation allowance has been provided for the capital loss relating
to the sale of Perfect Fit since General Felt has determined that capital gain
taxable income is not likely to be sufficient to recognize the deferred tax
asset relating to the capital loss carryforward.
Summary operating results of General Felt's discontinued operations were
as follows:
<TABLE>
<CAPTION>
1994 1995 1996(1)
------------ ------------ -----------
(thousands)
<S> <C> <C> <C>
Net sales .................................... $ 95,381 $ 98,464 $ 50,097
Gross profit ................................. 18,200 14,946 8,065
Income (loss) from operations ............... 4,170 (3,058) 1,123
Interest and debt issuance expense ............ 7,194 10,636 5,543
Other expense ................................. -- -- 348
Loss from discontinued operations before income
taxes ....................................... (3,024) (13,694) (4,768)
Provision (benefit) for income taxes ......... (731) (2,654) (1,379)
-------- --------- --------
Loss from discontinued operations, net of income
taxes ....................................... $ (2,293) $ (11,040) $ (3,389)
======== ========= ========
</TABLE>
(1) General Felt's discontinued operations includes the operations of Perfect
Fit through June 1996.
Net assets of General Felt's discontinued operations (excluding
intercompany net assets) at December 31, 1995 is as follows:
1995
------------
(thousands)
Current assets .............................. $31,925
Property, plant and equipment, net ......... 21,672
Cost in excess of assets acquired, net ...... 40,333
Other assets ................................. 2,219
--------
Total assets .............................. 96,149
--------
Current liabilities ........................ 11,076
Long-term debt due to Foamex L.P. ............ 73,384
--------
Total liabilities ........................... 84,460
--------
Net assets ................................. $11,689
========
4. RESTRUCTURING CHARGES
In 1995, General Felt approved a restructuring plan (the "1995
restructuring plan") to consolidate two foam production, fabrication or branch
locations to concentrate resources as a result of industry conditions and
better position itself to achieve its strategic growth objectives. General Felt
recorded restructuring charges of $14.2 million which was comprised of $13.1
million charge associated with the consolidation of the two foam production,
fabrication or branch locations and a $1.1 million charge associated with the
completion of a 1993 restructuring plan. The components of the $13.1 million
restructuring charge include: $8.5 million for fixed asset writedowns
F-53
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. RESTRUCTURING CHARGES (continued)
(net of estimated sale proceeds), $3.8 million for plant closure and operating
lease obligations and $0.8 million for personnel reductions. The $0.8 million
cost for personnel reductions primarily represents severance and employee
benefit costs associated with the elimination of manufacturing and
administrative personnel.
In 1996, General Felt determined to continue to operate one of the
facilities originally identified for closure in the 1995 restructuring plan
because of improved economics and the lack of synergy to be achieved from
relocating the manufacturing process. In addition, General Felt has approved a
plan to close a facility that was not originally identified in the 1995
restructuring plan. As a result of these changes to the 1995 restructuring
plan, General Felt recorded a $5.5 million net restructuring credit which
included a restructuring credit of $11.3 million associated with General Felt's
decision not to close the facility identified as part of the 1995 restructuring
plan offset by $5.8 million of restructuring charges relating to the closure of
a facility during 1997 (the "1996 restructuring plan").
Generally, the 1995 restructuring plan has been implemented as originally
contemplated. The following table sets forth the components of General Felt's
restructuring and other charges:
<TABLE>
<CAPTION>
Asset Plant Closure Personnel
Total Writedowns and Leases Reductions Other
---------- ------------ --------------- ------------ ---------
(millions)
<S> <C> <C> <C> <C> <C>
1995 restructuring charge ........................ $ 14.2 $ 8.5 $ 3.8 $ 0.8 $ 1.1
Asset writeoff/writedowns ........................ (11.3) (9.9) (0.3) -- (1.1)
------- ------ ------ ------ ------
Balances at December 31, 1995 ..................... 2.9 (1.4) 3.5 0.8 --
Cash spending .................................... (1.0) -- (0.5) (0.5) --
1996 restructuring charge ........................ 5.8 1.6 3.9 0.3 --
Restructuring credits ........................... (11.3) (8.4) (2.7) (0.2) --
Asset adjustments for restructuring credits ...... 8.2 8.2 -- -- --
------- ------ ------ ------ ------
Balances at December 29, 1996 ..................... $ 4.6 $ -- $ 4.2 $ 0.4 $ --
======= ====== ====== ====== ======
</TABLE>
As indicated in the table above, the accrued restructuring balance at
December 29, 1996, will be used for plant closure and leases including rundown
costs at the facilities. General Felt expects to incur approximately $2.3
million of charges during 1997 with the remaining $2.3 million to be incurred
through 2001. General Felt has terminated or notified 61 employees in the
manufacturing and administrative areas of their impending termination.
5. ACQUISITIONS
In April 1995, Foamex Fibers acquired certain assets and assumed certain
liabilities of GS Industries, Inc. and Pontotoc Fibers, Inc., manufacturers of
various nonwoven textile fiber products used primarily for carpet padding and
in the furniture industry for aggregate consideration of approximately $8.0
million, including related fees and expenses of approximately $0.3 million,
with an initial cash payment of $7.2 million. The excess of the purchase price
over the estimated fair value of the net assets acquired was approximately $3.9
million. The acquisition was accounted for as a purchase and the operations of
the acquired companies are included in the consolidated statements of
operations and cash flows from the date of acquisition. The cost of the
acquisition has been allocated on the basis of the fair value of the assets
acquired and the liabilities assumed. The excess of the purchase price over the
estimated fair value of the net assets acquired is being amortized using the
straight-line method over forty years.
F-54
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. INVENTORIES
Inventories consist of:
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
Raw material and supplies ...... $ 7,277 $12,795
Work in process ............... 917 1,120
Finished goods .................. 10,291 11,399
-------- --------
Total ........................ $18,485 $25,314
======== ========
7. LONG-TERM DEBT--RELATED PARTY
General Felt has two revolving promissory notes with Foamex L.P. to borrow
up to a maximum of $64.0 million. During 1996, General Felt used approximately
$22.5 million of the net proceeds from the sale of Perfect Fit to reduce these
promissory notes with Foamex L.P. The notes are due on demand, however, the
remaining net proceeds of $12.1 million from the sale of Perfect Fit will be
used to paydown the notes with Foamex L.P. during 1997 and is classified as a
current liability in the accompanying balance sheets. Foamex L.P. has indicated
that it does not intend to demand payment on the remaining balance of the notes
during 1997. Accordingly, the balance of the notes of $9.3 million is
classified as long-term in the accompanying balance sheets. Interest is payable
quarterly at the prime rate (8.25% at December 29, 1996). General Felt's cash
receipts reduce the outstanding balance and the cash requirements increase the
outstanding balance on a daily basis.
8. LONG-TERM DEBT--UNRELATED PARTY
Long-term debt--unrelated parties consists of:
December 31,
1995
-------------
(thousands)
Term loan .................. $11,250
Revolving loan ............ --
--------
11,250
Less current portion ...... 3,000
--------
Total ..................... $ 8,250
========
Term and Revolving Loans
On June 28, 1994, Foamex L.P. and General Felt entered into an amended
credit agreement (the "Foamex L.P. Credit Facility"). The Foamex L.P. Credit
Facility provides for loans of up to $85.0 million of which up to $40.0 million
was available as a term loan payable in 20 equal quarterly installments
commencing October 1994 and up to $45.0 million is available under a revolving
line of credit which expires in June 1999. On June 28, 1994, Foamex L.P. and
General Felt entered into a $40.0 million term loan under the Foamex L.P.
Credit Facility of which $15.0 million was borrowed by General Felt; no further
term loan borrowings are available thereunder. Borrowings under the Foamex L.P.
Credit Facility are collateralized by the accounts receivable of Foamex L.P.
and General Felt. During 1996, General Felt used $9.0 million of net proceeds
from the sale of Perfect Fit to repay its outstanding term loan borrowings.
Pursuant to the terms of the Foamex L.P. Credit Facility, borrowed funds will
bear interest at a floating rate equal to 1.0% per annum plus the higher of (I)
the base rate of The Bank of Nova Scotia, as in effect from time to time, (ii)
a rate that is, generally, 0.5% per annum plus a fluctuating rate generally
equal to the rate on three-month certificates of deposit, subject to certain
adjustments, plus a fluctuating rate generally equal to the annual assessment
rate paid by The Bank of Nova Scotia to the Federal Deposit Insurance
Corporation or (iii) 0.5% per annum plus the federal funds rate in effect from
time to time. At the option of either borrower, portions
F-55
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. LONG-TERM DEBT--UNRELATED PARTY (continued)
of outstanding loans under the Foamex L.P. Credit Facility will be convertible
into Eurodollar rate loans bearing interest at a rate generally equal to 3.0%
per annum above the average LIBOR rate of Citibank, N.A. and The Bank of Nova
Scotia. As of December 29, 1996, no revolving credit borrowings were
outstanding under the Foamex L.P. Credit Facility with unused availability of
$33.3 million. In addition, there were $11.7 million in letters of credit
outstanding under the Foamex L.P. Credit Facility.
Debt Restrictions and Covenants
The Foamex L.P. indentures, credit agreement and other indebtedness
agreements contain various covenants, including restrictions on payments of
distributions by Foamex L.P. to its partners, the incurrence of additional
indebtedness, the sale of assets, mergers and consolidations and transactions
with affiliates. In addition, certain agreements contain a provision that, in
the event of a defined change of control, the indebtedness must be repaid, in
certain cases at the option of the holder. Also, Foamex L.P. is required under
certain of these agreements to maintain specified financial ratios of which the
most restrictive is the maintenance of net worth and interest coverage ratios,
as defined. Under the most restrictive of the distribution restrictions,
approximately $0.7 million was available to be paid by Foamex L.P. to its
partners at December 29, 1996. Also, General Felt is required to maintain $41.0
million net worth, as defined.
As of December 29, 1996, Foamex L.P. and General Felt were in compliance
with the covenants of the Foamex L.P. Credit Facility and expect to be in
compliance with the covenants for the foreseeable future.
9. EMPLOYEE BENEFIT PLANS
Prior to December 31, 1996, General Felt had noncontributory defined
benefit pension plans (the "Plans") for eligible salaried employees (the
"Salaried Plan") and certain hourly employees at the Trenton and Pico Rivera
manufacturing facilities (the "Trenton Plan" and the "Pico Plan"). The Plans
provided benefits based principally on years of credited service and the
highest level of compensation earned during a specified period before
retirement for the Salaried Plan and stated amounts for each year of credited
service for the Trenton Plan and the Pico Plan. General Felt accounted for such
pension plans pursuant to SFAS No. 87, "Employer's Accounting for Pensions".
General Felt's funding policy was to make no less than the minimum annual
contributions required based upon actuarial methods allowable by applicable
governmental regulations. Effective January 1, 1995, General Felt merged the
Salaried Plan and the Trenton Plan with the defined benefit salaried pension
plan of Foamex L.P. During 1995, General Felt merged the Pico Plan with the
defined benefit hourly pension plan of Foamex L.P. Consequently, the aggregate
pension liability of approximately $2.2 million as of December 31, 1995
relating to these plans has been included in additional paid-in capital since
Foamex L.P. has assumed all future obligations under the plans. General Felt
will incur pension expense for future periods to the extent it provides funding
to the plans. During 1996, General Felt funded approximately $0.1 million to
the plans.
Net periodic pension cost includes the following components:
1994
------------
(thousands)
Service cost-benefits earned during the period ...... $ 419
Interest cost on projected benefit obligation ...... 1,077
Actual return on plan assets ........................ 84
Net amortization and deferral ........................ (1,195)
--------
Net periodic pension cost ........................... $ 385
========
F-56
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. EMPLOYEE BENEFIT PLANS (continued)
The assumptions used to determine net periodic pension cost and related
pension obligations were as follows:
1994
------
Discount rate .................................... 8.25%
Rate of increase in compensation levels ......... 4.00
Expected long-term rate of return on assets ...... 9.75
In addition, certain employees of General Felt are covered by
union-sponsored collectively bargained, multi-employer pension plans. General
Felt contributed and charged to expense $0.1 million related to these plans for
each of the years 1994, 1995 and 1996.
During 1995, General Felt merged its defined contribution plan with Foamex
L.P. Foamex L.P. is the plan sponsor; however, General Felt incurs a
contribution expense for its employees. The plan is qualified under Section
401(k) of the Internal Revenue Code (the "Code") and covers eligible employees
who elect to participate in the plan. Employee contributions are voluntary and
subject to certain limitations as imposed by the Code. During 1995, General
Felt provided contributions amounting to a 25% match of employees'
contributions up to 4% of eligible compensation. General Felt also provides an
additional 25% match of employees' contributions up to 4% of eligible
compensation made to a fund which invests in Foamex International common stock.
In addition, General Felt may make discretionary contributions amounting to a
25% match of employees' contributions up to 4% of eligible compensation. Prior
to 1995, contributions were provided only to employees who were members of
collective bargaining agreements. The expense for these contributions was $0.1
million for each of the years 1995 and 1996.
10. INCOME TAXES
The components of the total consolidated provision (benefit) for income
taxes are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ------------ -----------
(thousands)
<S> <C> <C> <C>
Continuing operations ................................. $5,587 $ 962 $ 6,344
Discontinued operations .............................. (731) (2,654) (2,558)
------- -------- --------
Total consolidated provision (benefit) for income taxes $4,856 $ (1,692) $ 3,786
======= ======== ========
Current:
Federal ............................................. $ -- $ -- $ 220
State ................................................ 46 -- 605
------- -------- --------
Total current ....................................... 46 -- 825
------- -------- --------
Deferred:
Federal ............................................. 3,598 (1,424) 1,666
State ................................................ 1,212 (268) 1,295
------- -------- --------
Total deferred .................................... 4,810 (1,692) 2,961
------- -------- --------
Total consolidated provision (benefit) for income
taxes ............................................. $4,856 $ (1,692) $ 3,786
======= ======== ========
</TABLE>
The components of the temporary differences that give rise to significant
deferred tax assets and liabilities are:
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
<S> <C> <C>
Deferred tax assets:
Inventory basis differences ..................... $ 861 $415
Employee benefit accruals ........................ 1,004 714
</TABLE>
F-57
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. INCOME TAXES (continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Allowances and contingent liabilities .............. 2,427 2,548
Restructuring and plant closing accruals ........... 7,498 3,632
Other ............................................. 77 139
Net operating loss carryforward .................. 8,975 5,154
Capital loss carryforwards ........................ -- 14,193
Valuation allowance .............................. (13,473) (15,988)
--------- ---------
Deferred tax assets .............................. 7,369 10,807
--------- ---------
Deferred tax liabilities:
Difference between book and tax depreciation ...... 7,009 6,722
Other ............................................. 360 1,016
--------- ---------
Deferred tax liabilities ........................ 7,369 7,738
--------- ---------
Net deferred tax asset (liabilities) ............... $ -- $ 3,069
========= =========
</TABLE>
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on continuing opera-tions is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ------------ -----------
(thousands)
<S> <C> <C> <C>
Statutory income taxes ........................ $4,892 $ (3,867) $ 8,683
State income taxes, net of federal ............ 839 (648) 1,235
Limitation on utilization of tax benefits ...... -- 4,929 --
Amortization of excess cost ..................... 525 554 517
Valuation allowance ........................... (452) -- (4,823)
Other .......................................... (217) (6) 732
------- --------- --------
Tax provision ................................. $5,587 $ 962 $ 6,344
======= ========= ========
</TABLE>
General Felt has determined that taxable capital gains in the foreseeable
future will likely not be sufficient to recognize the deferred tax asset
associated with the capital loss carryforward. Accordingly, a valuation
allowance has been provided for the deferred tax asset associated with the
capital loss carryforward and certain other deferred tax assets. During 1996,
the valuation allowance for deferred tax assets increased by $2.5 million which
included a $14.2 million increase for the capital loss carryforward, offset by
$6.9 million decrease due to reversal of preacquisition temporary differences
and $4.8 million for reversal of postacquisition temporary differences which is
reflected in the consolidated statement of operations. The $6.9 million
reversal of preacquisition temporary differences was used to reduce cost in
excess of assets acquired. As of December 29, 1996, approximately $1.8 million
of deferred tax assets are related to preacquisition activities and if utilized
will further reduce cost in excess of assets acquired. At December 29, 1996,
General Felt has $14.7 million of regular tax net operating loss carryforwards
for federal income tax purposes expiring from 2003 to 2010 of which $7.0
million was acquired in 1993 and is subject to limitations. In addition,
General Felt has $40.6 million of capital loss carryforwards that expire in
2001.
11. ENVIRONMENTAL MATTERS
During 1996, expenditures in connection with General Felt's compliance
with federal, state, and local environmental laws and regulations did not have
a material adverse effect on General Felt's operations, financial position,
capital expenditures or competitive position. As of December 29, 1996, General
Felt had environmental accruals of approximately $1.5 million for environmental
matters.
F-58
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. ENVIRONMENTAL MATTERS (continued)
General Felt has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at a
facility located in Philadelphia. General Felt has begun remediation and is
conducting further investigations into the extent of the contamination at this
facility and, accordingly, the extent of the remediation that may ultimately be
required. The actual cost and the timetable of any such remediation cannot be
predicted with any degree of certainty at this time. As of December 29, 1996,
General Felt had environmental accruals of approximately $1.2 million for the
remaining potential remediation costs for these facilities based on engineering
estimates.
Federal regulations require that by the end of 1998 all underground
storage tanks ("USTs") be removed or upgraded in all states to meet applicable
standards. General Felt has six USTs that will require removal or permanent
in-place closure by the end of 1998. Due to the age of these tanks, leakage may
have occurred resulting in soil and possibly groundwater contamination. General
Felt has accrued $0.3 million for the estimated removal and remediation, if
any, associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. General Felt believes that its USTs do not
pose a significant risk of environmental liability because of General Felt's
monitoring practices for USTs and conditional approval for the permanent
in-place closure for certain USTs. However, there can be no assurance that such
USTs will not result in significant environmental liability in the future.
Although it is possible that new information or future developments could
require General Felt to reassess its potential exposure relating to all pending
environmental matters, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on General Felt's
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be material.
12. COMMITMENTS AND CONTINGENCIES
Operating Leases
General Felt is obligated, under various noncancellable lease agreements,
for rental of facilities and machinery and equipment. Many of the leases
contain renewal options with varying terms and escalation clauses that provide
for increased rentals based upon increases in the Consumer Price Index, real
estate taxes and the lessors' operating expenses. Total minimum rental
commitment (excluding commitments accrued as part of the 1995 and 1996
restructuring plans) required under operating leases at December 29, 1996 was:
1997 .............................. $1,070
1998 .............................. 809
1999 .............................. 446
2000 .............................. 367
2001 .............................. 340
Thereafter ........................ 1,061
-------
Total minimum lease payments ...... $4,093
=======
Total rent expense for all operating leases for the years ended 1994, 1995
and 1996 was approximately $3.5 million, $2.8 million and $2.1 million,
respectively.
Guarantor
General Felt has pledged its stock as collateral for certain debt of
Foamex L.P. and is a co-guarantor of the borrowings outstanding under the
Foamex L.P. Credit Facility and Foamex L.P. bond indentures, which as of
December 29, 1996, had amounts outstanding of approximately $11.0 million and
$380.2 million, respectively.
F-59
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. RELATED PARTY TRANSACTIONS AND BALANCES
General Felt purchased $149.0 million, $141.2 million and $154.0 million
of carpet cushion foam from Foamex L.P. during 1994, 1995 and 1996,
respectively.
In connection with the consolidation of General Felt's administrative
functions with those of Foamex L.P., General Felt paid approximately $2.3
million and $1.4 million to Foamex L.P. in 1995 and 1996, respectively, for
direct costs incurred by Foamex L.P. on General Felt's behalf and for an
allocation of shared services and facilities.
During 1993, General Felt leased two facilities from limited partnerships
in which certain directors and officers of related parties have an interest.
The lessor under the first of these leases (the "East State Lease") is East
State Associates. The lease related to a warehouse at General Felt's Trenton,
New Jersey facility. In accordance with the terms of the lease, the lessor
exercised its right to require General Felt to purchase the facility at the
appraised fair market value of approximately $2.3 million. General Felt
assigned the purchase contract for the property to an unaffiliated third party
who purchased the property on March 28, 1994. General Felt no longer leases the
facility. The lessor under the second lease (the "West State Lease") is West
State Associates. The lease relates to General Felt's manufacturing facility in
Pico Rivera, California. During 1994, General Felt purchased the facility in
Pico Rivera, California from the lessor at the appraised fair market value of
$3.4 million. Rental payments for these leases for the year ended January 1,
1995 were $0.3 million.
14. FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
Concentration of Credit Risk
General Felt's financial instruments subject to credit risk are primarily
trade accounts receivable. Accounts receivable are concentrated with large
retail customers. General Felt performs ongoing credit evaluations of its
customers' financial conditions and, generally, requires no collateral. General
Felt maintains allowance accounts for potential credit losses and such losses
have been within management's expectations. Additionally, General Felt's ten
largest customers accounted for approximately 32.6% and 30.8% of accounts
receivable at December 31, 1995 and December 29, 1996, respectively.
Disclosure about Fair Value of Financial Instruments
The following disclosures of the estimated fair value amounts have been
determined based on General Felt's assessment of available market information
and appropriate valuation methodologies.
Carrying amounts reported in the consolidated balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities
and short term borrowings approximates fair value due to the short-term nature
of these instruments.
The carrying value of long-term debt approximates fair value based on the
borrowing rate available to General Felt for bank loans with similar terms and
maturities.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instruments. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
15. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental disclosures of cash flow information:
1994 1995 1996
-------- ------------ -------
(thousands)
Interest paid ............... $3,609 $5,300 $4,434
======= ======= =======
Income taxes paid, net ...... $ 316 $ 183 $ 596
======= ======= =======
F-60
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(thousands)
<TABLE>
<CAPTION>
December 29, June 29,
1996 1997
-------------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ................................................... $ 336 $ 150
Restricted cash ....................................... 12,143 --
Accounts receivable, net .............................. 44,973 45,571
Inventories .......................................... 25,314 26,325
Other current assets ................................. 9,435 8,115
--------- ---------
Total current assets ................................. 92,201 80,161
PROPERTY, PLANT AND EQUIPMENT, NET ..................... 31,748 31,244
COST IN EXCESS OF ASSETS ACQUIRED, NET .................. 50,574 49,879
OTHER ASSETS .......................................... 3,158 3,025
--------- ---------
TOTAL ASSETS .......................................... $ 177,681 $ 164,309
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt--related party ...... $ 12,143 $ --
Accounts payable ....................................... 13,719 10,415
Accounts payable to related parties .................. 17,987 15,180
Other accrued liabilities .............................. 17,923 16,640
--------- ---------
Total current liabilities ........................... 61,772 42,235
--------- ---------
LONG-TERM DEBT--RELATED PARTY ........................... 9,260 11,944
--------- ---------
OTHER LIABILITIES ....................................... 9,630 9,433
--------- ---------
COMMITMENTS AND CONTINGENCIES ........................... -- --
--------- ---------
STOCKHOLDER'S EQUITY: .................................
Common stock, $.01 par value; authorized, issued and
outstanding 1,000 shares .............................. -- --
Additional paid-in capital ........................... 143,965 143,965
Retained earnings (accumulated deficit) ............... (46,946) (43,268)
--------- ---------
Total stockholder's equity ........................... 97,019 100,697
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ............ $ 177,681 $ 164,309
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-61
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Week Periods Ended
-------------------------
June 30, June 29,
1996 1997
------------- ---------
<S> <C> <C>
NET SALES ................................................... $ 145,997 $148,633
COST OF GOODS SOLD .......................................... 127,002 132,512
--------- ---------
GROSS PROFIT ................................................ 18,995 16,121
SELLING, GENERAL AND .......................................
ADMINISTRATIVE EXPENSES .................................... 9,239 9,577
--------- ---------
INCOME FROM OPERATIONS ....................................... 9,756 6,544
INTEREST EXPENSE ............................................. 755 596
OTHER INCOME, NET .......................................... 234 140
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR
INCOME TAXES ................................................ 9,235 6,088
PROVISION FOR INCOME TAXES ................................. 3,880 2,410
--------- ---------
INCOME FROM CONTINUING OPERATIONS ........................... 5,355 3,678
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES ...... (42,686) --
--------- ---------
NET INCOME (LOSS) .......................................... $ (37,331) $ 3,678
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-62
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Week Periods Ended
--------------------------
June 30, June 29,
1996 1997
------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) .......................................... $ (37,331) $ 3,678
Adjustments to reconcile net income to net cash provided
by operating activities: .................................
Depreciation and amortization .............................. 2,212 2,293
Loss from discontinued operations ........................... 42,686 --
Other operating activities ................................. 238 1,941
Changes in operating assets and liabilities, net of
discontinued operations .................................... (7,514) (9,780)
--------- --------
Net cash provided by (used for) operating activities ...... 291 (1,868)
Net cash used for discontinued operations .................. (1,017) --
--------- --------
Net cash used for operating activities ..................... (726) (1,868)
--------- --------
INVESTING ACTIVITIES:
Capital expenditures ....................................... (1,336) (1,002)
Decrease in restricted cash ................................. -- 12,143
Capital expenditures for discontinued operations ............ (900) --
--------- --------
Net cash provided by (used for) investing activities ...... (2,236) 11,141
--------- --------
FINANCING ACTIVITIES:
Net proceeds from (repayments of) Foamex L.P.
notes payable ............................................. 2,238 (9,459)
Payment on long-term debt--unrelated party .................. (1,500) --
Net financing activities of discontinued operations ......... 1,917 --
--------- --------
Net cash (used for) provided by financing activities ...... 2,655 (9,459)
--------- --------
Net decrease in cash ....................................... (307) (186)
Cash at beginning of period ................................. 538 336
--------- --------
Cash at end of period ....................................... $ 231 $ 150
========= ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-63
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
General Felt Industries, Inc. and subsidiaries' ("General Felt") condensed
consolidated balance sheet as of December 29, 1996 has been condensed from the
audited consolidated balance sheet at that date. The condensed consolidated
balance sheet as of June 29, 1997 and the condensed consolidated statements of
operations and the condensed consolidated statements of cash flows for the
twenty-six week periods ended June 30, 1996 and June 29, 1997 have been
prepared by General Felt and have not been audited by General Felt's
independent accountants. Also, the condensed consolidated statements of
operations and the condensed consolidated statement of cash flows for the
twenty-six week period ended June 30, 1996 have been restated for discontinued
operations (see Note 2 below). In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a
fair presentation of the consolidated financial position, results of operations
and cash flows have been included.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with General
Felt's 1996 consolidated financial statements and notes thereto as set forth
elsewhere in this Prospectus.
2. DISCONTINUED OPERATIONS
During 1996, General Felt sold the outstanding common stock of Perfect Fit
Industries, Inc. ("Perfect Fit"), a wholly-owned subsidiary, for an adjusted
sale price of approximately $44.2 million. The sale included the net assets of
General Felt's home comfort products business segment.
General Felt's condensed consolidated financial statements have been
restated to reflect the discontinuation of the home comfort products business
segment. A summary of the operating results for the discontinued operations is
as follows:
<TABLE>
<CAPTION>
26 Week
Period Ended
June 30, 1996
(thousands)
--------------
<S> <C>
Net sales ...................................................... $ 50,097
Gross profit ................................................... 8,065
Income (loss) from operations .................................... 1,123
Interest and debt issuance expense ............................... 5,543
Loss on disposal of discontinued operations ...................... (39,297)
Other expense ................................................... 348
Loss from discontinued operations before (benefit) from
income taxes .................................................. (44,065)
Benefit for income taxes ........................................ (1,379)
Loss from discontinued operations, net of income taxes ........... (42,686)
</TABLE>
F-64
<PAGE>
GENERAL FELT INDUSTRIES, INC. AND SUBSIDIARIES.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
3. INVENTORIES
Inventories consist of:
December 29, June 29,
1996 1997
-------------- ---------
(thousands)
Raw materials and supplies ...... $12,795 $13,517
Work-in-process .................. 1,120 1,200
Finished goods .................. 11,399 11,608
-------- --------
Total ........................... $25,314 $26,325
======== ========
4. RELATED PARTY TRANSACTIONS
General Felt purchased approximately $72.7 million and $72.5 million
during the twenty-six week periods ended June 30, 1996 and June 29, 1997,
respectively.
5. ENVIRONMENTAL MATTERS
As of June 29, 1997, General Felt had accruals of approximately $1.4
million for environmental matters.
General Felt has reported to appropriate state authorities that it has
found soil and groundwater contamination in excess of state standards at a
facility located in Philadelphia, Pennsylvania. General Felt has begun
remediation and is conducting further investigations into the extent of the
contamination at this facility and, accordingly, the extent of the remediation
that may ultimately be required. The actual cost and the timetable of any such
remediation cannot be predicted with any degree of certainty at this time. As
of June 29, 1997, General Felt had environmental accruals of approximately $1.1
million for the remaining potential remediation costs for this facility based
on engineering estimates.
Federal regulations require that by 1998 all underground storage tanks
("USTs") be removed or upgraded in most states to meet applicable standards.
General Felt has six USTs that will require removal or permanent in-place
closure by the end of 1998. Due to the age of these tanks, leakage may have
occurred resulting in soil and possibly groundwater contamination. General Felt
has accrued $0.3 million for the estimated removal and remediation, if any,
associated with these USTs. However, the full extent of contamination and,
accordingly, the actual cost of such remediation cannot be predicted with any
degree of certainty at this time. General Felt believes that its USTs do not
pose a significant risk of environmental liability because of General Felt's
monitoring practices for USTs and conditional approval for permanent in-place
closure for certain USTs. However, there can be no assurance that such USTs
will not result in significant environmental liability in the future.
Although it is possible that new information or future developments could
require General Felt to reassess its potential exposure relating to all pending
environmental matters, including those described herein, management believes
that, based upon all currently available information, the resolution of such
environmental matters will not have a material adverse effect on General Felt's
operations, financial position, capital expenditures or competitive position.
The possibility exists, however, that new environmental legislation and/or
environmental regulations may be adopted, or other environmental conditions may
be found to exist, that may require expenditures not currently anticipated and
that may be material.
F-65
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
Foamex Fibers, Inc.:
We have audited the accompanying balance sheets of Foamex Fibers, Inc. ("Foamex
Fibers") (successor to GS Industries, Inc. and Pontotoc Fibers, Inc.
(collectively, the "Predecessor Company")) as of December 31, 1995 and December
29, 1996, and the related combined statements of operations, cash flows and
stockholder's equity for the year ended December 31, 1994 and the period from
January 1, 1995 to April 12, 1995 (Predecessor Company) and the statements of
operations, cash flows and stockholder's equity for the period from April 13,
1995 to December 31, 1995 and for the year ended December 29, 1996. These
financial statements are the responsibility of Foamex Fibers' management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Foamex Fibers as of December
31, 1995 and December 29, 1996, and the results of its operations and its cash
flows for the year ended December 31, 1994, the period from January 1, 1995 to
April 12, 1995 (Predecessor Company), the period from April 13, 1995 to
December 31, 1995 and for the year ended December 29, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
June 20, 1997
F-66
<PAGE>
FOAMEX FIBERS, INC.
BALANCE SHEETS (unaudited)
(thousands)
<TABLE>
<CAPTION>
December 31, December 29,
1995 1996
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ................................................ $ 469 $ 156
Accounts receivable, net ........................... 884 707
Accounts receivable from General Felt ............... 1,389 5,092
Inventories .......................................... 1,282 972
Other current assets ................................. 61 181
------ -------
Total current assets .............................. 4,085 7,108
------ -------
PLANT AND EQUIPMENT:
Machinery, equipment and furnishings ............... 2,002 2,666
Less accumulated depreciation and amortization ...... (131) (340)
------ -------
Plant and equipment, net ........................... 1,871 2,326
COST IN EXCESS OF ASSETS ACQUIRED, NET ............... 3,938 3,880
------ -------
TOTAL ASSETS .......................................... $9,894 $13,314
====== =======
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $1,349 $ 1,236
Other accrued liabilities ........................... 160 466
------ -------
Total current liabilities ........................... 1,509 1,702
INCOME TAXES DUE TO GENERAL FELT ..................... 410 1,566
------ -------
Total liabilities ................................. 1,919 3,268
------ -------
COMMITMENTS AND CONTINGENCIES ........................ -- --
------ -------
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; authorized, issued and
outstanding 1,000 shares ........................... -- --
Additional paid-in capital ........................... 7,272 7,272
Retained earnings .................................... 703 2,774
------ -------
Total stockholder's equity ........................ 7,975 10,046
------ -------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ............ $9,894 $13,314
====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-67
<PAGE>
FOAMEX FIBERS, INC.
STATEMENTS OF OPERATIONS
for the year ended December 31, 1994, for the period from January 1, 1995
to April 12, 1995 (Predecessor Company), for the period from April 13, 1995
to December 31, 1995 and for the year ended December 29, 1996
(thousands)
<TABLE>
<CAPTION>
Predecessor Company
---------------------------------- April 13, 1995
Year Ended January 1, 1995 to Year Ended
December 31, to December 31 December 29,
1994 April 12, 1995 1995 1996
-------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
NET SALES ........................ $16,778 $ 5,577 $14,112 $21,410
COST OF GOODS SOLD ............... 13,565 4,580 11,948 16,843
-------- -------- -------- --------
GROSS PROFIT ..................... 3,213 997 2,164 4,567
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ......... 1,497 336 980 1,257
-------- -------- -------- --------
INCOME FROM OPERATIONS ......... 1,716 661 1,184 3,310
OTHER EXPENSE, NET ............... 29 6 12 7
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES ............... 1,687 655 1,172 3,303
PROVISION FOR INCOME TAXES ...... -- -- 469 1,232
-------- -------- -------- --------
NET INCOME ..................... $ 1,687 $ 655 $ 703 $ 2,071
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-68
<PAGE>
FOAMEX FIBERS, INC.
STATEMENTS OF CASH FLOWS
for the year ended December 31, 1994, for the period from January 1, 1995
to April 12, 1995 (Predecessor Company), for the period from April 13, 1995
to December 31, 1995 and for the year ended December 29, 1996
(thousands)
<TABLE>
<CAPTION>
Predecessor Company
---------------------------------- April 13, 1995
Year Ended January 1, 1995 to Year Ended
December 31, to December 31 December 29,
1994 April 12, 1995 1995 1996
-------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ................................. $1,687 $ 655 $ 703 $ 2,071
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization ............... 528 143 195 314
Income taxes due to General Felt ............ -- -- 410 1,156
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable ........................ (520) (210) 573 178
Accounts receivable from General Felt ...... -- -- (837) (3,703)
Inventories ................................. (439) 106 (117) 310
Other assets and liabilities ............... 148 278 (267) 30
------ -------- -------- --------
Net cash provided by operating
activities ................................. 1,404 972 660 356
------ -------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures ........................ (491) (587) (191) (669)
Acquisition, net of cash acquired ............ -- -- (7,272) --
------ -------- -------- --------
Net cash used for investing
activities ................................. (491) (587) (7,463) (669)
------ -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt ............... -- 1,000 -- --
Repayment of advances from
former stockholders ........................ (228) (102) -- --
Repayment of long-term debt ............... (41) (531) -- --
Distribution to former stockholders ......... (94) (150) -- --
Cash retained by former owners ............ -- (1,622) -- --
Capital contributions ..................... -- -- 7,272 --
------ -------- -------- --------
Net cash provided by (used for)
financing activities ..................... (363) (1,405) 7,272 --
------ -------- -------- --------
NET INCREASE (DECREASE)
IN CASH .................................... 550 (1,020) 469 (313)
CASH AT BEGINNING OF PERIOD .................. 470 1,020 -- 469
------ -------- -------- --------
CASH AT END OF PERIOD ........................ $1,020 $ -- $ 469 $ 156
====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-69
<PAGE>
FOAMEX FIBERS, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
for the year ended December 31, 1994, for the period from
January 1, 1995 to April 12, 1995 (Predecessor Company), for the period from
April 13, 1995 to December 31, 1995 and for the year ended December 29, 1996
(thousands)
<TABLE>
<CAPTION>
Common Stock Additional Retained Earnings
----------------- Paid-In (Accumulated)
Shares Amount Capital Deficit)
-------- -------- ------------ ------------------
<S> <C> <C> <C> <C>
Balances at January 1, 1994 ..................... 110 $ 200 $ -- $ (829)
Net income ....................................... -- -- -- 1,687
Distributions to former stockholders ............ -- -- -- (94)
----- ------ ------- --------
Balances at December 31, 1994 .................. 110 200 -- 764
Net income for the period from January 1, 1995 to
April 12, 1995 ................................. -- -- -- 655
Distributions to former stockholders ............ -- -- -- (150)
Acquisition adjustment ........................... (110) (200) -- (1,269)
----- ------ ------- --------
Balances at April 12, 1995 ..................... -- -- -- --
Capital Contribution by General Felt ............ 1 -- 7,272 --
Net income for the period from April 13, 1995
to December 31, 1995 ........................... -- -- -- 703
----- ------ ------- --------
Balances at December 31, 1995 .................. 1 -- 7,272 703
Net income ....................................... -- -- -- 2,071
----- ------ ------- --------
Balances at December 29, 1996 .................. 1 -- $7,272 $ 2,774
===== ====== ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-70
<PAGE>
FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex Fibers, Inc. ("Foamex Fibers") manufactures various nonwoven
textile fiber products used primarily for carpet padding and in the furniture
industry.
Foamex Fibers was formed on March 29, 1995 for the purpose of acquiring
certain assets and assuming certain liabilities of GS Industries, Inc. and
Pontotoc Fibers, Inc. On April 13, 1995, Foamex Fibers acquired such assets and
assumed such liabilities for an aggregate purchase price of approximately $8.0
million. (See Note 3 for further discussion.)
Foamex Fibers is a wholly-owned subsidiary of General Felt Industries,
Inc. ("General Felt") which in turn is a wholly-owned subsidiary of Foamex L.P.
Foamex L.P. is a 99% owned subsidiary of Foamex International Inc. ("Foamex
International").
The balance sheets as of December 31, 1995 and December 29, 1996 and the
statements of operations, cash flows and stockholder's equity for the period
from April 13, 1995 to December 31, 1995 and for the year ended December 29,
1996 pertain to Foamex Fibers.
The accompanying combined statements of operations, cash flows and
stockholder's equity for the year ended December 31, 1994 and the period from
January 1, 1995 to April 12, 1995 include the combined individual operations of
GS Industries, Inc. and Pontotoc Fibers, Inc. (collectively, the "Predecessor
Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year
Foamex Fibers' fiscal year ends on the Sunday closest to the thirty-first
day of December. Fiscal year 1996 was composed of fifty-two weeks and ended on
December 29, 1996. The Predecessor Company's year end was the thirty-first day
of December.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.
Revenue Recognition
Revenue from sales is recognized when products are shipped.
Discounts and Billing Adjustments
A reduction in sales revenue is recognized for sales discounts when
product is invoiced or for other billing adjustments when authorized.
Inventories
Inventories are stated at the lower of cost or market. The cost of
inventories is determined on a first-in, first-out basis.
Plant and Equipment
Plant and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets. The range
of useful lives estimated for machinery, equipment and furnishings is five to
twelve years. Leasehold improvements are amortized over the shorter of the
terms of the respective lease or the estimated useful life of the improvement,
whichever is shorter. Depreciation expense for the year ended December
F-71
<PAGE>
FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
31, 1994, the period from January 1, 1995 to April 12, 1995, the period from
April 13, 1995 to December 31, 1995 and for the year ended December 29, 1996
was $0.5 million, $0.1 million, $0.1 million and $0.2 million, respectively.
For income tax purposes, Foamex Fibers uses accelerated depreciation methods.
Cost of maintenance and repairs is charged to expense as incurred.
Renewals and improvements are capitalized. Upon retirement or other disposition
of items of plant and equipment, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
Cost in Excess of Net Assets Acquired
The excess of the acquisition cost over the fair value of net assets
acquired in business combinations accounted for by the purchase method is
amortized using the straight-line method over a forty year period. At each
balance sheet date Foamex Fibers evaluates the recoverability of cost in excess
of net assets acquired using certain financial indicators such as historical
and future ability to generate income from operations based on a going concern
basis. Accumulated amortization as of December 31, 1995 and December 29, 1996
is approximately $0.1 million and $0.2 million, respectively.
Environmental Matters
Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the cost
can be reasonably estimated.
Income Taxes
Income taxes are accounted for under the liability method in which
deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of assets and liabilities using the
income tax rates, under existing legislation, expected to be in effect at the
date such temporary differences are expected to reverse.
Foamex Fibers joins with General Felt in the filing of a consolidated U.S.
Federal income tax return. Foamex Fiber's policy is to provide for Federal and
state income taxes on a separate return basis. As of December 29, 1996, Foamex
Fibers does not have a tax sharing agreement with General Felt therefore
current and deferred Federal income taxes payable are classified as noncurrent
and are included in Income Taxes Due to General Felt. Net deferred Federal
income tax liabilities amounting to approximately $0.3 million at December 29,
1996 are included in Income Taxes Due to General Felt and consist primarily of
accelerated depreciation for plant and equipment and accelerated amortization
for costs in excess of assets acquired for income tax purposes offset by
deferred tax assets relating to allowance accounts and accrued liabilities not
deductible for income tax purposes.
The stockholders of the Predecessor Company had elected S Corporation
status under the provision of the Internal Revenue Code, which provides that,
in lieu of corporate income taxes, the stockholders are taxed on the Company's
taxable income.
3. ACQUISITIONS
On April 13, 1995, Foamex Fibers acquired certain assets and assumed
certain liabilities of GS Industries, Inc. and Pontotoc Fibers, Inc. for
aggregate consideration of approximately $8.0 million, including related fees
and expenses of approximately $0.3 million, with an initial cash payment of
$7.2 million. The purchase price was funded by General Felt in the form of a
capital contribution. The excess of the purchase price over the estimated fair
value of the net assets acquired was approximately $3.9 million. The
acquisition was accounted for as a purchase. The cost of the acquisition has
been allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years.
F-72
<PAGE>
FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS
4. INVENTORIES
Inventories consist of:
December 31, December 29,
1995 1996
-------------- -------------
(thousands)
Raw material and supplies ...... $ 846 $700
Finished goods .................. 436 272
------- -----
Total ........................ $1,282 $972
======= =====
5. INCOME TAXES
The components of the provision for income taxes are summarized as
follows:
Year Ended
Period from April 13, 1995 December 29,
to December 31, 1995 1996
---------------------------- -------------
(thousands)
Federal ........................ $410 $1,156
State ........................ 59 76
----- -------
Provision for income taxes ... $469 $1,232
===== =======
A reconciliation of the statutory federal income tax rate to the effective
income tax rate is as follows:
April 13, 1995 to December 29,
December 31, 1995 1996
------------------- -------------
(thousands)
Statutory income taxes ................ $410 $1,156
State income taxes, net of federal .... 59 76
----- -------
Provision for income taxes .......... $469 $1,232
===== =======
6. COMMITMENTS AND CONTINGENCIES
Operating Leases
Foamex Fibers is obligated, under various noncancellable lease agreements,
for rental of facilities and machinery and equipment. Many of the leases
contain renewal options with varying terms and escalation clauses that provide
for increased rentals based upon increases in the Consumer Price Index, real
estate taxes and the lessors' operating expenses. Total minimum rentals
commitment required under operating leases at December 29, 1996 (thousands)
was:
1997 .............................. $ 338
1998 .............................. 328
1999 .............................. 318
2000 .............................. 318
2001 .............................. 318
Thereafter ........................ 1,050
-------
Total minimum lease payments ...... $2,670
=======
F-73
<PAGE>
FOAMEX FIBERS, INC.
NOTES TO FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES (continued)
Total rent expense for all operating leases for the year ended December
31, 1994, for the period from January 1, 1995 to April 12, 1995, the period
from April 13, 1995 to December 31, 1995 and for the year ended December 29,
1996 was approximately $0.2 million, $0.1 million, $0.2 million and $0.3
million, respectively,
7. RELATED PARTY TRANSACTIONS AND BALANCES
General Felt purchased $1.2 million, $0.8 million, $6.4 million and $10.1
million of carpet cushion from Foamex Fibers for the year ended December 31,
1994, the period from January 1, 1995 to April 12, 1995, the period from April
13, 1995 to December 31, 1995 and for the year ended December 29, 1996,
respectively. As of December 31, 1995 and December 29, 1996, Foamex Fibers had
accounts receivable from General Felt of approximately $1.4 million and $5.1
million, respectively.
Foamex Fibers leases five facilities from an officer of Foamex Fibers. The
rental expense for the year ended December 31, 1994, the period from January 1,
1995 to April 12, 1995, the period from April 13, 1995 to December 31, 1995 and
for the year ended December 29, 1996 was $0.2 million, $0.1 million, $0.2
million and $0.3 million, respectively.
The Predecessor Company had sales of approximately $1.9 million during the
year ended December 31, 1994 to a company controlled by the former shareholder
of GS Industries, Inc.
F-74
<PAGE>
FOAMEX FIBERS, INC. CONDENSED BALANCE SHEETS (unaudited)
(thousands)
December 29, June 29,
1996 1997
-------------- ---------
ASSETS
CURRENT ASSETS:
Cash .......................................... $ 156 $ 131
Accounts receivable, net ........................ 707 1,029
Accounts receivable from General Felt ......... 5,092 6,317
Inventories .................................... 972 1,086
Other current assets ........................... 181 222
-------- --------
Total current assets ........................... 7,108 8,785
PLANT AND EQUIPMENT, NET ........................ 2,326 2,780
COST IN EXCESS OF ASSETS ACQUIRED, NET ......... 3,880 3,830
-------- --------
TOTAL ASSETS .................................... $13,314 $15,395
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 1,236 $ 1,212
Other accrued liabilities ........................ 466 399
-------- --------
Total current liabilities ..................... 1,702 1,611
-------- --------
INCOME TAXES DUE TO GENERAL FELT ............... 1,566 2,322
-------- --------
COMMITMENTS AND CONTINGENCIES .................. -- --
STOCKHOLDERS EQUITY:
Common stock .................................... -- --
Additional paid-in capital ..................... 7,272 7,272
Retained earnings .............................. 2,774 4,190
-------- --------
Total stockholder's equity ..................... 10,046 11,462
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY ....... $13,314 $15,395
======== ========
The accompanying notes are an integral part of the condensed financial
statements.
F-75
<PAGE>
FOAMEX FIBERS, INC.
CONDENSED STATEMENTS OF OPERATIONS (unaudited)
(thousands)
26 Week Periods Ended
----------------------
June 30, June 29,
1996 1997
---------- ---------
NET SALES .......................................... $10,510 $11,888
COST OF GOODS SOLD ................................. 8,323 8,993
-------- --------
GROSS PROFIT ....................................... 2,187 2,895
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ...... 482 647
-------- --------
INCOME FROM OPERATIONS ........................... 1,705 2,248
OTHER EXPENSE, NET ................................. 8 1
-------- --------
INCOME FROM BEFORE PROVISION FOR INCOME TAXES ...... 1,697 2,247
PROVISION FOR INCOME TAXES ........................ 634 831
-------- --------
NET INCOME ....................................... $ 1,063 $ 1,416
======== ========
The accompanying notes are an integral part of the condensed financial
statements.
F-76
<PAGE>
FOAMEX FIBERS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (unaudited)
(thousands)
<TABLE>
<CAPTION>
26 Week Periods Ended
-----------------------
June 30, June 29,
1996 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................... $ 1,063 $ 1,416
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .............................. 141 185
Changes in operating assets and liabilities ............... (1,343) (1,038)
-------- --------
Net cash provided by (used for) operating activities ...... (139) 563
-------- --------
INVESTING ACTIVITIES:
Capital expenditures .......................................... (178) (588)
-------- --------
Net cash used for investing activities ..................... (178) (588)
-------- --------
Net decrease in cash .......................................... (317) (25)
Cash at beginning of period ................................. 469 156
-------- --------
Cash at end of period ....................................... $ 152 $ 131
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
F-77
<PAGE>
FOAMEX FIBERS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Foamex Fibers, Inc.'s ("Foamex Fibers") condensed balance sheet as of
December 29, 1996 has been condensed from the audited consolidated balance
sheet at that date. The condensed balance sheet as of June 29, 1997 and the
condensed statements of operations and the condensed statements of cash flows
for the twenty-six week periods ended June 30, 1996 and June 29, 1997 have been
prepared by Foamex Fibers and have not been audited by Foamex Fiber's
independent accountants. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a
fair presentation of the consolidated financial position, results of operations
and cash flows have been included.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
financial statements should be read in conjunction with Foamex Fibers 1996
financial statements and notes thereto as set forth elsewhere in this
Prospectus.
2. INVENTORIES
Inventories consist of:
December 29, June 29,
1996 1997
-------------- ---------
(thousands)
Raw material and supplies ...... $700 $ 753
Finished goods .................. 272 333
----- -------
Total ........................... $972 $1,086
===== =======
3. RELATED PARTY TRANSACTIONS
General Felt purchased approximately $4.8 million and $5.2 million for the
twenty-six week periods ended June 30, 1996 and June 29, 1997, respectively.
F-78
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS OR THE SUBSIDIARY GUARANTORS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NEW
NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE ISSUERS OR THE SUBSIDIARY GUARANTORS SINCE THE DATE
HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Incorporation of Certain Documents by Reference ....................................... iii
Available Information ............................................................... iii
Prospectus Summary .................................................................. 1
Risk Factors ........................................................................ 13
Refinancing Plan ..................................................................... 18
Use of Proceeds ..................................................................... 18
Capitalization ..................................................................... 19
Selected Historical Consolidated Financial Information .............................. 20
Management's Discussion and Analysis of Financial Condition and Results of Operations 22
Business ........................................................................... 32
The Exchange Offer .................................................................. 42
Management ........................................................................... 51
Security Ownership of Certain Beneficial Owners .................................... 53
Certain Relationships and Related Transactions ....................................... 54
Description of Certain Debt Instruments ............................................. 57
Description of Notes ............................................................... 60
Description of the Partnership Agreement ............................................. 88
Certain Federal Income Tax Considerations .......................................... 90
Plan of Distribution ............................................................... 91
Legal Matters ........................................................................ 92
Experts .............................................................................. 92
Forward-Looking Statements ............................................................ 92
Index to Financial Statements ...................................................... F-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
$150,000,000
Foamex L.P.
Foamex Capital Corporation
9 7/8% Senior Subordinated Notes
due 2007
----------------------
PROSPECTUS
----------------------
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Fourth Amended and Restated Agreement of Limited Partnership of Foamex
L.P. (the "Partnership Agreement") generally provides that, to the fullest
extent permitted by law, Foamex will indemnify the partners, their respective
affiliates, officers, directors, stockholders, employees and agents, and any
employee, agent and officer of Foamex, against all expenses actually and
reasonably incurred by it or them in connection with any threatened, pending or
completed action, suit or proceeding against it or them or by, against or in
the right of Foamex to which it or them is or was a party, or is threatened to
be made a party, involving an alleged cause of action for damages arising out
of, or in any way related to or connected with, the business or internal
affairs of Foamex, if, in the transaction giving rise to such action, suit, or
proceeding, such person acted in good faith, without gross negligence or
willful misconduct or the willful breach of the Partnership Agreement and in a
manner such person reasonably believed to be within the scope of its authority
under the Partnership Agreement.
The Certificate of Incorporation and Bylaws of FCC, General Felt and
Foamex Fibers provide that each such corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in
the right of such corporation), by reason of the fact that he is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation, partnership or other enterprise, against expenses actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of such corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
The Bylaws of FCC, General Felt and Foamex Fibers further provide that for
actions by or in the right of each of such corporation, similar indemnification
exists, except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to such corporation unless and only to the extent that the court in which such
action or suit was brought shall determine that such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
The Certificates of Incorporation of FCC, General Felt and Foamex Fibers
also provide that a director of any such corporation shall not be personally
liable to such corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (1) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (3) under Section 174 of the General Corporation Law
of the State of Delaware; or (4) for any transaction from which the director
derived an improper personal benefit. Additionally, the Certificates of
Incorporation of FCC, General Felt and Foamex Fibers provide that to the
fullest extent permitted by Delaware Law, a director of such corporation shall
not be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director.
The directors and officers of Foamex International and its subsidiaries
are covered in their capacities as such under a Directors and Officers
insurance policy.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<S> <C>
3.1(a) --Certificate of Limited Partnership of Foamex L.P. ("Foamex").
3.2.1(a) --Fourth Amended and Restated Agreement of Limited Partnership of Foamex L.P., dated as
of December 14, 1993, by and among FMXI Inc. ("FMXI") and Trace Foam Company,
Inc. ("Trace Foam"), as general partners, and Foamex International Inc. ("Foamex
International"), as a limited partner (the "Partnership Agreement").
3.2.2(b) --First Amendment to the Partnership Agreement, dated June 28, 1994.
3.2.3(c) --Second Amendment to the Partnership Agreement, dated June 12, 1997.
3.3(a) --Certificate of Incorporation of FMXI.
II-1
<PAGE>
3.4(a) --By-laws of FMXI.
3.5(k) --Certificate of Incorporation of Foamex Capital Corporation ("FCC").
3.6(k) --By-laws of FCC.
3.7(g) --Certificate of Incorporation of General Felt Industries, Inc. ("General Felt").
3.8(g) --By-laws of General Felt.
3.9** --Certificate of Incorporation of Foamex Fibers, Inc. ("Foamex Fibers").
3.10** --By-laws of Foamex Fibers.
4.1.1(d) --Indenture, dated as of June 12, 1997, by and among Foamex, FCC, the Subsidiary
Guarantors and The Bank of New York, as Trustee, relating to $150,000,000 principal
amount of 9-7/8% Senior Subordinated Notes due 2007, including the form of Senior
Subordinated Note and Subsidiary Guarantee.
4.1.2(d) --Registration Rights Agreement, dated as of June 12, 1997, by and among Foamex, FCC,
General Felt, Foamex Fibers and all future direct or indirect domestic subsidiaries of
Foamex or FCC, and Donaldson, Lufkin & Jenrette Securities Corporation, Salomon
Brothers Inc. and Scotia Capital Markets, as Initial Purchasers.
4.2.1(e) --Indenture, dated as of June 3, 1993, among Foamex and FCC, as joint and several
obligors, General Felt, as Guarantor, and Shawmut Bank, National Association
("Shawmut"), as trustee, relating to $160,000,000 principal amount of 9-1/2% Senior
Secured Notes due 2000, including the form of Senior Secured Note.
4.2.2(a) --First Supplemental Indenture, dated as of November 18, 1993, among Foamex and FCC,
as Issuers, General Felt and Perfect Fit Industries, Inc. ("Perfect Fit"), as Guarantors and
Shawmut, as trustee, relating to the Senior Secured Notes.
4.2.3(a) --Second Supplemental Indenture, dated as of December 14, 1993, among Foamex and
FCC, as Issuers, Foamex International, General Felt and Perfect Fit, as Guarantors and
Shawmut, as trustee, relating to the Senior Secured Notes.
4.2.4(f) --Third Supplemental Indenture, dated as of August 1, 1996, by and among Foamex L.P.
and FCC, as Issuers, Foamex International, as parent guarantor, General Felt, as
guarantor, Perfect Fit, as withdrawing guarantor, and Fleet National Bank ("Fleet"), as
trustee relating to the Senior Secured Notes.
4.2.5(c) --Fourth Supplemental Indenture, dated as of May 28, 1997, by and among Foamex and
FCC, as Issuers, Foamex International, as Parent Guarantor, General Felt, as Guarantor,
and Fleet, as Trustee.
4.2.6(e) --Company Pledge Agreement, dated as of June 3, 1993, by Foamex in favor of Shawmut,
as trustee for the holders of the Senior Secured Notes.
4.2.7* --Amendment No. 1 to Company (Foamex L.P.) Pledge Agreement, dated June 12, 1997.
4.2.8(e) --Company Pledge Agreement, dated as of June 3, 1993, by FCC in favor of Shawmut, as
trustee for the holders of the Senior Secured Notes.
4.2.9* --Amendment No. 1 to Company (FCC) Pledge Agreement, dated June 12, 1997.
4.2.10(e) --Subsidiary Pledge Agreement, dated as of June 3, 1993, by General Felt in favor of
Shawmut, as trustee for the holders of the Senior Secured Notes.
4.2.11* --Amendment No. 1 to Subsidiary (General Felt) Pledge Agreement, dated June 12, 1997.
4.2.12(e) --Company Security Agreement, dated as of June 3, 1993, by Foamex and FCC in favor of
Shawmut, as trustee for the holders of the Senior Secured Notes.
4.2.13* --Amendment No. 1 to Company Security Agreement, dated June 12, 1997 (Foamex
and FCC).
4.2.14(e) --Subsidiary Security Agreement, dated as of June 3, 1993, by General Felt in favor of
Shawmut, as trustee for the holders of the Senior Secured Notes.
4.2.15* --Amendment No. 1 to Subsidiary Security Agreement, dated June 12, 1997 (General Felt).
4.2.16(e) --Collateral Assignment of Patents and Trademarks, dated as of June 3, 1993, by Foamex in
favor of Shawmut, as trustee for the holders of the Senior Secured Notes.
4.2.17* --Amendment No. 1 to Collateral Assignment of Patents and Trademarks (Foamex), dated
June 12, 1997.
4.2.18(e) --Collateral Assignment of Patents and Trademarks, dated as of June 3, 1993, by FCC in
favor of Shawmut, as trustee for the holders of the Senior Secured Notes.
II-2
<PAGE>
4.2.19* --Amendment No. 1 to Collateral Assignment of Patents and Trademarks (FCC), dated
June 12, 1997.
4.2.20(e) --Collateral Assignment of Patents and Trademarks, dated as of June 3, 1993, by General
Felt in favor of Shawmut, as trustee for the holders of the Senior Secured Notes.
4.2.21* --Amendment No. 1 to Collateral Assignment of Patents and Trademarks (General Felt),
dated June 12, 1997.
4.2.22* --Amended and Restated Receivables Intercreditor Agreement, by and among Fleet,
Citicorp USA, Inc. and The Bank of Nova Scotia, dated as of June 12, 1997
4.2.23** --Intercreditor Agreement, by and among, Fleet, Citicorp USA, Inc. and The Bank of Nova
Scotia, dated as of June 12, 1997. (re: Senior Secured Notes).
4.3.1(g) --Indenture, dated as of October 13, 1992, among Foamex, FCC and The Connecticut
National Bank, as trustee, relating to $150,000,000 principal amount of 11-1/4% Senior
Notes due 2002, including form of Senior Note.
4.3.2(h) --First Supplemental Indenture, dated as of March 23, 1993, among Foamex and FCC, as
joint and several obligors, General Felt, as Guarantor, and Shawmut, as trustee, relating to
the Senior Notes.
4.3.3(a) --Second Supplemental Indenture, dated as of November 18, 1993, among Foamex and
FCC, as Issuers, General Felt and Perfect Fit, as Guarantors and Shawmut, as trustee,
relating to the Senior Notes.
4.3.4(a) --Third Supplemental Indenture, dated as of December 14, 1993, among Foamex L.P. and
FCC, as Issuers, Foamex International, General Felt and Perfect Fit, as Guarantors, and
Shawmut, as trustee, relating to the Senior Notes.
4.3.5(i) --Fourth Supplemental Indenture, dated as of October 31, 1994, among Foamex and FCC
as Issuers, Foamex International as Parent Guarantor, General Felt and Perfect Fit, as
Guarantors and Shawmut, as Trustee, relating to the Senior Notes.
4.3.6(j) --Fifth Supplemental Indenture, dated as of August 1, 1996, by and among Foamex and
FCC, as issuers, Foamex International as Parent Guarantor, General Felt, as guarantor,
Perfect Fit, as withdrawing guarantor, and Fleet, as trustee relating to the Senior Notes.
4.3.7(c) --Sixth Supplemental Indenture, dated as of May 28, 1997, by and among Foamex and
FCC, as Issuers, Foamex International, as Parent Guarantor, GFI, as Guarantor, and Fleet,
as Trustee.
4.3.8** --Intercreditor Agreement, by and among, Fleet, Citicorp USA, Inc. and The Bank of Nova
Scotia, dated as of June 12, 1997 (re: Senior Notes).
4.4.1(g) --Indenture, dated as of October 13, 1992, among Foamex, FCC and Shawmut, as trustee,
relating to $126,000,000 principal amount of 11-7/8% Senior Subordinated Debentures due
2004, including form of Senior Subordinated Debenture.
4.4.2(h) --First Supplemental Indenture, dated as of March 23, 1993, among Foamex L.P. and FCC,
as joint and several obligors, General Felt, as guarantor, and Shawmut, as trustee, relating
to the Senior Subordinated Debentures.
4.4.3(a) --Second Supplemental Indenture, dated as of November 18, 1993, among Foamex and
FCC, as Issuers, General Felt and Perfect Fit, as Guarantors, and Shawmut, as trustee,
relating to the Senior Subordinated Debentures.
4.4.4(e) --Third Supplemental Indenture, dated as of December 14, 1993, among Foamex L.P. and
FCC, as Issuers, Foamex International, General Felt and Perfect Fit, as Guarantors, and
Shawmut, as trustee, relating to the Senior Subordinated Debentures.
4.4.5(j) --Fourth Supplemental Indenture, dated as of August 1, 1996, among Foamex L.P. and
FCC, as Issuers, Foamex International, as Parent Guarantor, General Felt, as Guarantor,
Perfect Fit, as withdrawing guarantor, and Fleet, as trustee, relating to the Senior
Subordinated Debentures.
4.4.6(c) --Fifth Supplemental Indenture, dated as of May 28, 1997, by and among Foamex and
FCC, as Issuers, Foamex International, as Parent Guarantor, General Felt, as Guarantor,
and Fleet, as Trustee.
II-3
<PAGE>
4.5.1(d) --Credit Agreement, dated as of June 12, 1997, by and among Foamex, General Felt, Trace
Foam, FMXI, the institutions from time to time party thereto as lenders, the institutions
from time to time party thereto as issuing banks, and Citicorp USA, Inc. and The Bank of
Nova Scotia, as Administrative Agents.
4.5.2** --Foamex International Guaranty, dated as of June 12, 1997, in favor of Citicorp USA, Inc.,
as Collateral Agent.
4.5.3** --Partnership Guaranty, dated as of June 12, 1997, made by Trace Foam Company, Inc. and
FMXI, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.4** --Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P. in favor of Citicorp
USA, Inc., as Collateral Agent.
4.5.5** --GFI Guaranty, dated as of June 12, 1997, made by General Felt Industries, Inc. in favor
of Citicorp, USA, Inc., as Collateral Agent.
4.5.6** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Fibers, Inc. in favor of
Citicorp USA, Inc., as Collateral Agent.
4.5.7** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Latin America, Inc. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.8** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Mexico, Inc. in favor
of Citicorp USA, Inc., as Collateral Agent.
4.5.9** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Capital Corporation in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.10** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Mexico II, Inc. in favor
of Citicorp USA, Inc., as Collateral Agent.
4.5.11** --Subsidiary Guaranty, dated as of June 12, 1997, made by Foamex Asia, Inc. in favor of
Citicorp USA, Inc., as Collateral Agent.
4.5.12** --Partnership Pledge Agreement, dated as of June 12, 1997, made by Trace Foam Company,
Inc., FMXI, Inc., and Foamex International Inc. in favor of Citicorp USA, Inc., as
Collateral Agent.
4.5.13** --Foamex Pledge Agreement, dated as of June 12, 1997, made by Foamex L.P. in favor of
Citicorp USA, Inc., as Collateral Agent.
4.5.14** --GFI Pledge Agreement, dated as of June 12, 1997, made by General Felt Industries, Inc.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.15** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Capital
Corporation in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.16** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Fibers, Inc. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.17** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Latin
America, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.18** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Asia, Inc. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.19** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Mexico, Inc.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.20** --Subsidiary Pledge Agreement, dated as of June 12, 1997, made by Foamex Mexico II,
Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.21** --Foamex Security Agreement, dated as of June 12, 1997, made by Foamex L.P. in favor of
Citicorp USA, Inc., as Collateral Agent.
4.5.22** --GFI Security Agreement, dated as of June 12, 1997, made by General Felt Industries, Inc.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.23** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Fibers, Inc.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.24** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Latin
America, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.25** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Mexico, Inc.
in favor of Citicorp USA, Inc., as Collateral Agent.
4.5.26** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Mexico II,
Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
II-4
<PAGE>
4.5.27** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Asia, Inc. in
favor of Citicorp USA, Inc., as Collateral Agent.
4.5.28** --Subsidiary Security Agreement, dated as of June 12, 1997, made by Foamex Capital
Corporation, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.6(j) --Commitment Letter, dated July 9, 1996, from The Bank of Nova Scotia to Foamex
Canada Inc.
4.7(a) --Subordinated Promissory Note, dated as of May 6, 1993, in the original principal amount
of $7,014,864 executed by Foamex L.P. to John Rallis ("Rallis").
4.8(a) --Marely Loan Commitment Agreement, dated as of December 14, 1993, by and between
Foamex International and Marely s.a. ("Marely").
4.9(a) --DLJ Loan Commitment Agreement, dated as of December 14, 1993, by and between
Foamex International and DLJ Funding, Inc. ("DLJ Funding").
4.10.1** --Promissory Note, dated June 12, 1997, in the aggregate principal amount of $5,000,000,
executed by Trace Holdings to Foamex.
4.10.2** --Promissory Note, dated June 12, 1997, in the aggregate principal amount of $4,794,828,
executed by Trace Holdings to Foamex.
5.1** --Opinion of Willkie Farr & Gallagher.
8.1** --Opinion of Willkie Farr & Gallagher, as to tax matters.
10.1.1** --Amendment to Master Agreement, dated as of June 5, 1997, between Citibank, N.A. and
Foamex.
10.1.2** --Amended confirmation, dated as of June 13, 1997, between Citibank, N.A. and Foamex.
10.2(h) --Reimbursement Agreement, dated as of March 23, 1993, between Trace Holdings and
General Felt.
10.3(h) --Shareholder Agreement, dated December 31, 1992, among Recticel, s.a. ("Recticel"),
Recticel Holding Noord B.V., Foamex L.P., Beamech Group Limited, LME-Beamech,
Inc., James Brian Blackwell and Prefoam AG relating to foam technology sharing
arrangement.
10.4.1(k) --Asset Transfer Agreement, dated as of October 2, 1990, between Trace Holdings and
Foamex (the "Trace Holdings Asset Transfer Agreement").
10.4.2(k) --First Amendment, dated as of December 19, 1991, to the Trace Holdings Asset Transfer
Agreement.
10.4.3(k) --Amended and Restated Guaranty, dated as of December 19, 1991, made by Trace Foam
in favor of Foamex L.P.
10.5.1(k) --Asset Transfer Agreement, dated as of October 2, 1990, between RFC and Foamex L.P.
(the "RFC Asset Transfer Agreement").
10.5.2(k) --First Amendment, dated as of December 19, 1991, to the RFC Asset Transfer Agreement.
10.5.3(k) --Schedule 5.03 to the RFC Asset Transfer Agreement (the "5.03 Protocol").
10.5.4(h) --The 5.03 Protocol Assumption Agreement, dated as of October 13, 1992, between RFC
and Foamex L.P.
10.5.5(h) --Letter Agreement between Trace Holdings and Recticel regarding the Recticel Guaranty,
dated as of July 22, 1992.
10.6(l) --Supply Agreement, dated June 28, 1994, between Foamex L.P. and Foamex International.
10.7.1(l) --First Amended and Restated Tax Sharing Agreement, dated as of December 14, 1993,
among Foamex, Trace Foam, FMXI and Foamex International.
10.7.2(d) --First Amendment to Amended and Restated Tax Sharing Agreement of Foamex, dated as
of June 12, 1997, by and among Foamex, Foamex International, FMXI, and Trace Foam.
10.8.1(m) --Tax Distribution Advance Agreement, dated as of December 11, 1996, by and between
Foamex and Foamex-JPS Automotive L.P.
10.8.2(d) --Amendment No. 1 to Tax Distribution Advance Agreement, dated as of June 12, 1997, by
and between Foamex International and Foamex.
10.9.1(h) --Trace Foam Management Agreement between Foamex and Trace Foam, dated as of
October 13, 1992.
10.9.2(l) --Affirmation Agreement re: Management Agreement, dated as of December 14, 1993,
between Foamex and Trace Foam.
II-5
<PAGE>
10.9.3(d) --First Amendment to Management Agreement, dated as of June 12, 1997, by and between
Foamex and Trace Foam.
10.10.1(k) --Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.10.2(k) --Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k) --Equity Growth Participation Program.
10.10.4(o) --General Felt Industries, Inc. Retirement Plan for Salaried Employees, effective as of
January 1, 1995.
10.10.5(o) --Foamex L.P. Salaried Retirement Plan (formerly known as the Foamex L.P. Products, Inc.
Salaried Employee Retirement Plan), as amended, effective July 1, 1984.
10.10.6(n) --Foamex/General Felt 401(k) Savings Plan dated July 1, 1995.
10.10.7(a) --Foamex International's 1993 Stock Option Plan.
10.10.8(a) --Foamex International's Non-Employee Director Compensation Plan.
10.11.1(o) --Employment Agreement, dated as of February 1, 1994, by and between Foamex L.P. and
William H. Bundy.
10.11.2(p) --Employment Agreement, dated as of July 26, 1995, by and between Foamex L.P. and
Salvatore J. Bonanno.
10.12(a) --Warrant Exchange Agreement, dated as of December 14, 1993, by and between Foamex
International and Marely.
10.13(a) --Warrant Exchange Agreement, dated as of December 14, 1993, by and between Foamex
International and DLJ Funding.
10.14(o) --Stock Purchase Agreement, dated as of December 23, 1993, by and between
Transformacion de Espumas y Fieltros, S.A., the stockholders which are parties thereto,
and Foamex L.P.
10.15(q) --Asset Purchase Agreement, dated as of August 29, 1997, by and among General Felt
Industries, Inc., Foamex L.P., Bretlin, Inc. and The Dixie Group, Inc.
12.1** --Computation of Ratios of Earnings to Fixed Charges. (Foamex
12.2** --Computation of Ratios of Earnings to Fixed charges (General Felt)
21.1** --Subsidiaries of the Registrant.
23.1** --Consent of Coopers & Lybrand, L.L.P., independent accountants, to Foamex L.P.
23.2** --Consent of Coopers & Lybrand, L.L.P., independent accountants, to General Felt
Industries, Inc.
23.3** --Consent of Coopers & Lybrand, L.L.P., independent accountants, to Foamex Capital
Corporation
23.4** --Consent of Coopers & Lybrand L.L.P., independent accountants, to Foamex Fibers.
23.5** --Consent of Willkie Farr & Gallagher included in Exhibit 5.1.
25* --Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
of The Bank of New York, as Trustee under the Indenture.
99.1** --Form of Letter of Transmittal.
99.2** --Form of Notice of Guaranteed Delivery.
99.3** --Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.4** --Form of Letter to Clients.
</TABLE>
- -------------
* To be filed by amendment.
** Filed herewith.
(a) Incorporated herein by reference to the Exhibit to Foamex International's
Registration Statement on Form S-1, Registration No. 33-69606.
(b) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex L.P. for the fiscal year ended January 1, 1995.
(c) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P. reporting an event that occurred May 28, 1997.
(d) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Foamex L.P. reporting an event that occurred June 12, 1997.
(e) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-4, Registration No. 33-65158.
II-6
<PAGE>
(f) Incorporated herein by reference to the Exhibit to the Quarterly Report
on Form 10-Q of Foamex L.P. for the quarterly period ended June 30, 1996.
(g) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P., FCC and General Felt on Form S-1, Registration
Nos. 33-60888, 33-60888-01, and 33-60888-02.
(h) Incorporated herein by reference to the Exhibit to the Annual Report Form
10-K Statement of Foamex L.P. and FCC for the fiscal year ended January
3, 1993.
(i) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex International for the fiscal year ended January 1,
1995.
(j) Incorporated herein by reference to the Exhibit to the Quarterly Report
on Form 10-Q of Foamex L.P. for the quarterly period ended September
30, 1996.
(k) Incorporated herein by reference to the Exhibit to the Registration
Statement of Foamex L.P. and FCC on Form S-1, Registration Nos. 33-49976
and 33-49976-01.
(l) Incorporated herein by reference to the Exhibit to the Registration
Statement of FJPS, FJCC and Foamex International on Form S-4, Registration
No. 33-82028.
(m) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex L.P. for the fiscal year ended December 29, 1996.
(n) Incorporated herein by reference to the Exhibit to the Quarterly Report
on Form 10-Q of Foamex L.P. for the quarterly period ended July 2, 1995.
(o) Incorporated herein by reference to the Exhibit to the Annual Report Form
10-K of Foamex International for the fiscal year ended January 2, 1994.
(p) Incorporated herein by reference to the Exhibit to the Annual Report on
Form 10-K of Foamex L.P. for the fiscal year ended December 31, 1995.
(q) Incorporated herein by reference to the Current Report on Form 8-K of
Foamex L.P. reporting an event that occurred August 29, 1997.
Certain instruments defining the rights of security holders have been
excluded herefrom in accordance with Item 601(b)(4)(iii) of Regulation S-K.
The Registrant hereby agrees to furnish a copy of any such instrument to the
Commission upon request.
(d) Schedules
None.
Item 22. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrants pursuant to the provisions described under Item 20 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrants of expenses incurred or paid by a director,
officer or controlling person of the Registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
Issuers being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual reports pursuant to section 13(a) or section 15(d) of
II-7
<PAGE>
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuers undertake that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
FOAMEX L.P.
By: FMXI, Inc.,
Its Managing General Partner
By: /s/ Philip N. Smith, Jr.
-----------------------------------
Name: Philip N. Smith, Jr.
Title: Vice President of FMXI, Inc.
and Foamex L.P.
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, each thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chairman and Chief Executive Officer of
- ---------------------------------------- FMXI, Inc. and Foamex L.P.
Andrea Farace (principal executive officer)
* Vice Chairman of Foamex L.P. and FMXI, Inc.
- ----------------------------------------
Marshall S. Cogan
* President and Chief Operating Officer of Foamex
- ---------------------------------------- L.P. and FMXI, Inc. and a director of FMXI, Inc.
Salvatore J. Bonanno
* Senior Vice President of Finance and Chief
- ---------------------------------------- Financial Officer of Foamex L.P. and
Kenneth R. Fuette (principal financial officer)nce and
/s/ R. Allen Baker Chief Accounting Officer of Foamex L.P.
- ---------------------------------------- and FMXI, Inc.
R. Allen Baker (principal accounting officer)
* By: /s/ Philip N. Smith, Jr.
- ----------------------------------------
Philip N. Smith, Jr.
Attorney-in-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
FOAMEX CAPITAL CORPORATION
By: /s/ Philip N. Smith, Jr.
-----------------------------------
Name: Philip N. Smith, Jr.
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, each thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chairman and Chief Executive Officer
- ---------------------------------------- (principal executive officer)
Andrea Farace
* Senior Vice President of Finance, Chief Financial
- ---------------------------------------- Officer and a director
Kenneth R. Fuette (principal financial officer)
/s/ R. Allen Baker Chief Accounting Officer
- ---------------------------------------- (principal accounting officer)
R. Allen Baker
* Director
- ----------------------------------------
Marshall S. Cogan
* Vice President and a director
- ----------------------------------------
Robert H. Nelson
* By: /s/ Philip N. Smith, Jr.
- ----------------------------------------
Philip N. Smith, Jr.
Attorney-in-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
GENERAL FELT INDUSTRIES, INC.
By: /s/ Philip N. Smith, Jr.
-----------------------------------
Name: Philip N. Smith, Jr.
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to the Registration Statement
to be signed on its behalf by the undersigned, each thereunto duly authorized
in the City of New York, State of New York, on the 11 day of September, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* President and a director
- ---------------------------------------- (principal executive officer)
Theodore J. Kall
* Chief Financial Officer and a director
- ---------------------------------------- (principal financial officer)
Kenneth R. Fuette
/s/ R. Allen Baker Chief Accounting Officer
- ---------------------------------------- (principal accounting officer)
R. Allen Baker
* Vice President
- ----------------------------------------
Robert H. Nelson
* Chairman
- ----------------------------------------
Andrea Farace
* Director
- ----------------------------------------
Marshall S. Cogan
* Director
- ----------------------------------------
Barry Zimmerman
* By: /s/ Philip N. Smith, Jr.
- ----------------------------------------
Philip N. Smith, Jr.
Attorney-in-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
FOAMEX FIBERS, INC.
By: /s/ Philip N. Smith, Jr.
-----------------------------------
Name: Philip N. Smith, Jr.
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, each thereunto duly
authorized in the City of New York, State of New York, on the 11 day of
September, 1997.
<TABLE>
<CAPTION>
Signature Title
--------- ------
<S> <C>
* Chairman and Chief Executive Officer
- ---------------------------------------- (principal executive officer)
Andrea Farace
* Treasurer
- ---------------------------------------- (principal financial officer)
Kenneth R. Fuette
/s/ R. Allen Baker Chief Accounting Officer
- ---------------------------------------- (principal accounting officer)
R. Allen Baker
* Vice President
- ----------------------------------------
Robert H. Nelson
* Director
- ----------------------------------------
Salvatore J. Bonanno
* Director
- ----------------------------------------
Marshall S. Cogan
* By: /s/ Philip N. Smith, Jr.
- ----------------------------------------
Philip N. Smith, Jr.
Attorney-in-Fact
</TABLE>
II-12
CERTIFICATE OF INCORPORATION
OF
FOAMEX FIBERS, INC.
THE UNDERSIGNED, acting as incorporator of a corporation under and in
accordance with the General Corporation Law of the State of Delaware, do hereby
adopt the following Certificate of Incorporation for such corporation:
ARTICLE 1.
NAME
The name of the corporation is Foamex Fibers, Inc. (hereinafter the
"Corporation").
ARTICLE 2.
REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Delaware is
located at 32 Lookerman Square, Suite L-100, in the City of Dover, County of
Kent. The name of the registered agent of the Corporation at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE 3.
PURPOSE
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "DGCL").
ARTICLE 4.
CAPITAL
The aggregate number of shares of stock which the Corporation shall have
authority to issue is 1,000 shares, par value $.01 per share, designated Common
Stock. Unless specifically provided otherwise herein, the holder of such shares
shall be entitled to one vote for each share held in any stockholder vote in
which any of such holders is entitled to participate.
ARTICLE 5.
DURATION
The Corporation shall have perpetual existence.
ARTICLE 6.
PREEMPTIVE RIGHTS DENIED; NO CUMULATIVE VOTE
No holder of stock of any class or series of the Corporation shall have any
preemptive rights to subscribe for, purchase or receive any shares of stock of
any class or series whether
<PAGE>
now or hereafter authorized, or any options or warrants for such shares, or any
securities convertible into or exchangeable for such shares, which may at any
time be issued, sold or offered for sale by the Corporation. Cumulative voting
by the holders of any class and of any series of any such class of the stock of
the Corporation at any election of directors of the Corporation is hereby
prohibited.
ARTICLE 7.
INCORPORATOR
The name of the incorporator of the Corporation is Tambra S. King, and the
mailing address of such incorporator is c/o Trace International Holdings, Inc.,
375 Park Avenue, 11th Floor, New York, New York 10152.
ARTICLE 8.
STOCKHOLDER MEETINGS
Meetings of the stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the DGCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation.
ARTICLE 9.
ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
Pursuant to Section 102(b)(7) of the DGCL, a director of the Corporation
shall not be personally liable to the Corporation of its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders; and (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the DGCL; or (iv) for any transaction from which the
director derived an improper personal benefit. To the fullest extent permitted
by the DGCL, as the same exists or may hereafter be amended, a director of the
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
ARTICLE 10.
INDEMNIFICATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(whether or not by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), liability, loss,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
2
<PAGE>
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, or
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and with respect to any criminal action or
proceeding, have reasonable cause to believe that his conduct was unlawful. The
right to indemnification under this Article 11 shall be a contract right and
shall include, with respect to directors and officers, the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its disposition; provided, however, that if the DGCL requires, the
payment of such expenses incurred by a director or officer in advance of the
final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article 11 or
otherwise. The Corporation may, by action of its Board of Directors, pay such
expenses incurred by employees and agents of the Corporation upon such terms as
the Board of Directors deems appropriate. Indemnification of, and advancement of
expenses to, such persons shall be mandatory to the extent that applicable law
provides that the Corporation may authorize such indemnification and advancement
of expenses. Such indemnification and advancement of expenses shall be in
addition to any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any law, Bylaw, agreement, vote of
stockholders or otherwise. Any repeal or amendment of this Article 11 by the
stockholders of the Corporation or by changes in applicable law shall, to the
extent permitted by applicable law, be prospective only, and shall not adversely
affect any limitation on the personal liability of any director, officer,
employee or agent of the Corporation at the time of such repeal or amendment.
ARTICLE 11.
ARRANGEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the DGCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the DGCL, order a meeting of the creditors or
class of creditors, and/or the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders of this Corporation, as the case
may be, and also on this Corporation.
3
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ARTICLE 12.
AMENDMENT OF CORPORATE DOCUMENTS
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE 13.
MISCELLANEOUS
Election of directors need not be by written ballot. Any director or
the entire board of directors may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote at an election of
directors, except as otherwise provided by law. In furtherance and not in
limitation of the powers conferred by statute, the board of directors of the
Corporation is expressly authorized to make, alter or repeal the bylaws of the
Corporation.
ARTICLE 14.
SEVERABILITY
If any provision contained in this Certificate of Incorporation shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not invalidate the entire
Certificate of Incorporation or any other provisions hereof. Such provision
shall be deemed to be modified to the extent necessary to render it valid and
enforceable, then the Certificate of Incorporation shall be construed as if not
containing such provision.
4
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I, THE UNDERSIGNED, for the purpose of forming the Corporation under
the laws of the State of Delaware, do make, file, and record this Certificate of
Incorporation and do certify that this is my act and deed and that the facts
stated herein are true and accordingly, I do hereunto set my hand on this 28th
day of March, 1995.
By: /s/ Tambra S. King
----------------------------
Tambra S. King, Incorporator
5
BY-LAWS
OF
FOAMEX FIBERS, INC.
a Delaware corporation
(the "Corporation")
As adopted on March 29, 1995
<PAGE>
I. OFFICES............................................................... (1)
1.1. Registered Office............................................... (1)
1.2. Additional Offices.............................................. (1)
II. STOCKHOLDERS MEETINGS................................................. (1)
2.1. Annual Meetings................................................. (1)
2.2. Special Meetings................................................ (1)
2.3. Notices......................................................... (1)
2.4. Quorum.......................................................... (1)
2.5. Organization and Conduct of Meetings............................ (2)
2.6. Notification of Stockholder Business............................ (2)
2.7. Voting of Shares................................................ (3)
2.7.1. Voting Lists......................................... (3)
2.7.2. Votes Per Share...................................... (3)
2.7.3. Proxies.............................................. (3)
2.7.4. Required Vote........................................ (4)
2.7.5. Consents in Lieu of Meeting.......................... (4)
III. DIRECTORS............................................................. (4)
3.1. Purpose......................................................... (4)
3.2. Number.......................................................... (4)
3.3. Election........................................................ (4)
3.4. Notification of Nominations..................................... (4)
3.5. Vacancies and Newly Created Directorships....................... (5)
3.6. Removal......................................................... (5)
3.7. Compensation.................................................... (5)
IV. BOARD MEETINGS........................................................ (6)
4.1. Regular Meetings................................................ (6)
4.2. Special Meetings................................................ (6)
4.3. Conduct of Meetings............................................. (6)
4.4. Quorum, Required Vote........................................... (6)
4.5. Consent In Lieu of Meeting...................................... (6)
V. COMMITTEES OF DIRECTORS............................................... (7)
5.1. Establishment; Standing Committees.............................. (7)
5.1.1. Finance Committee.................................... (7)
5.1.2. Audit Committee...................................... (7)
5.1.3. Compensation Committee............................... (7)
5.2. Available Powers................................................ (8)
5.3. Unavailable Powers.............................................. (8)
5.4. Alternate Members............................................... (8)
5.5. Procedures...................................................... (8)
(i)
<PAGE>
VI. OFFICERS............................................................ (9)
6.1. Elected Officers.............................................. (9)
6.1.1. Chairman of the Board.............................. (9)
6.1.2. President.......................................... (9)
6.1.3. Chief Financial Officer............................ (9)
6.1.4. Vice Presidents.................................... (9)
6.1.5. Secretary.......................................... (9)
6.1.6. Assistant Secretaries.............................. (10)
6.1.7. Treasurer.......................................... (10)
6.1.8. Assistant Treasurers............................... (10)
6.1.9. Divisional Officers................................ (10)
6.2. Election...................................................... (11)
6.3. Appointed Officers............................................ (11)
6.4. Multiple Officeholders, Stockholder and
Director Officers............................................. (11)
6.5. Compensation, Vacancies....................................... (11)
6.6. Additional Powers and Duties.................................. (11)
6.7. Removal....................................................... (11)
6.8. Voting Upon Stocks............................................ (11)
VII. SHARE CERTIFICATES.................................................. (12)
7.1. Entitlement to Certificates................................... (12)
7.2. Multiple Classes of Stock..................................... (12)
7.3. Signatures.................................................... (12)
7.4. Issuance and Payment.......................................... (12)
7.5. Lost, Stolen or Destroyed Certificates........................ (12)
7.6. Transfer of Stock............................................. (13)
7.7. Registered Stockholders....................................... (13)
VIII. INDEMNIFICATION..................................................... (13)
8.1. General....................................................... (13)
8.2. Actions by or in the Right of the Corporation................. (13)
8.3. Board Determinations.......................................... (14)
8.4. Advancement of Expenses....................................... (14)
8.5. Nonexclusive.................................................. (14)
8.6. Insurance..................................................... (14)
8.7. Certain Definitions........................................... (15)
8.8. Change in Governing Law....................................... (15)
IX. INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS..................... (16)
9.1. Validity...................................................... (16)
9.2. Disclosure, Approval.......................................... (16)
9.3. Nonexclusive.................................................. (16)
X. MISCELLANEOUS....................................................... (16)
10.1. Place of Meetings............................................ (16)
(ii)
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10.2. Fixing Record Dates.......................................... (16)
10.3. Means of Giving Notice....................................... (17)
10.4. Waiver of Notice............................................. (17)
10.5. Attendance via Communications Equipment...................... (17)
10.6. Dividends.................................................... (17)
10.7. Reserves..................................................... (17)
10.8. Reports to Stockholders...................................... (18)
10.9. Checks, Notes and Contracts.................................. (18)
10.10. Loans........................................................ (18)
10.11. Fiscal Year.................................................. (18)
10.12. Seal......................................................... (18)
10.13. Books and Records............................................ (18)
10.14. Resignation.................................................. (18)
10.15. Surety Bonds................................................. (19)
10.16. Amendments................................................... (19)
(iii)
<PAGE>
BY-LAWS
OF
FOAMEX FIBERS, INC.
ARTICLE I.
OFFICES
Section 1.1. Registered Office. The registered office of the
Corporation within the State of Delaware shall be located at the principal place
of business in said state of such Corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2. Additional Offices. The Corporation may, in addition to
its registered office in the State of Delaware, have such other offices and
places of business, both within and without the State of Delaware, as the Board
of Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business and affairs of the Corporation may require.
ARTICLE II.
STOCKHOLDERS MEETINGS
Section 2.1. Annual Meetings. Annual meetings of stockholders shall be
held at a place and time on any weekday which is not a holiday as shall be
designated by the Board of Directors and stated in the notice of the meeting, at
which meeting the stockholders shall elect the directors of the Corporation and
transact such other business as may properly be brought before the meeting.
Section 2.2. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by statute, the
Certificate of Incorporation or by these By-Laws, may be called only by (i) the
Chairman of the Board, (ii) the President or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the then-authorized number of
directors of the Corporation.
Section 2.3. Notices. Written notices of each stockholders meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote thereat at the address of such stockholder as
reflected in the records of the Corporation. Such notice shall be given by or at
the direction of the party calling such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting. If said notice is for a
stockholders meeting other than an annual meeting, it shall in addition state
the purpose or purposes for which said meeting is being called, and the business
transacted at such meeting shall be limited to the matters so stated in said
notice and any matters reasonably related thereto.
Section 2.4. Quorum. At any stockholders meeting, the holders present
in person or by proxy of a majority of the outstanding shares of capital stock
entitled to vote thereat shall constitute a quorum of the stockholders for all
purposes (unless the representation of a larger number of shares shall be
required by law or by the Certificate of Incorporation, in which case the
representation of the
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number of shares so required shall constitute a quorum).
The holders of a majority of the outstanding shares of capital stock
entitled to vote which are present in person or by proxy at any meeting (whether
or not constituting a quorum of the outstanding shares) may adjourn the meeting
from time to time without notice other than by announcement thereat; and at any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally called,
but only those stockholders entitled to vote at the meeting originally noticed
shall be entitled to vote at any adjournment or adjournments thereof. However,
if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 2.5. Organization and Conduct of Meetings. The Chairman of the
Board shall call stockholders meetings to order and shall act as Chairman of
such meetings. In the absence of the Chairman of the Board at any meeting, the
President or, in his absence, any Vice President designated by the Board of
Directors to perform the duties of the Chairman of the Board shall act as
Chairman. In the absence of the Chairman of the Board, the President and any
such Vice President at any meeting, the holders of a majority of the shares of
capital stock entitled to vote present in person or by proxy at such meeting
shall elect a Chairman.
The Secretary of the Corporation shall act as Secretary of all
stockholders meetings; but, in the absence of the Secretary, the Chairman may
appoint any person to act as Secretary of the meeting.
Proceedings at every stockholders meeting shall, at the election of the
Chairman, comply with Robert's Rules of Order (latest published edition).
Section 2.6. Notification of Stockholder Business. All business
properly brought before an annual meeting shall be transacted at such meeting.
Subject to the right of stockholders to elect a Chairman of the meeting, as set
forth in Section 2.5 of these By-Laws, business shall be deemed properly brought
only if it is (i) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise properly
brought before the meeting by or at the direction of the Board of Directors or
(iii) brought before the meeting by a stockholder of record entitled to vote at
such meeting if written notice of such stockholder's intent to bring such
business before such meeting is delivered to, or mailed, postage prepaid, and
received by, the Secretary of the Corporation at the principal executive offices
of the Corporation not later than the close of business on the tenth day
following the date on which the Corporation first makes public disclosure (by
notice to any national securities exchange or national market system in the
United States on which the capital stock of the Corporation entitled to vote at
such meeting is listed or otherwise) of the date of the annual meeting;
provided, however, that in the event that the annual meeting is adjourned, and
the Corporation is required by Delaware law to give notice to stockholders of
the adjourned meeting date, written notice of such stockholder's intent to bring
such business before the meeting must be delivered to or received by the
Secretary of the Corporation no later than the close of business on the fifth
day following the earlier of (1) the date the Corporation makes public
disclosure (by notice to any such exchange or system or otherwise) of the date
of the
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adjourned meeting or (2) the date on which notice of such adjourned meeting is
first given to stockholders. Each notice given by such stockholder shall set
forth: (A) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting; (B) the
name and address of the stockholder who intends to propose such business; (C) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting (or if the record date for such
meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such meeting)
and intends to appear in person or by proxy at such meeting to propose such
business; and (D) any material interest of the stockholder, if any, in such
business. The Chairman of the meeting may refuse to transact any business at any
meeting made without compliance with the foregoing procedure.
Section 2.7. Voting of Shares.
Section 2.7.1. Voting Lists. The officer or agent who has
charge of the stock ledger of the Corporation shall prepare, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote thereat arranged in alphabetical order and showing the address
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present. The
original stock transfer books shall be prima facie evidence as to who are the
stockholders entitled to examine such list or transfer books or to vote at any
meeting of stockholders. Failure to comply with the requirements of this section
shall not affect the validity of any action taken at said meeting.
Section 2.7.2. Votes Per Share. Each outstanding share of
capital stock shall be entitled to vote in accordance with the provisions for
voting included in the Certificate of Incorporation. In determining the number
of shares of stock required by law, by the Certificate of Incorporation or by
the By-Laws to be represented for any purpose, or to determine the outcome of
any matter submitted to stockholders for approval or consent, the number of
shares represented or voted shall be weighted in accordance with the provisions
of the Certificate of Incorporation regarding voting powers of each class of
stock. Any reference in these By-Laws to a majority or a particular percentage
of the voting stock or a majority or a particular percentage of the capital
stock shall be deemed to refer to a majority or a particular percentage,
respectively, of the voting power of such stock. Issues shall be determined by a
class vote only when a class vote is required by law or the Certificate of
Incorporation.
Section 2.7.3. Proxies. Every stockholder entitled to vote at
a meeting or to express consent or dissent without a meeting or a stockholder's
duly authorized attorney-in-fact may authorize another person or persons to act
for him by proxy. Each proxy shall be in writing, executed by the stockholder
giving the proxy or by his duly authorized attorney. No proxy shall be voted on
or after three (3) years from its date, unless the proxy provides for a longer
period. Unless
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and until voted, every proxy shall be revocable at the pleasure of the person
who executed it, or his legal representatives or assigns, except in those cases
where an irrevocable proxy permitted by statute has been given.
Section 2.7.4. Required Vote. When a quorum is present at any
meeting, the vote of the holders, present in person or represented by proxy, of
capital stock of the Corporation representing a majority of the votes of all
capital stock of the Corporation entitled to vote thereat shall decide any
question brought before such meeting, unless the question is one upon which, by
express provision of law or the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 2.7.5. Consents in Lieu of Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any annual or special meeting of the
stockholders of the Corporation, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, is signed by the holders of capital stock of the Corporation having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a duly convened meeting. The signed consent, or a signed
copy, shall be placed in the minute book of the Corporation.
ARTICLE III.
DIRECTORS
Section 3.1. Purpose. The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors, acting by not
less than a majority of the directors then in office. The Board of Directors
shall exercise all such powers of the Corporation and do all such lawful acts
and things as are not by law, the Certificate of Incorporation or these By-Laws
directed or required to be exercised or done by the stockholders. Directors need
not be stockholders or residents of the State of Delaware.
Section 3.2. Number. The number of directors constituting the Board of
Directors shall never be less than one (1) nor more than twenty-five (25), and
shall be determined by resolution of the Board of Directors.
Section 3.3. Election. Directors shall be elected by the stockholders
by plurality vote at a stockholders meeting as provided in the Certificate of
Incorporation and these By-Laws, and each director shall hold office until his
successor has been duly elected and qualified.
Section 3.4. Notification of Nominations. Subject to the rights of the
holders of any one or more series of Preferred Stock then outstanding,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote for the election of directors. Any
stockholder entitled to vote for the election of directors at an annual meeting
or a special meeting called for the purpose of electing directors may nominate
persons for election as directors at such meeting only if written notice of such
stockholder's intent to make such nomination is delivered to, or mailed, postage
prepaid, and received by, the Secretary of the Corporation at the principal
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executive offices of the Corporation not later than the close of business on the
tenth day following the date on which the Corporation first makes public
disclosure (by notice to any national securities exchange or national market
system in the United States on which the capital stock of the Corporation
entitled to vote at such meeting is listed or otherwise) of the date of the
meeting; provided, however, that in the event that the meeting is adjourned, and
the Corporation is required by Delaware law to give notice to stockholders of
the adjourned meeting date, written notice of such stockholder's intent to make
such nomination at such adjourned meeting must be delivered to or received by
the Secretary of the Corporation no later than the close of business on the
fifth day following the earlier of (1) the date the Corporation makes public
disclosure (by notice to any such exchange or system or otherwise) of the date
of the adjourned meeting or (2) the date on which notice of such adjourned
meeting is first given to stockholders. Each notice given by such stockholder
shall set forth: (A) the name and address of the stockholder who ntends to make
the nomination and of the person or persons to be nominated; (B) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting (or if the record date for such
meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the record date for such meeting)
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (C) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (D) such other information
regarding each nominee proposed by such stockholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated, by the Board of Directors; and (E) the written consent of each
nominee to serve as a director of the Corporation if so elected. The Chairman of
the meeting may refuse to acknowledge the nomination of any person made without
compliance with the foregoing procedure.
Section 3.5. Vacancies and Newly Created Directorships. Any newly
created directorships or any vacancies on the Board resulting from death,
resignation, disqualification, removal or other cause, may be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board. Any director elected in accordance with
the preceding sentence shall hold office until the next annual meeting of
stockholders or until his successor has been duly elected and qualified, subject
to earlier death, resignation, disqualification or removal.
Section 3.6. Removal. Any director may be removed either for or without
cause at any special meeting of stockholders by the affirmative vote of a
majority in number of the stockholders present in person or represented by proxy
at such meeting and entitled to vote for the election of such director, if
notice of the intention to act upon such matter shall have been given in the
notice calling such meeting.
Section 3.7. Compensation. Unless otherwise restricted by law, the
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix compensation of directors. The directors may be reimbursed
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid either a fixed sum for attendance at each meeting of the Board
of Directors and/or a stated salary as director. No such payment shall preclude
any director
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from serving the Corporation in any other capacity and receiving compensation
therefor. Members of committees of the Board of Directors may be allowed like
compensation.
ARTICLE IV.
BOARD MEETINGS
Section 4.1. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
determine. No notice shall be required for any regular meeting of the Board of
Directors; but a notice of the fixing or changing of the time or place of
regular meetings shall be mailed to every director at least five (5) days before
the first meeting held pursuant to the notice.
Section 4.2. Special Meetings. Special meetings of the Board of
Directors (i) may be called by the Chairman of the Board or President and (ii)
shall be called by the President or Secretary on the written request of two or
more directors. Notice of each special meeting of the Board of Directors shall
be given to each director at least 24 hours before the meeting if such notice is
delivered personally or by means of telephone, telegram, telex or facsimile
transmission and delivery; two (2) days before the meeting if such notice is
delivered by a recognized express delivery service; and three (3) days before
the meeting if such notice is delivered through the United States mail. Any and
all business may be transacted at a special meeting which may be transacted at a
regular meeting of the Board of Directors. Except as may be otherwise expressly
provided by law, the Certificate of Incorporation or these By-Laws, neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in the notice or waiver of notice of such meeting.
Section 4.3. Conduct of Meetings. The Chairman of the Board shall
preside at all meetings of the Board of Directors and shall determine the order
of business that shall be considered at such meetings. In the absence of the
Chairman of the Board, the President shall preside at all meetings of the Board
of Directors. In the absence of the President, a Chairman of the meeting shall
be elected from the directors present. The Secretary of the Corporation shall
act as Secretary of all meetings of the directors, but in the absence of the
Secretary, the Chairman of the meeting may appoint any person to act as
Secretary of the meeting.
Section 4.4. Quorum, Required Vote. A majority of the directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, and the act of a majority of the directors present at any meeting
at which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law, the Certificate of Incorporation
or these By-Laws. If a quorum shall not be present at any meeting, a majority of
the directors present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present.
Section 4.5. Consent In Lieu of Meeting. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken by written consent in lieu of a meeting in accordance with
applicable provisions of law.
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ARTICLE V.
COMMITTEES OF DIRECTORS
Section 5.1. Establishment; Standing Committees. The Board of Directors
may by resolution establish, name or dissolve one or more committees, each
committee to consist of one or more of the directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required. Such committees may include the following standing committees,
which committees, if established, shall have and may exercise the following
powers and authority:
Section 5.1.1. Finance Committee. The Finance Committee shall,
from time to time, meet to review the Corporation's consolidated operating and
financial affairs, both with respect to the Corporation and all of its
subsidiaries, and to report its findings and recommendations to the Board of
Directors for final action. The Finance Committee shall not be empowered to
approve any corporate action, of whatever kind or nature, and the
recommendations of the Finance Committee shall not be binding on the Board of
Directors, except when, pursuant to the provisions of Section 5.2 of these
By-Laws, such power and authority have been specifically delegated to such
committee by the Board of Directors by resolution. In addition to the foregoing,
the specific duties of the Finance Committee shall be determined by the Board of
Directors by resolution.
Section 5.1.2. Audit Committee. The Audit Committee shall,
from time to time, but no less than two times per year, meet to review and
monitor the financial and cost accounting practices and procedures of the
Corporation and all of its subsidiaries and to report its findings and
recommendations to the Board of Directors for final action. In addition, the
Audit Committee shall recommend an independent public accountant to audit the
Corporation's financial statements and perform other accounting services for the
Corporation to the Board of Directors for submission to the stockholders for
approval. The composition of the Audit Committee shall meet the requirements of
any national securities exchange or national market system on which the
Corporation lists any of its capital stock. The Audit Committee shall not be
empowered to approve any corporate action, of whatever kind or nature, and the
recommendations of the Audit Committee shall not be binding on the Board of
Directors, except when, pursuant to the provisions of Section 5.2 of these
By-Laws, such power and authority have been specifically delegated to such
committee by the Board of Directors by resolution. In addition to the foregoing,
the specific duties of the Audit Committee shall be determined by the Board of
Directors by resolution.
Section 5.1.3. Compensation Committee. The Compensation
Committee shall, from time to time, meet to review the various compensation
plans, policies and practices of the Corporation and all of its subsidiaries and
to report its findings and recommendations to the Board of Directors for final
action. The Compensation Committee shall not be empowered to approve any
corporate action, of whatever kind or nature, and the recommendations of the
Compensation Committee shall not be binding on the Board of Directors, except
when, pursuant to the provisions of Section 5.2 of these By-Laws, such power and
authority have been specifically delegated to such committee by the Board of
Directors by resolution. In addition to the foregoing, the specific duties
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of the Compensation Committee shall be determined by the Board of Directors by
resolution.
Section 5.2. Available Powers. Any committee established pursuant to
Section 5.1 of these By-Laws, including the Finance Committee, the Audit
Committee and the Compensation Committee, but only to the extent provided in the
resolution of the Board of Directors establishing such committee or otherwise
delegating specific power and authority to such committee, and as limited by
law, the Certificate of Incorporation, and these By-Laws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it.
Without limiting the foregoing, such committee may, but only to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors as provided in Section 151(a) of the
General Corporation Law of the State of Delaware, fix any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the company.
Section 5.3. Unavailable Powers. No committee of the Board of Directors
shall have the power or authority to amend the Certificate of Incorporation
(except in connection with the issuance of capital stock as provided in the
previous section); adopt an agreement of merger or consolidation; recommend to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, a dissolution of the Corporation or a
revocation of such a dissolution; amend the By-Laws of the Corporation; or,
unless the resolution establishing such committee or the Certificate of
Incorporation expressly so provides, declare a dividend, authorize the issuance
of stock or adopt a certificate of ownership and merger.
Section 5.4. Alternate Members. In the absence or disqualification of a
member of a committee, (i) the Board of Directors may designate one or more
directors as alternate members of any such committee or (ii) the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member; provided, however, that any person or
persons appointed pursuant to subparagraph (i) or (ii) are qualified to serve on
such committee in accordance with the resolutions establishing the same.
Section 5.5. Procedures. Time, place and notice, if any, of meetings of
a committee shall be determined by such committee. At meetings of a committee, a
majority of the number of members designated by the Board of Directors to serve
on such committee shall constitute a quorum for the transaction of business. The
act of a majority of the members present at any meeting at which a quorum is
present shall be the act of the committee, except as otherwise specifically
provided by law, the Certificate of Incorporation, these By-Laws or the
resolution or resolutions establishing such committee. If a quorum is not
present at a meeting of a committee, the members present may adjourn the meeting
from time to time, without notice other than an announcement at the meeting,
until a quorum is present.
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ARTICLE VI.
OFFICERS
Section 6.1. Elected Officers. The Board of Directors shall elect a
President and a Secretary (collectively, the "Required Officers") and may elect
such other officers having the titles and duties set forth below which are not
reserved for the Required Officers or such other titles as the Board of
Directors may by resolution from time to time establish. The respective duties
of the Required Officers or any other officer, shall be defined by and subject
to the description of such office set forth below and by the resolution creating
the same.
Section 6.1.1. Chairman of the Board. The Chairman of the
Board, or in his absence, the President, shall preside, when present, over all
meetings of the stockholders and the Board of Directors. The Chairman of the
Board shall advise and counsel the President and other officers and shall
exercise such powers and perform such duties as shall be assigned to or required
of him from time to time by the Board of Directors or these By-Laws. The
Chairman of the Board may execute bonds, mortgages and other contracts requiring
a seal under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed to another agent of the Corporation or
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation. The
Chairman of the board may delegate all or any of his powers or duties to the
President, if and to the extent deemed by the Chairman of the Board to be
desirable or appropriate.
Section 6.1.2. President. The President shall be the chief
executive officer of the Corporation, shall have general and active management
of the business of the Corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. In the absence of the
Chairman of the Board or in the event of his inability or refusal to act, the
President shall perform the duties and exercise the powers of the Chairman of
the Board.
Section 6.1.3. Chief Financial Officer. The Chief Financial
Officer shall be the principal financial officer of the Corporation and shall
have such powers and perform such duties as these By-Laws or the Board of
Directors may from time to time prescribe.
Section 6.1.4. Vice Presidents. In the absence of the
President, or in the event of his inability or refusal to act, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any such designation, then in the order of their election or appointment)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
Section 6.1.5. Secretary. The Secretary shall keep in books
provided for that purpose the minutes of all meetings of the Board of Directors
and of all committees of the Board of Directors and the minutes of all meetings
of the stockholders; he shall attend to the giving or serving of all notices of
the Corporation; he may sign with the Chairman of the Board or the President or
a
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Vice President, in the name of the Corporation, all contracts when authorized so
to do either generally or in specific instances by the Board of Directors or by
any committee of the Board of Directors having the requisite authority and, when
so ordered by the Board of Directors or such committee, he shall affix the seal
of the Corporation thereto; he may sign with the Chairman of the Board, the
President or a Vice President certificates for shares of the capital stock; he
shall have charge of the stock certificate books, transfer books and stock
ledgers and such other books and papers as the Board of Directors shall direct,
all of which shall at all reasonable times be open to the examination of the
independent public accountants of the Corporation or any director, at the office
of the Corporation during business hours; and he shall in general perform all
the duties incident to the office of Secretary, subject to the control of the
Board of Directors.
Section 6.1.6. Assistant Secretaries. The Assistant Secretary,
or if there be more than one, the Assistant Secretaries (in the order determined
by the Board of Directors or if there be no such determination, then in the
order of their election or appointment) shall, in the absence of the Secretary
or in the event of his inability or refusal to act, perform the duties and
exercise the powers of the Secretary.
Section 6.1.7. Treasurer. The Treasurer shall have custody of
all the funds and securities of the Corporation which may come into his hands,
and shall deposit the same with such bank or banks or other depositary or
depositaries as the Board of Directors from time to time shall determine; he may
endorse on behalf of the Corporation for collection checks, notes and other
obligations and shall deposit the same to the credit of the Corporation in such
bank or banks or depositary or depositaries as the Board of Directors may
designate; he may sign all receipts and vouchers for payments made to the
Corporation; he may sign with the Chairman of the Board or the President or a
Vice President certificates for shares of the capital stock; he shall enter or
cause to be entered regularly in the books of the Corporation full and accurate
accounts of all moneys received and paid on account for the Corporation and
wherever required by the Board of Directors shall render statements of such
accounts; he shall, at all reasonable times, exhibit his books and accounts to
the independent public accountant of the Corporation or to any director of the
Corporation during business hours; and he shall perform all acts incident of the
office of Treasurer, subject to the control of the Board of Directors.
Section 6.1.8. Assistant Treasurers. The Assistant Treasurer,
or if there shall be more than one, the Assistant Treasurers (in the order
determined by the Board of Directors or if there be no such determination, then
in the order of their election or appointment) shall, in the absence of the
Treasurer or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the Treasurer.
Section 6.1.9. Divisional Officers. Each division of the
Corporation, if any, may have a President, Secretary or Treasurer and one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
assistant officers. Any number of such offices may be held by the same person.
Such divisional officers will be appointed by, report to and serve at the
pleasure of the Board of Directors and such other officers that the Board of
Directors may place in authority over them. The officers of each division shall
have such authority with respect to the business and affairs of that division as
may be granted from time to time by the Board of Directors, and in the regular
course of
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business of such division may sign contracts and other documents in the name of
the division where so authorized; provided that in no case and under no
circumstances shall an officer of one division have authority to bind any other
division of the Corporation except as necessary in the pursuit of the normal and
usual business of the division of which he is an officer.
Section 6.2. Election. All officers shall serve until their successors
are duly elected and qualified or until their earlier death, disqualification,
retirement, resignation or removal from office.
Section 6.3. Appointed Officers. The Board of Directors may also
appoint or delegate the power to appoint such other officers, assistant officers
and agents, and may also remove such officers and agents or delegate the power
to remove same, as it shall from time to time deem necessary, and the titles and
duties of such appointed officers may be as described in Section 6.1 for elected
officers; provided that the officers and any officer possessing authority over
or responsibility for any function of the Board of Directors shall be elected
officers.
Section 6.4. Multiple Officeholders, Stockholder and Director Officers.
Any number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws otherwise provide. Officers need not be
stockholders or residents of the State of Delaware. Officers, such as the
Chairman of the Board, possessing authority over or responsibility for any
function of the Board of Directors must be directors.
Section 6.5. Compensation, Vacancies. The compensation of elected
officers shall be set by the Board of Directors. The Board of Directors shall
also fill any vacancy in an elected office. The compensation of appointed
officers and the filling of vacancies in appointed offices may be delegated by
the Board of Directors to the same extent as permitted by these By-Laws for the
initial filling of such offices.
Section 6.6. Additional Powers and Duties. In addition to the foregoing
especially enumerated powers and duties, the several elected and appointed
officers of the Corporation shall perform such other duties and exercise such
further powers as may be provided by law, the Certificate of Incorporation or
these By-Laws or as the Board of Directors may from time to time determine or as
may be assigned to them by any competent committee or superior officer.
Section 6.7. Removal. Any officer may be removed, either with or
without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board of Directors.
Section 6.8. Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the Chairman of the Board or the President, or any other officer
of the Corporation designated by the Chairman of the Board or the President,
shall have full power and authority on behalf of the Corporation to attend and
to act and to vote in person or by proxy at any meeting of the holders of
securities of any corporation or entity in which the Corporation may own or hold
stock or other securities, and at any such meeting shall possess and may
exercise in person or by proxy any and all rights, powers and privileges
incident to the ownership of such stock or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The
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Chairman of the Board, the President or any other officer of the Corporation
designated by the Chairman of the Board or the President, may also execute and
deliver on behalf of the Corporation powers of attorney, proxies, waivers of
notice and other instruments relating to the stocks or securities owned or held
by the Corporation. The Board of Directors may, from time to time, by resolution
confer like powers upon any other person or persons.
ARTICLE VII.
SHARE CERTIFICATES
Section 7.1. Entitlement to Certificates. Every holder of the capital
stock of the Corporation, unless and to the extent the Board of Directors by
resolution provides that any or all classes or series of stock shall be
uncertificated, shall be entitled to have a certificate, in such form as is
approved by the Board of Directors and conforms with applicable law, certifying
the number of shares owned by him.
Section 7.2. Multiple Classes of Stock. If the Corporation shall be
authorized to issue more than one class of capital stock or more than one series
of any class, a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualification, limitations or restrictions of such preferences
and/or rights shall, unless the Board of Directors shall by resolution provide
that such class or series of stock shall be uncertificated, be set forth in full
or summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock; provided that, to the extent
allowed by law, in lieu of such statement, the face or back of such certificate
may state that the Corporation will furnish a copy of such statement without
charge to each requesting stockholder.
Section 7.3. Signatures. Each certificate representing capital stock of
the Corporation shall be signed by or in the name of the Corporation by (1) the
Chairman of the Board, the President or a Vice President; and (2) the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the
Corporation. The signatures of the officers of the Corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to hold such office before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he held such office on the date of issue.
Section 7.4. Issuance and Payment. Subject to the provisions of the
law, the Certificate of Incorporation or these By-Laws, shares may be issued for
such consideration and to such persons as the Board of Directors may determine
from time to time. Shares may not be issued until the full amount of the
consideration has been paid, unless upon the face or back of each certificate
issued to represent any partly paid shares of capital stock there shall have
been set forth the total amount of the consideration to be paid.
Section 7.5. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost, stolen or destroyed.
When
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authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 7.6. Transfer of Stock. Upon surrender to the Corporation or
its transfer agent, if any, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer and of the payment of all taxes applicable to the transfer of said
shares, the Corporation shall be obligated to issue a new certificate to the
person entitled thereto, cancel the old certificate and record the transaction
upon its books; provided, however, that the Corporation shall not be so
obligated unless such transfer was made in compliance with applicable state and
federal securities laws.
Section 7.7. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, vote and be held liable for calls and
assessments and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any person other than such
registered owner, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1. General. The Corporation shall indemnify any person who
was or is party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation),
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of or in any other capacity with
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, have
reasonable cause to believe that his conduct was unlawful.
Section 8.2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or
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completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture or
trust or other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 8.3. Board Determinations. Any indemnification under Sections
8.1 and 8.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 8.1 and 8.2.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
Section 8.4. Advancement of Expenses. Expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding shall (in the case of any action, suit or proceeding
against a director of the Corporation) or may (in the case of any pending
threatened action, suit or proceeding against an officer, employee or agent) be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized by law or in this Section.
Section 8.5. Nonexclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Section shall not be deemed
exclusive of any other rights to which any director, officer, employee or agent
of the Corporation seeking indemnification or advancement of expenses may be
entitled under any other provision of these By-Laws or by the Certificate of
Incorporation, an agreement, a vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent of the Corporation and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 8.6. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was
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serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
provisions of the statutes, the Certificate of Incorporation or this Section.
Section 8.7. Certain Definitions. For purposes of this Article VIII,
(a) references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger, which, if its separate
existence had continued, would have the power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee, or agent of such constituent corporation, or is
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, shall stand in the same position under the provisions of this
Section with respect to the resulting or surviving corporation as he would have
with respect to such constituent corporation if its separate existence had
continued; (b) references to "other enterprises" shall include employee benefit
plans; (c) references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and (d) references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
any employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to in this Section.
Section 8.8. Change in Governing Law. In the event of any amendment or
addition to Section 145 of the General Corporation Law of the State of Delaware
or the addition of any other section to such law which shall limit
indemnification rights thereunder, the Corporation shall, to the extent
permitted by the General Corporation Law of the Sate of Delaware, indemnify to
the fullest extent authorized or permitted hereunder, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding.
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ARTICLE IX.
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
Section 9.1. Validity. Any contract or other transaction between the
Corporation and any of its directors, officers or stockholders (or any
corporation or firm in which any of them are directly or indirectly interested)
shall be valid for all purposes notwithstanding the presence of such director,
officer, or stockholder at the meeting authorizing such contract or transaction,
or his participation or vote in such meeting or authorization.
Section 9.2. Disclosure, Approval. The foregoing shall, however, apply only
if the material facts of the relationship or the interest of each such director,
officer or stockholder is known or disclosed:
(1) to the Board of Directors and it nevertheless in good faith
authorizes or ratifies the contract or transaction by a majority of the
directors present, each such interested director to be counted in determining
whether a quorum is present but not in calculating the majority to carry the
vote; or
(2) to the stockholders and they nevertheless in good faith authorize
or ratify the contract or transaction by a majority of the shares present, each
such interested stockholder to be counted for quorum and voting purposes.
Section 9.3. Nonexclusive. This provision shall not be construed to
invalidate any contract or transaction which would be valid in the absence of
this provision.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Place of Meetings. All stockholders, directors and committee
meetings shall be held at such place or places, within or without the State of
Delaware, as shall be designated from time to time by the Board of Directors or
such committee and stated in the notices thereof. If no such place is so
designated, said meetings shall be held at the principal business office of the
Corporation.
Section 10.2. Fixing Record Dates. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, to receive payment of any dividend or
other distribution or allotment of any rights, to exercise any rights in respect
of any change, conversion or exchange of stock or to effect any other lawful
action, or to make a determination of stockholders for any other proper purpose,
the Board of Directors may fix, in advance, a record date for any such
determination of stockholders, which shall not be more than sixty (60) nor less
than ten (10) days prior to the date on which the particular action requiring
such determination of stockholders is to be taken. In the absence of any action
by the Board of Directors, the date on which a notice of meeting is given, or
the date the Board of
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Directors adopts the resolution declaring a dividend or other distribution or
allotment or approving any change, conversion or exchange, as the case may be,
shall be the record date. A record date validly fixed for any meeting of
stockholders and the determination of stockholders entitled to vote at such
meeting shall be valid for any adjournment of said meeting except where such
determination has been made through the closing of stock transfer books and the
stated period of closing has expired.
Section 10.3. Means of Giving Notice. Except as expressly provided
elsewhere herein, whenever under law, the Certificate of Incorporation or these
By-Laws, notice is required to be given to any director or stockholder, such
notice may be given in writing and delivered personally, through the United
States mail, by a recognized express delivery service (such as Federal Express)
or by means of telegraph, telex, or facsimile transmission, addressed to such
director or stockholder at his address, telex or facsimile transmission number,
as the case may be, appearing on the records of the Corporation, with postage
and fees thereon prepaid. Such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail or with an express
delivery service or when transmitted, as the case may be.
Section 10.4. Waiver of Notice. Whenever notice is required to be given
under any provision of law or of the Certificate of Incorporation or of these
By-Laws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting of stockholders or of directors or
of a committee shall constitute waiver of notice of such meeting, except where
otherwise provided by law.
Section 10.5. Attendance via Communications Equipment. Unless otherwise
restricted by law, the Certificate of Incorporation or these By-Laws, members of
the Board of Directors or any committee thereof or the stockholders may hold a
meeting by means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can effectively
communicate with each other. Such participation in a meeting shall constitute
presence in person at the meeting, except where a person participates in the
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting is not lawfully called or convened.
Section 10.6. Dividends. Dividends on the capital stock of the Corporation,
paid in cash, property, or securities of the Corporation and as may be limited
by applicable law and applicable provisions of the Certificate of Incorporation
(if any), may be declared by the Board of Directors at any regular or special
meeting.
Section 10.7. Reserves. Before payment of any dividends, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
think proper as a reserve or reserves to meet contingencies, for equalizing
dividends, for repairing or maintaining any property of the Corporation to be
distributed to stockholders, or for such other purpose as the Board of Directors
shall determine to be in the best interest of the Corporation; and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
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Section 10.8. Reports to Stockholders. The Board of Directors shall present
at each annual meeting of stockholders, and at any special meeting of
stockholders when called for by vote of the stockholders, a statement of the
business and condition of the Corporation.
Section 10.9. Checks, Notes and Contracts. Checks and other orders for the
payment of money shall be signed by such person or persons as the Board of
Directors shall from time to time by resolution determine. Contracts and other
instruments or documents may be signed in the name of the Corporation by the
Chairman of the Board or the President or by any other officer authorized to
sign such contract, instrument or document by the Board of Directors, and such
authority may be general or confined to specific instances.
Checks and other orders for the payment of money made payable to the
Corporation may be endorsed for deposit to the credit of the Corporation, with a
depositary authorized by resolution of the Board of Directors, by the Chief
Financial Officer or Treasurer or such other persons as the Board of Directors
may from time to time by resolution determine.
Section 10.10. Loans. No loans and no renewals of any loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. When authorized so to do by the Board of Directors, any officer or
agent of the Corporation may effect loans and advances for the Corporation from
any bank, trust company or other institution or from any firm, corporation or
individual, and for such loans and advances may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the Corporation.
When authorized so to do by the Board of Directors, any officer or agent of the
Corporation may pledge, hypothecate or transfer, as security for the payment of
any and all loans, advances, indebtedness and liabilities of the Corporation,
any and all stocks, securities and other personal property at any time held by
the Corporation, and to that end may endorse, assign and deliver the same. Such
authority may be general or confined to specific instances.
Section 10.11. Fiscal Year. The fiscal year of the Corporation shall be the
52-53 week period ending on the Sunday closest to the end of each calendar year.
Section 10.12. Seal. The seal of the Corporation shall be in such form as
shall from time to time be adopted by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or otherwise
reproduced.
Section 10.13. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its stockholders, Board of Directors and committees and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of the shares held by
each.
Section 10.14. Resignation. Any director, committee member, officer or
agent may resign by giving written notice to the Chairman of the Board, the
President or the Secretary. The resignation shall take effect at the time
specified herein, or immediately if no time is specified. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it
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effective.
Section 10.15. Surety Bonds. Such officers and agents of the Corporation
(if any) as the President or the Board of Directors may direct, from time to
time, shall be bonded for the faithful performance of their duties and for the
restoration to the Corporation, in case of their death, resignation, retirement,
disqualification or removal from office, of all books, papers, vouchers, money
and other property of whatever kind in their possession or under their control
belonging to the Corporation, in such amounts and by such surety companies as
the president or the Board of Directors may determine. The premiums on such
bonds shall be paid by the Corporation and the bonds so furnished shall be in
the custody of the Secretary.
Section 10.16. Amendments. These By-Laws may from time to time be altered,
amended or repealed and new By-Laws may be adopted, as provided in the
Certificate of Incorporation.
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SENIOR SECURED
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (as amended, supplemented, amended and
restated or modified from time to time, this "Agreement"), dated as of June 12,
1997, among (a) THE BANK OF NOVA SCOTIA ("Scotiabank") and CITICORP USA, Inc.
("Citicorp"), each acting in its capacity as administrative agent (in such
capacity, the "Administrative Agents") for and on behalf of the various
financial institutions (collectively, the "Lenders") which are, or may from time
to time hereafter become, parties to the Credit Agreement (such capitalized term
and all other capitalized terms to have the respective meanings provided for in
Section 1 or as otherwise indicated herein) and the Issuing Banks, (b) Citicorp,
as collateral agent for the Lenders and the Noteholders (together with its
successors and assigns, the "Intercreditor Collateral Agent"), (c) Fleet
National Bank, as Trustee (the "Trustee"), on behalf of the Noteholders and each
subsequent holder of a Note, and (d) Scotiabank, acting in its capacity as
intercreditor agent for the Lenders, the Issuing Banks and the Noteholders
(together with its successors and assigns, the "Intercreditor Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time or
refinanced, refunded or replaced in whole or in part from time to time and
regardless of whether the indebtedness outstanding or permitted to be
outstanding thereunder is increased or decreased, the "Credit Agreement"), among
Foamex L.P., a Delaware limited partnership ("Foamex"), General Felt Industries,
Inc., a Delaware corporation ("GFI"; together with Foamex being the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and a general
partner of Foamex, FMXI, Inc., a Delaware corporation and a general partner of
Foamex, the Lenders, the collateral agent and funding agent thereunder and the
Administrative Agents, the Lenders have agreed, subject to the satisfaction of
certain conditions precedent and the other terms of the Credit Agreement, to
make Loans to and to issue or participate in Letters of Credit for the account
of the Borrowers, and the Issuing Banks, subject to the satisfaction of certain
conditions precedent, have agreed to issue the Letters of Credit (the "Credit
Extensions");
WHEREAS, pursuant to the terms of the Loan Documents, among other things,
each of Foamex and each Subsidiary Guarantor has granted pledges of and security
interests in substantially all of their real and personal assets, including
without limitation, accounts, inventory, general intangibles, intellectual
property, certain real property, shares of Subsidiary
<PAGE>
stock and intercompany notes;
WHEREAS, pursuant to the Senior Secured Note Indenture, dated as of June 3,
1993, as amended on or prior to the date hereof (as so amended, including,
without limitation, pursuant to the Supplemental Indenture (Senior Secured),
being the "Indenture"), among Foamex and Foamex Capital Corporation, a Delaware
corporation ("FCC"), as issuers (the "Issuers"), Foamex International and GFI,
as guarantors, and the Trustee on behalf of the holders of the Notes (such
holders, together with all subsequent holders of the Notes collectively referred
to herein as the "Noteholders") the Issuers have issued the Notes;
WHEREAS, pursuant to the terms of the Senior Secured Note Collateral
Documents the Trustee has been granted a security interest in the Note
Collateral, including, without limitation, (a) each of Foamex and GFI have
granted a security interest in stock of certain of its Subsidiaries,
intercompany notes, and certain of its personal property assets (including,
without limitation, equipment, inventory, intangibles, contracts and
intellectual property) and (b) FCC and GFI have entered into stock pledges in
favor of the Trustee (each such pledge, a "Stock Pledge Agreement"); and
WHEREAS, in connection with the agreements made among the parties hereto
relating to the making of Credit Extensions under the Credit Agreement, the
Lenders and the Trustee on behalf of the Noteholders desire to establish among
themselves their relative rights, remedies and priorities with respect to the
Shared Collateral;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. (a) Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agents" is defined in the preamble.
"Agreement" is defined in the preamble.
"Borrowers" is defined in the first recital.
"Citicorp" is defined in the preamble.
"Commitments" means "Commitments" as that term is defined in the Credit
Agreement.
"Credit Agreement" is defined in the first recital.
"Credit Agreement Collateral" means, collectively, the "Collateral" as
defined in the Loan
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Documents.
"Credit Agreement Notes" means "Notes" as that term is defined in the
Credit Agreement.
"Credit Agreement Obligations" means "Obligations" as that term is defined
in the Credit Agreement.
"Credit Extensions" is defined in the first recital.
"Existing Secured Debt" means "Existing Secured Debt" as defined in the
Credit Agreement.
"FCC" is defined in the third recital.
"Foamex International" means Foamex International Inc., a Delaware
corporation.
"Funding Agent" means "Funding Agent" as such term is defined in the Credit
Agreement.
"Indenture" is defined in the third recital.
"Intercreditor Agent" is defined in the preamble.
"Intercreditor Collateral Agent" is defined in the preamble.
"Issuers" is defined in the third recital.
"Issuing Banks" means "Issuing Banks" as that term is defined in the Credit
Agreement.
"Lenders" is defined in the preamble and shall in any event include any
assignee, successor, transferee or refinancing or refunding party of any person
that is a party to the Credit Agreement and all other persons which from and
after the date hereof become parties to the Credit Agreement.
"Letter of Credit" means "Letter of Credit" as that term is defined in the
Credit Agreement.
"Letter of Credit Obligations" means "Letter of Credit Obligations" as that
term is defined in the Credit Agreement.
"Loan Documents" means the Security Agreement, the GFI Security Agreement
and the Subsidiary Security Agreement to which FCC is a party (as each such term
is defined in the Credit Agreement) but solely as such documents relate to the
Shared Collateral.
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<PAGE>
"Note Collateral" means "Collateral" as that term is defined in the
Indenture.
"Noteholder Direction Period" means the period (i) commencing on the date
of the receipt of notice by the Intercreditor Agent from the Trustee that (w) an
Event of Default has occurred under the Indenture, (x) the Required Noteholders
have accelerated the Note Obligations, (y) the Intercreditor Agent has failed to
commence an action to foreclose upon any of the Shared Collateral and (z) the
Required Noteholders have directed the Trustee in writing to commence such an
action under the Senior Secured Note Collateral Documents and (ii) ending on the
date that such Event of Default has been cured or waived and such acceleration
has been rescinded pursuant to the terms of the Indenture.
"Noteholders" is defined in the third recital.
"Note Obligations" means the principal of and interest and, if applicable,
premium, on the Notes.
"Notes" means "Securities" as that term is defined in the Indenture.
"Property" means "Property" as that term is defined in the Credit
Agreement.
"Required Noteholders" means the holders of greater than 50% in principal
amount of the outstanding Notes.
"Required Senior Creditors" means the holders of greater than 50% of the
outstanding principal amount of Senior Obligations, voting as a single class.
"Scotiabank" is defined in the preamble.
"Senior Creditors" means, collectively, the Lenders and the Noteholders.
"Senior Obligations" means, collectively, the Credit Agreement Obligations
and the Note Obligations; provided, however, for purposes of the definition of
"Required Senior Creditors", the principal amount of "Senior Obligations" means
the principal amount of the Note Obligations and the lesser of (a) the principal
amount of the Credit Agreement Obligations and (b) the principal amount of the
Notes repurchased in the Refinancing (as defined in the Credit Agreement).
"Senior Secured Note Collateral Documents" means the "Senior Secured Note
Collateral Documents" as that term is defined in the Credit Agreement.
"Shared Collateral" means, collectively, (a) the Note Collateral and (b)
the Credit Agreement Collateral, but only to the extent such collateral would
constitute Note Collateral.
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<PAGE>
"Stock Pledge Agreement" is defined in the fourth recital.
"Supplemental Indenture (Senior Secured)" means the "Supplemental Indenture
(Senior Secured)" as that term is defined in the Credit Agreement.
"Trustee" is defined in the preamble.
(b) Use of Certain Defined Terms. The definition of any term incorporated
by reference from the Credit Agreement or from the Indenture shall have the
meaning provided for therein.
SECTION 2. Limitation of Rights of Senior Creditors. (5) The Trustee on
behalf of the Noteholders agrees that it shall not have the right to foreclose
or commence to foreclose upon (either pursuant to the Senior Secured Note
Collateral Documents or otherwise) or exercise any other rights or remedies in
respect of the Shared Collateral in a manner inconsistent with, or otherwise
contrary to the terms of, this Agreement.
(b) The Trustee shall not take any direct or indirect action, or vote in
any way, so as to challenge in a bankruptcy or insolvency proceeding or
otherwise (i) the validity, priority or enforceability of the Credit Agreement
Obligations or the liens under the "Loan Documents" (as defined in the Credit
Agreement), (ii) the rights of the Administrative Agents and the Lenders set
forth in the Credit Agreement or any of the "Loan Documents" (as defined in the
Credit Agreement), or (iii) the validity or enforceability of any provision of
this Paragraph 2(b).
(c) Neither the Administrative Agents nor any Lender shall take any direct
or indirect action, or vote in any way, so as to challenge in a bankruptcy or
insolvency proceeding or otherwise (i) the validity, priority or enforceability
of the Note Obligations or the Trustee's liens in the Note Collateral, (ii) the
rights of the Trustee and the Noteholders set forth in the Indenture or any of
the Senior Secured Note Collateral Documents, or (iii) the validity of
enforceability of any provision of this Paragraph 2(c).
(d) Nothing in this Section 2 shall be deemed to permit any Borrower, GFI
or any other affiliate of Foamex to enter into any transaction that is
prohibited by the terms of the Credit Agreement or the Indenture.
SECTION 3. Direction of Action. (10) The Intercreditor Agent or the
Intercreditor Collateral Agent, in each case subject to Section 6, shall make
such demands and give such notices under the Senior Secured Note Collateral
Documents and the Loan Documents as the Required Senior Creditors may request,
and shall take such actions to enforce the Senior Secured Note Collateral
Documents and the Loan Documents and to foreclose upon, collect, sell, transfer,
or otherwise dispose of all or any portion of the Shared Collateral as may be
directed by the Required Senior Creditors; provided, however, that (i) all such
directions shall be binding upon each Senior Creditor for all purposes, (ii) the
Intercreditor Agent or the Intercreditor Collateral Agent shall not take any
such action and (including any foreclosure action) unless directed to do
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<PAGE>
so by the Required Senior Creditors, (iii) neither the Intercreditor Agent nor
the Intercreditor Collateral Agent shall be required to obtain the vote of all
Senior Creditors in determining whether it has obtained the vote of the Required
Senior Creditors. No Senior Creditor shall have any right to exercise,
individually, any rights or remedies under the Senior Secured Note Collateral
Documents and the Loan Documents, it being understood and agreed that all of
such rights and remedies shall be exercised solely by and through the
Intercreditor Agent and the Intercreditor Collateral Agent. If the Required
Senior Creditors shall direct the Intercreditor Agent and the Intercreditor
Collateral Agent to foreclose upon, collect, sell, transfer, substitute or
otherwise dispose of all or any part of the Shared Collateral, the Intercreditor
Collateral Agent shall do so as provided in and pursuant to the Senior Secured
Note Collateral Documents or the Loan Documents, as the case may be . The only
right and remedy of the Senior Creditors which are not Required Senior Creditors
in respect of any disposal of Shared Collateral is to the receipt of proceeds
as, if, and when received upon the sale or other final disposition of Shared
Collateral as provided in Section 5.
(b) Notwithstanding clause (a) above, solely during a Noteholder Direction
Period, the Intercreditor Agent or the Intercreditor Collateral Agent shall, as
the case may be, subject in each case to Section 6, make such demands and give
such notices under the Senior Secured Note Collateral Documents as the Trustee,
acting at the written direction of the Required Noteholders may reasonably
request, in order to commence foreclosure proceedings under the Senior Secured
Note Collateral Documents to enforce the Senior Note Collateral Documents, and
to foreclose upon, collect, sell, transfer, or otherwise dispose of all or any
portion of the Shared Collateral; provided, however, that (i) all such
directions shall be binding upon each Senior Creditor for all purposes, (ii) the
Intercreditor Agent or the Intercreditor Collateral Agent, as the case may be,
shall not take any such action unless directed to do so by the Trustee acting at
the written direction of the Required Noteholders, and (iii) during the first
ninety days of any Noteholder Direction Period, the Required Senior Creditors
may instruct the Intercreditor Agent or the Intercreditor Collateral Agent to
delay any such action until the ninety-first day of such Noteholder Direction
Period, and provided further, however, that during such Noteholder Direction
Period and notwithstanding any contrary request by the Trustee at the written
request of Required Noteholders, the Intercreditor Agent and the Intercreditor
Collateral Agent will be required to follow any subsequent instructions given by
the Required Senior Creditors concerning the conduct (but not the delay or
termination) of any such foreclosure proceedings or any other action to enforce
the Senior Secured Note Collateral Documents or to collect, sell, transfer or
otherwise dispose of all or any portion of the Shared Collateral. If the
Trustee, acting at the written direction of the Required Noteholders, shall
direct the Intercreditor Agent or the Intercreditor Collateral Agent to
foreclose upon, collect, sell, transfer or otherwise dispose of all or any part
of the Shared Collateral, the Intercreditor Collateral Agent shall do so as
provided in and pursuant to the Senior Secured Note Collateral Documents. The
Trustee's and the Noteholders' right to direct any such action shall
automatically terminate, without any requirement of notice, upon the termination
of a Noteholder Direction Period.
(c) In furtherance of the purposes of this Agreement and subject to Section
6(c), the
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<PAGE>
Trustee will deliver to the Intercreditor Collateral Agent, in a form acceptable
to the Intercreditor Collateral Agent, all Shared Collateral that is currently,
or in the future becomes, subject to each Stock Pledge Agreement. Subject to the
terms of this Agreement, the Intercreditor Collateral Agent shall hold such
Property on behalf of and as agent for the Collateral Agent and the Trustee.
Nothing in this Section 3(c) shall relieve the Trustee of any of its duties or
responsibilities under each Stock Pledge Agreement or cause the Intercreditor
Collateral Agent to become a party to either Stock Pledge Agreement.
Nothing set forth in this Section 3 shall be construed to qualify or
otherwise limit the right of any Senior Creditor to declare such Senior
Creditor's Senior Obligations to be due and payable in accordance with the
Credit Agreement or the Indenture, as the case may be, or to enforce any other
rights or remedies such Senior Creditor may have in collateral other than Shared
Collateral.
Notwithstanding any provision of this Agreement to the contrary, nothing
herein shall (i) prevent or hinder the ability of the Collateral Agent or any
Lender to exercise its rights or remedies under the Loan Documents or any other
"Loan Document" (as defined in the Credit Agreement) with respect to any or all
Credit Agreement Collateral or any other "Collateral" (as defined in the Credit
Agreement) which is not Shared Collateral and (ii) give the Trustee or any
Noteholder any interest in or right to (x) any Credit Agreement Collateral or
any other "Collateral" (as defined in the Credit Agreement) which is not Shared
Collateral or (y) in any Loan Document or any other "Loan Document" (as defined
in the Credit Agreement). Neither the Intercreditor Agent, any Administrative
Agent, the Funding Agent, the Collateral Agent, the Intercreditor Collateral
Agent, any Lender or any Issuing Bank shall have any obligation or duty to
account to the Trustee or the Noteholders for any proceeds of any Credit
Agreement Collateral or any other "Collateral" (as defined in the Credit
Agreement) which is not Shared Collateral or for any other recovery under any
Loan Document or any other "Loan Document" (as defined in the Credit Agreement).
SECTION 4. Release of Shared Collateral; Coordination of Action. (14) The
Intercreditor Collateral Agent is hereby authorized, at any time and from time
to time, to release any or all or any portion of the Shared Collateral or
terminate the lien on the Shared Collateral granted pursuant to the Senior
Secured Note Collateral Documents pursuant to the terms of the Indenture and
provided the net cash proceeds arising from the sale or other disposition of
such Shared Collateral is applied to the Senior Obligations in accordance with
the terms of Section 5 or reinvested in accordance with the terms of the
Indenture and the Credit Agreement. Any such release of the Shared Collateral
will automatically and without the requirement of the giving of any notice or
the taking of any action release all liens on such Shared Collateral and any
transferee of such Shared Collateral shall take such Shared Collateral free and
clear of all such liens. The Senior Creditors agree that such release in
accordance with the immediately preceding sentence shall be binding and
conclusive upon them and their successors and assigns and hereby waive all
rights and claims with respect to any such release or substitution; provided,
however, that the Senior Creditors shall have a continuing security interest in
any proceeds arising from the
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<PAGE>
sale or other disposition of any of the Shared Collateral and shall be entitled
to receive such proceeds in accordance with Section 5.
(b) If the Intercreditor Agent or the Collateral Agent is directed by the
Required Senior Creditors to exercise any rights or remedies against the Shared
Collateral, the Intercreditor Collateral Agent shall, simultaneously exercise
such rights and remedies under the Senior Secured Note Collateral Documents and
the Loan Documents. Any proceeds of such exercise of such rights or remedies
shall be deemed to have first been received under the Senior Secured Note
Collateral Documents and second under the Loan Documents; provided, however,
that all such proceeds shall be applied as set forth in Section 5.
SECTION 5. Application of Proceeds. (17) Upon the exercise of any rights
and remedies by the Intercreditor Agent under the Senior Secured Note Collateral
Documents or any Loan Document with respect to the security interest granted
thereunder in the Shared Collateral, or in connection with any sale of Shared
Collateral permitted under the Indenture and the Credit Agreement any and all
net cash proceeds from the sale, foreclosure or other disposition of Shared
Collateral pursuant thereto shall, promptly following their receipt by the
Intercreditor Agent, be applied and distributed by the Intercreditor Agent as
follows:
(i) First, (x) following an Event of Default (as such term is
defined in the Indenture) to the payment of all costs, expenses,
liabilities and advances made or incurred by the Intercreditor Agent
and the Intercreditor Collateral Agent in connection with such sale,
foreclosure or other disposition and the costs, expenses and
compensation of agents and legal counsel to the Intercreditor Agent
and the Intercreditor Collateral Agent or (y) after an Event of
Default (as such term is defined in the Credit Agreement) the payment
of all costs, expenses, liabilities and advances made or incurred by
the Intercreditor Agent and the Intercreditor Collateral Agent in
connection with an Asset Sale (as defined in the Indenture);
(ii) Second, to the extent any proceeds remain after payment in
full of those items specified in clause (i) above, to the payment of
the Note Obligations in accordance with and to the extent required
under the terms of the Indenture;
(iii) Third, to the extent any proceeds remain after the
application required by clauses (i) and (ii) above, to the payment of
the Credit Agreement Obligations (or the cash collateralization
thereof) in accordance with the terms of the Credit Agreement and the
other Loan Documents; and
(iv) Fourth, to the extent any proceeds remain after payment of
those items specified in clauses (i), (ii) and (iii) above, such
proceeds shall be paid to or at the direction of the Borrower or as a
court of competent jurisdiction shall direct.
(b) Payment by the Intercreditor Agent to the Lenders in respect of the
Credit Agreement
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<PAGE>
Obligations shall be made to the Funding Agent for distribution to the Lenders
in accordance with the Credit Agreement. Payments by the Intercreditor Agent to
the Noteholders shall be made to the Trustee or distribution to the Noteholders
in accordance with the terms of the Indenture.
(c) Each Lender and the Trustee on behalf of each Noteholder and for each
subsequent holder of the Notes hereby agrees that (i) if at any time it shall
receive the proceeds of any Shared Collateral (other than through application by
the Intercreditor Agent in accordance with clauses (a) and (b) of this Section
5), it shall hold such proceeds in trust for the benefit of the Senior Creditors
and shall promptly turn the same over to the Intercreditor Agent for application
in accordance with said clauses (a) and (b) and (ii) it will not take or cause
to be taken any action, including, without limitation, the commencement of any
legal or equitable proceedings, the purpose of which is to give such Lender or
Noteholder any preference or priority against the other parties hereto with
respect to the Shared Collateral, except as provided for in this Agreement.
(d) The Trustee acknowledges that, pursuant to Section 12.09 of the Credit
Agreement, the Collateral Agent is permitted (but not required) to make
Protective Advances (as defined in the Credit Agreement) for the purpose of
discharging the Issuers' obligations under Sections 3.07, 4.15, 6.02 and 8.01 of
the Indenture. The Trustee agrees that, upon notification by the Collateral
Agent that the Collateral Agent has determined to make such a Protective
Advance, (i) the Trustee shall deem notices given to the Trustee pursuant to
such sections of the Indenture by the Collateral Agent to be notices given by
the Issuers and (ii) the Trustee shall receive the proceeds of such Protective
Advances and apply such proceeds to the redemption or other payments of the
Existing Secured Debt Payment in accordance with the terms of the Indenture as
set forth in such notice from the Collateral Agent.
(e) The Trustee, on its own behalf, and on behalf of the Noteholders,
hereby agrees and acknowledges that the Credit Agreement constitutes a "Credit
Agreement" (as defined in the Indenture).
(f) The Trustee hereby waives any right it may have to require the
Administrative Agents or the Lenders to marshal the Credit Agreement Collateral
or any other Collateral (as defined in the Credit Agreement) of any Person or
entity in favor of the Trustee or the Noteholders.
(g) The Administrative Agents each hereby waives any right it may have to
require the Trustee or the Noteholders to marshal the Note Collateral in favor
of the Administrative Agents or the Lenders.
SECTION 6. Concerning the Intercreditor Agent and the Intercreditor
Collateral Agent. (a) The Administrative Agents, on behalf of the Lenders, and
the Trustee on behalf of the Noteholders, authorizes each of the Intercreditor
Agent and the Intercreditor Collateral Agent to
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act on its and such holders' behalf under this Agreement and under the Senior
Secured Note Collateral Documents and the Loan Documents pursuant to the
provisions hereof and thereof. Each of the Intercreditor Agent and the
Intercreditor Collateral Agent accepts its appointment as Intercreditor Agent
and Intercreditor Collateral Agent, respectively, hereunder and, subject to
clause (b) below, agrees to act in accordance with the terms hereof and the
directions from time to time given to it by the Required Senior Creditors or, in
the circumstances contemplated in Section 3(b), the Required Noteholders, as
contemplated hereby.
(b) Neither the Intercreditor Agent nor the Intercreditor Collateral Agent
shall be under any duty to take any action, or to prosecute or defend any suit
with respect to this Agreement or the Senior Secured Note Collateral Documents
or the Loan Documents, (A) except as specified in a direction from the Required
Senior Creditors or otherwise provided herein and (B) unless it shall have
received a written or other assurance, reasonably satisfactory to it, from the
Senior Creditors, or the Noteholders, as the case may be, joining in such
direction as to its indemnification from and against any and all liabilities,
obligations, losses, damages, penalties, judgments, suits, costs, expenses,
charges or disbursements (not including for this purpose, however, any amounts
in respect of fees or other remuneration for its services in so acting as
Intercreditor Agent or the Intercreditor Collateral Agent, as the case may be),
of any kind or nature whatsoever which may at any time be imposed on, incurred
by or asserted against the Intercreditor Agent or the Intercreditor Collateral
Agent in any way relating to or arising out of actions taken by it in accordance
with such direction.
(c) Neither the Intercreditor Agent, the Intercreditor Collateral Agent nor
any of its directors, officers, employees, or agents
(i) shall be liable to any Senior Creditor, the Trustee or any
Administrative Agent for any action taken or omitted to be taken by it
under this Agreement, any Senior Secured Note Collateral Documents or
any Loan Document or in connection therewith, except for its own
willful misconduct or gross negligence,
(ii) shall be responsible for any recitals or representations or
warranties in this Agreement, any Senior Secured Note Collateral
Documents or any Loan Document, or for the effectiveness,
enforceability, validity, or due execution of this Agreement (except
by it), any Senior Secured Note Collateral Documents or any Loan
Document, including the liens purportedly created by the Senior
Secured Note Collateral Documents or the Loan Documents, or
(iii) shall be obligated to make any inquiry respecting the
performance by the Borrowers or any of their subsidiaries of its
obligations hereunder or thereunder.
Each of the Intercreditor Agent and the Intercreditor Collateral Agent shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement, or writing which it believes to be
genuine and to have been presented by a proper
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person. Except as is expressly set forth herein, neither the Intercreditor Agent
nor the Intercreditor Collateral Agent shall have any duty or responsibility to,
or be considered in a fiduciary relationship with, any Senior Creditor, the
Trustee or any Administrative Agent.
(d) The Intercreditor Agent or the Intercreditor Collateral Agent may (i)
be removed upon at least 30 days' prior notice provided or consented to by the
Required Senior Creditors to the Intercreditor Agent or the Intercreditor
Collateral Agent, as the case may be, or (ii) resign upon at least 30 days'
prior notice to the Senior Creditors, in each such case subject to the
acceptance and appointment of a successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, approved by the Required Senior Creditors.
If the Intercreditor Agent or the Intercreditor Collateral Agent shall resign
and the Required Senior Creditors have not appointed within 30 days after their
receipt of the notice of resignation a successor Intercreditor Agent or
Intercreditor Collateral Agent, as the case may be, the resigning Intercreditor
Agent or the Intercreditor Collateral Agent, as the case may be, may, without
the consent of the Required Senior Creditors, appoint a successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be. The Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, agrees to cooperate
with the Senior Creditors in locating and appointing a successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, following its
removal or resignation. Any successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, whether appointed by the Required Senior
Creditors or the resigning Intercreditor Agent or Intercreditor Collateral
Agent, as the case may be, shall be a nationally recognized commercial banking
institution or trust institution organized in the United States of America (or
any State thereof) or a U.S. branch or agency of a foreign commercial banking
institution and having in each case a combined capital and surplus and undivided
profits of not less than $500,000,000 (or $250,000,000 if such successor
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be, shall
at the time of its appointment be a Senior Creditor). A removal of or a
resignation of the Intercreditor Agent or Intercreditor Collateral Agent, as the
case may be, and the appointment of a successor Intercreditor Agent or
Intercreditor Collateral Agent, as the case may be, shall become effective upon
receipt of acceptance by the successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, of its appointment by the Required Senior
Creditors or resigning Intercreditor Agent or Intercreditor Collateral Agent, as
the case may be. Upon the acceptance of any appointment as Intercreditor Agent
or Intercreditor Collateral Agent, as the case may be, by a successor
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be, such
successor Intercreditor Agent or Intercreditor Collateral Agent, as the case may
be, shall thereupon become the Intercreditor Agent or Intercreditor Collateral
Agent, as the case may be, hereunder, shall be entitled to receive from the
retiring Intercreditor Agent or Intercreditor Collateral Agent, as the case may
be, such documents of transfer and assignment as such successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, may reasonably
request, and the retiring Intercreditor Agent or Intercreditor Collateral Agent,
as the case may be, shall be discharged from its duties and obligations under
this Agreement.
SECTION 7. No Representations or Warranties. No Senior Creditor makes any
representation or warranty to any other Senior Creditor with respect to the
effectiveness,
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<PAGE>
enforceability, validity or due execution of the Senior Secured Note Collateral
Documents, the Loan Documents or as to any of the Shared Collateral.
SECTION 8. Notices. All notices, requests and other communications
(including directions and instructions by the Senior Creditors to the
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be,)
provided for hereunder shall be in writing and personally delivered, mailed or
telecopied (all telecopier notices promptly to be confirmed by mail or courier
notice) or delivered,
(a) if to the Administrative Agents or the Collateral Agent, at its address
or telecopier number specified in the Credit Agreement,
(b) if to the Intercreditor Agent or the Intercreditor Collateral Agent, at
its address or telecopier number specified on the signature page hereof, or at
such other address or telecopier number as it may designate by notice as herein
provided to the Administrative Agents and the Trustee, and
(c) if to the Trustee, at the address or telecopier number provided for in
the Indenture.
All such notices and communications shall be effective when received. Each
Senior Creditor which shall make any change in its notice information shall
promptly furnish the Intercreditor Agent with such correct notice information.
SECTION 9. Benefit of Agreement; Obligations Several; Execution by the
Agent; Notice of Obligations. (a) This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the Administrative Agents, the
Collateral Agent, the Funding Agent, each Lender, each Issuing Bank, each
Noteholder, the Intercreditor Agent, the Intercreditor Collateral Agent and
their respective successors and assigns, and is not for the benefit of any third
party beneficiary. The obligations of each party under this Agreement are
several and not joint, it being expressly agreed that no party shall be liable
for the failure of any other party to perform its obligations hereunder. Each of
the Administrative Agents hereby confirms that it has been authorized to enter
into this Agreement on behalf of the Lenders pursuant to the Credit Agreement.
The Trustee hereby confirms that it has been authorized to enter into this
Agreement on behalf of the Noteholders pursuant to the Indenture.
(b) The Administrative Agents and the Trustee each agrees that the terms
and conditions of this Agreement shall be absolute and unconditional
irrespective of:
(i) any lack of validity or enforceability of, or any default or
event of default occurring under, the Credit Agreement, the other Loan
Documents (as defined in the Credit Agreement), the Indenture, the
Notes or the Senior Secured Note Collateral Documents;
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<PAGE>
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Credit Agreement Obligations or
the Note Obligations, or any amendment or waiver of, or any consent to
departure from, the Credit Agreement, the other Loan Documents (as
defined in the Credit Agreement), the Indenture, the Notes or the
Senior Secured Note Collateral Documents;
(iii) any exchange, release or non-perfection of any Shared
Collateral or any "Collateral" (as defined in the Credit Agreement) or
any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Credit Agreement Obligations or Note
Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any guarantor.
SECTION 10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
SECTION 11. Effectiveness. This Agreement shall become effective when
copies hereof executed by the Intercreditor Agent, the Administrative Agents,
the Intercreditor Collateral Agent and the Trustee on behalf of the Senior
Noteholders shall have been delivered to the Intercreditor Agent.
SECTION 12. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provisions of this Agreement.
SECTION 13. Amendment or Waiver. This Agreement may be, as the case may be,
amended, supplemented, amended and restated, otherwise modified, waived,
discharged or terminated only with the written consent of each of the parties
hereto.
SECTION 14. Inconsistent Provisions. If any provision of this Agreement
shall be inconsistent with, or contrary to, any provision in the Credit
Agreement, any Loan Document, the Indenture, the Notes, any Senior Secured Note
Collateral Document or any document entered into in connection therewith, the
provision in this Agreement shall be controlling and shall supersede such
inconsistent provision to the extent necessary to give full effect to all
provisions contained in this Agreement.
SECTION 15. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE ENTIRE
UNDERSTANDING
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<PAGE>
AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 16. Waiver of Jury Trial. EACH PARTY HEREIN HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT. EACH PARTY HEREIN ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING
INTO THE CREDIT AGREEMENT.
SECTION 17. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. EACH PARTY HEREIN EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO EACH SUCH
PARTY'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT
EXPRESSLY WAIVED IN THIS SECTION 17. EACH PARTY HERETO FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY HERETO
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT ANY PARTY HEREIN HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS INTERCREDITOR
AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the Intercreditor Agent, the Intercreditor Collateral
Agent, the Administrative Agents, on behalf of the Lenders, and the Trustee have
caused this Agreement to be duly executed, and the Borrower has acknowledged and
consented to this Agreement, as of the day and year first above written.
THE BANK OF NOVA SCOTIA, as
Intercreditor Agent and Administrative Agent
By: /s/ Brian S. Allen
----------------------------------
Name: Brian S. Allen
Title: Senior Relationship Manager
Notice Address: The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Telecopier No.: 212-225-5090
Attention: Brian S. Allen
CITICORP USA, INC., as Administrative Agent
as Intercreditor Collateral Agent
By: /s/ Timothy L. Freeman
------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address: Citicorp USA, Inc.
399 Park Avenue
New York, New York New York
Telecopier No.: 212-793-1290
Attention: Timothy L. Freeman
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<PAGE>
FLEET NATIONAL BANK, as Trustee
By: /s/ Robert L. Reynolds
-------------------------------
Name: Robert L. Reynolds
Title: Vice President
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<PAGE>
ACKNOWLEDGED AND
CONSENTED TO:
TRACE FOAM COMPANY, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Name: Philip N. Smith, Jr., Esq.
Title: Vice President
FOAMEX, L.P.
By: FMXI, INC., its
Managing General Partner
FMXI, INC.
FOAMEX INTERNATIONAL, INC.
GENERAL FELT INDUSTRIES, INC.
By: /s/ George L. Karpinski
------------------------
Name: George L. Karpinski
Title: Vice President
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INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (as amended, supplemented, amended and
restated or modified from time to time, this AGREEMENT"), dated as of June 12,
1997, among (a) THE BANK OF NOVA SCOTIA ("Scotiabank") and CITICORP USA, Inc.
("Citicorp"), each acting in its capacity as administrative agent (in such
capacity, the "Administrative Agents") for and on behalf of the various
financial institutions (collectively, the "Lenders") which are, or may from time
to time hereafter become, parties to the Credit Agreement (such capitalized term
and all other capitalized terms to have the respective meanings provided for in
Section 1 or as otherwise indicated herein) and the Issuing Banks, (b) Citicorp,
as collateral agent for the Lenders and the Noteholders (together with its
successors and assigns, the "Intercreditor Collateral Agent"), (c) Fleet
National Bank, as Trustee (the "Trustee"), on behalf of the Noteholders and each
subsequent holder of a Note, and (d) Scotiabank, acting in its capacity as
intercreditor agent for the Lenders, the Issuing Banks and the Noteholders
(together with its successors and assigns, the "Intercreditor Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time or
refinanced, refunded or replaced in whole or in part from time to time and
regardless of whether the indebtedness outstanding or permitted to be
outstanding thereunder is increased or decreased, the "Credit Agreement"), among
Foamex L.P., a Delaware limited partnership ("Foamex"), General Felt Industries,
Inc., a Delaware corporation ("GFI"; together with Foamex being the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and a general
partner of Foamex, FMXI, Inc., a Delaware corporation and a general partner of
Foamex, the Lenders, the collateral agent and funding agent thereunder and the
Administrative Agents, the Lenders have agreed, subject to the satisfaction of
certain conditions precedent and the other terms of the Credit Agreement, to
make Loans to and to issue or participate in Letters of Credit for the account
of the Borrowers, and the Issuing Banks, subject to the satisfaction of certain
conditions precedent, have agreed to issue the Letters of Credit (the "Credit
Extensions");
WHEREAS, pursuant to the terms of the Credit Agreement Mortgages, among
other things, each of Foamex and each Subsidiary Guarantor has granted pledges
of and security interests in certain of their real property assets;
<PAGE>
WHEREAS, pursuant to the Senior Note Indenture, dated as of October 13,
1992, as amended on or prior to the date hereof (as so amended, including,
without limitation, pursuant to the Supplemental Indenture (Senior), being the
"Indenture"), among Foamex and Foamex Capital Corporation, a Delaware
corporation ("FCC"), as issuers (the "Issuers"), Foamex International and GFI,
as guarantors, and the Trustee on behalf of the holders of the Notes (such
holders, together with all subsequent holders of the Notes collectively referred
to herein as the "Noteholders") the Issuers have issued the Notes;
WHEREAS, pursuant to the terms of the Senior Note Mortgages the Trustee has
been granted a security interest in the Senior Note Collateral; and
WHEREAS, in connection with the agreements made among the parties hereto
relating to the making of Credit Extensions under the Credit Agreement, the
Lenders and the Trustee on behalf of the Noteholders desire to establish among
themselves their relative rights, remedies and priorities with respect to the
Shared Collateral;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. (a) Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Administrative Agents" is defined in the preamble.
"Agreement" is defined in the preamble.
"Borrowers" is defined in the first recital.
"Citicorp" is defined in the preamble.
"Commitments" means "Commitments" as that term is defined in the Credit
Agreement.
"Credit Agreement" is defined in the first recital.
"Credit Agreement Collateral" means, collectively, the "Trust Premises" or
"Collateral" as defined in the Credit Agreement Mortgages.
"Credit Agreement Mortgages" means, collectively, the "Mortgages" as
defined in the Credit Agreement.
"Credit Agreement Notes" means "Notes" as that term is defined in the
Credit Agreement.
2
<PAGE>
"Credit Agreement Obligations" means "Obligations" as that term is defined
in the Credit Agreement.
"Credit Extensions" is defined in the first recital.
"Existing Secured Debt" means "Existing Secured Debt" as defined in the
Credit Agreement.
"FCC" is defined in the third recital.
"Foamex International" means Foamex International Inc., a Delaware
corporation.
"Funding Agent" means "Funding Agent" as such term is defined in the Credit
Agreement.
"Indenture" is defined in the third recital.
"Intercreditor Agent" is defined in the preamble.
"Intercreditor Collateral Agent" is defined in the preamble.
"Issuers" is defined in the third recital.
"Issuing Banks" means "Issuing Banks" as that term is defined in the Credit
Agreement.
"Lenders" is defined in the preamble and shall in any event include any
assignee, successor, transferee or refinancing or refunding party of any person
that is a party to the Credit Agreement and all other persons which from and
after the date hereof become parties to the Credit Agreement.
"Letter of Credit" means "Letter of Credit" as that term is defined in the
Credit Agreement.
"Letter of Credit Obligations" means "Letter of Credit Obligations" as that
term is defined in the Credit Agreement.
"Note Collateral" means "Mortgaged Property" as that term is defined in the
Indenture.
"Noteholder Direction Period" means the period (i) commencing on the date
of the receipt of notice by the Intercreditor Agent from the Trustee that (w) an
Event of Default has occurred under the Indenture, (x) the Required Noteholders
have accelerated the Note Obligations, (y) the Intercreditor Agent has failed to
commence an action to foreclose upon any of the Shared Collateral and (z) the
Required Noteholders have directed the Trustee in writing to commence
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<PAGE>
such an action under the Senior Secured Note Collateral Documents and (ii)
ending on the date that such Event of Default has been cured or waived and such
acceleration has been rescinded pursuant to the terms of the Indenture.
"Noteholders" is defined in the third recital.
"Note Obligations" means the principal of and interest and, if applicable,
premium, on the Notes.
"Notes" means "Securities" as that term is defined in the Indenture.
"Property" means "Property" as that term is defined in the Credit
Agreement.
"Required Noteholders" means the holders of at least 51% in principal
amount of the outstanding Notes.
"Required Senior Creditors" means the holders of greater than 50% of the
outstanding principal amount of Senior Obligations, voting as a single class.
"Scotiabank" is defined in the preamble.
"Senior Creditors" means, collectively, the Lenders and the Noteholders.
"Senior Note Mortgages" means the "Mortgages" as that term is defined in
the Indenture.
"Senior Obligations" means, collectively, the Credit Agreement Obligations
and the Note Obligations; provided, however, for purposes of the definition of
"Required Senior Creditors", the principal amount of "Senior Obligations" means
the principal amount of the Note Obligations and the lesser of (a) the principal
amount of the Credit Agreement Obligations and (b) the principal amount of the
Notes repurchased in the Refinancing (as defined in the Credit Agreement).
"Shared Collateral" means, collectively, (a) the Note Collateral and (b)
the Credit Agreement Collateral, but only to the extent such collateral would
constitute Note Collateral.
"Supplemental Indenture (Senior)" means the "Supplemental Indenture
(Senior)" as that term is defined in the Credit Agreement.
"Trustee" is defined in the preamble.
(b) Use of Certain Defined Terms. The definition of any term incorporated
by reference from the Credit Agreement or from the Indenture shall have the
meaning provided for therein.
4
<PAGE>
SECTION 2. Limitation of Rights of Senior Creditors. (a) The Trustee on
behalf of the Noteholders agrees that it shall not have the right to foreclose
or commence to foreclose upon (either pursuant to the Senior Note Mortgages or
otherwise) or exercise any other rights or remedies in respect of the Shared
Collateral in a manner inconsistent with, or otherwise contrary to the terms of,
this Agreement.
(b) The Trustee shall not take any direct or indirect action, or vote in
any way, so as to challenge in a bankruptcy or insolvency proceeding or
otherwise (i) the validity, priority or enforceability of the Credit Agreement
Obligations or the liens under the "Loan Documents" (as defined in the Credit
Agreement), (ii) the rights of the Administrative Agents and the Lenders set
forth in the Credit Agreement or any of the "Loan Documents" (as defined in the
Credit Agreement), or (iii) the validity or enforceability of any provision of
this Paragraph 2(b).
(c) Neither the Administrative Agents nor any Lender shall take any direct
or indirect action, or vote in any way, so as to challenge in a bankruptcy or
insolvency proceeding or otherwise (i) the validity, priority or enforceability
of the Note Obligations or the Trustee's liens in the Note Collateral, (ii) the
rights of the Trustee and the Noteholders set forth in the Indenture or any of
the Senior Note Mortgages, or (iii) the validity of enforceability of any
provision of this Paragraph 2(c).
(d) Nothing in this Section 2 shall be deemed to permit any Borrower, GFI
or any other affiliate of Foamex to enter into any transaction that is
prohibited by the terms of the Credit Agreement or the Indenture.
SECTION 3. Direction of Action. (a) The Intercreditor Agent or the
Intercreditor Collateral Agent, in each case subject to Section 6, shall make
such demands and give such notices under the Senior Note Mortgages and the
Credit Agreement Mortgages as the Required Senior Creditors may request, and
shall take such actions to enforce the Senior Note Mortgages and the Credit
Agreement Mortgages and to foreclose upon, collect, sell, transfer, or otherwise
dispose of all or any portion of the Shared Collateral as may be directed by the
Required Senior Creditors; provided, however, that (i) all such directions shall
be binding upon each Senior Creditor for all purposes, (ii) the Intercreditor
Agent or the Intercreditor Collateral Agent shall not take any such action and
(including any foreclosure action) unless directed to do so by the Required
Senior Creditors, (iii) neither the Intercreditor Agent nor the Intercreditor
Collateral Agent shall be required to obtain the vote of all Senior Creditors in
determining whether it has obtained the vote of the Required Senior Creditors.
No Senior Creditor shall have any right to exercise, individually, any rights or
remedies under the Senior Note Mortgages and the Credit Agreement Mortgages it
being understood and agreed that all of such rights and remedies shall be
exercised solely by and through the Intercreditor Agent and the Intercreditor
Collateral Agent. If the Required Senior Creditors shall direct the
Intercreditor Agent and the Intercreditor Collateral Agent to foreclose upon,
collect, sell, transfer, substitute or otherwise dispose of all or any part of
the Shared Collateral, the Intercreditor Collateral Agent shall do so as
provided in and pursuant to the Senior Note Mortgages or the Credit Agreement
Mortgages, as the case may be.
5
<PAGE>
The only right and remedy of the Senior Creditors which are not Required Senior
Creditors in respect of any disposal of Shared Collateral is to the receipt of
proceeds as, if, and when received upon the sale or other final disposition of
Shared Collateral as provided in Section 5.
(b) Notwithstanding clause (a) above, solely during a Noteholder Direction
Period, the Intercreditor Agent or the Intercreditor Collateral Agent shall, as
the case may be, subject in each case to Section 6, make such demands and give
such notices under the Senior Note Mortgages as the Trustee, acting at the
written direction of the Required Noteholders may reasonably request, in order
to commence foreclosure proceedings under the Senior Note Mortgages to enforce
the Senior Note Mortgages, and to foreclose upon, collect, sell, transfer, or
otherwise dispose of all or any portion of the Shared Collateral; provided,
however, that (i) all such directions shall be binding upon each Senior Creditor
for all purposes, (ii) the Intercreditor Agent or the Intercreditor Collateral
Agent, as the case may be, shall not take any such action unless directed to do
so by the Trustee acting at the written direction of the Required Noteholders,
and (iii) during the first ninety days of any Noteholder Direction Period, the
Required Senior Creditors may instruct the Intercreditor Agent or the
Intercreditor Collateral Agent to delay any such action until the ninety-first
day of such Noteholder Direction Period, and provided further, however, that
during such Noteholder Direction Period and notwithstanding any contrary request
by the Trustee at the written request of Required Noteholders, the Intercreditor
Agent and the Intercreditor Collateral Agent will be required to follow any
subsequent instructions given by the Required Senior Creditors concerning the
conduct (but not the delay or termination) of any such foreclosure proceedings
or any other action to enforce the Senior Note Mortgages or to collect, sell,
transfer or otherwise dispose of all or any portion of the Shared Collateral. If
the Trustee, acting at the written direction of the Required Noteholders, shall
direct the Intercreditor Agent or the Intercreditor Collateral Agent to
foreclose upon, collect, sell, transfer or otherwise dispose of all or any part
of the Shared Collateral, the Intercreditor Collateral Agent shall do so as
provided in and pursuant to the Senior Note Mortgages . The Trustee's and the
Noteholders' right to direct any such action shall automatically terminate,
without any requirement of notice, upon the termination of a Noteholder
Direction Period.
Nothing set forth in this Section 3 shall be construed to qualify or
otherwise limit the right of any Senior Creditor to declare such Senior
Creditor's Senior Obligations to be due and payable in accordance with the
Credit Agreement or the Indenture, as the case may be, or to enforce any other
rights or remedies such Senior Creditor may have in collateral other than Shared
Collateral.
Notwithstanding any provision of this Agreement to the contrary, nothing
herein shall (i) prevent or hinder the ability of the Collateral Agent or any
Lender to exercise its rights or remedies under the Credit Agreement Mortgages
or any other "Loan Document" (as defined in the Credit Agreement) with respect
to any or all Credit Agreement Collateral or any other "Collateral" (as defined
in the Credit Agreement) which is not Shared Collateral and (ii) give the
Trustee or any Noteholder any interest in or right to (x) any Credit Agreement
Collateral or any other "Collateral" (as defined in the Credit Agreement) which
is not Shared Collateral or (y) in
6
<PAGE>
any Credit Agreement Mortgages or any other "Loan Document" (as defined in the
Credit Agreement). Neither the Intercreditor Agent, any Administrative Agent,
the Funding Agent, the Collateral Agent, the Intercreditor Collateral Agent, any
Lender or any Issuing Bank shall have any obligation or duty to account to the
Trustee or the Noteholders for any proceeds of any Credit Agreement Collateral
or any other "Collateral" (as defined in the Credit Agreement) which is not
Shared Collateral or for any other recovery under any Credit Agreement Mortgages
or any other "Loan Document" (as defined in the Credit Agreement).
SECTION 4. Release of Shared Collateral; Coordination of Action. (a) The
Intercreditor Collateral Agent is hereby authorized, at any time and from time
to time, to release any or all or any portion of the Shared Collateral or
terminate the lien on the Shared Collateral granted pursuant to the Senior Note
Mortgages pursuant to the terms of the Indenture and provided the net cash
proceeds arising from the sale or other disposition of such Shared Collateral is
applied to the Senior Obligations in accordance with the terms of Section 5 or
reinvested in accordance with the terms of the Indenture and the Credit
Agreement. Any such release of the Shared Collateral will automatically and
without the requirement of the giving of any notice or the taking of any action
release all liens on such Shared Collateral and any transferee of such Shared
Collateral shall take such Shared Collateral free and clear of all such liens.
The Senior Creditors agree that such release in accordance with the immediately
preceding sentence shall be binding and conclusive upon them and their
successors and assigns and hereby waive all rights and claims with respect to
any such release or substitution; provided, however, that the Senior Creditors
shall have a continuing security interest in any proceeds arising from the sale
or other disposition of any of the Shared Collateral and shall be entitled to
receive such proceeds in accordance with Section 5.
(b) If the Intercreditor Agent or the Collateral Agent is directed by the
Required Senior Creditors to exercise any rights or remedies against the Shared
Collateral, the Intercreditor Collateral Agent shall, simultaneously exercise
such rights and remedies under the Senior Note Mortgages and the Credit
Agreement Mortgages. Any proceeds of such exercise of such rights or remedies
shall be deemed to have first been received under the Senior Note Mortgages and
second under the Credit Agreement Mortgages; provided, however, that all such
proceeds shall be applied as set forth in Section 5.
SECTION 5. Application of Proceeds. (a) Upon the exercise of any rights and
remedies by the Intercreditor Agent under the Senior Note Mortgages or any
Credit Agreement Mortgage with respect to the security interest granted
thereunder in the Shared Collateral, or in connection with any sale of Shared
Collateral permitted under the Indenture and the Credit Agreement any and all
net cash proceeds from the sale, foreclosure or other disposition of Shared
Collateral pursuant thereto shall, promptly following their receipt by the
Intercreditor Agent, be applied and distributed by the Intercreditor Agent as
follows:
(i) First, (x) following an Event of Default (as such term is defined
in the Indenture) to the payment of all costs, expenses, liabilities
7
<PAGE>
and advances made or incurred by the Intercreditor Agent and the
Intercreditor Collateral Agent in connection with such sale, foreclosure or
other disposition and the costs, expenses and compensation of agents and
legal counsel to the Intercreditor Agent and the Intercreditor Collateral
Agent or (y) after an Event of Default (as such term is defined in the
Credit Agreement) the payment of all costs, expenses, liabilities and
advances made or incurred by the Intercreditor Agent and the Intercreditor
Collateral Agent in connection with an Asset Sale (as defined in the
Indenture);
(ii) Second, to the extent any proceeds remain after payment in full
of those items specified in clause (i) above, to the payment of the Note
Obligations in accordance with and to the extent required under the terms
of the Indenture;
(iii) Third, to the extent any proceeds remain after the application
required by clauses (i) and (ii) above, to the payment of the Credit
Agreement Obligations (or the cash collateralization thereof) in accordance
with the terms of the Credit Agreement and the Credit Agreement Mortgages ;
and
(iv) Fourth, to the extent any proceeds remain after payment of those
items specified in clauses (i), (ii) and (iii) above, such proceeds shall
be paid to or at the direction of the Borrower or as a court of competent
jurisdiction shall direct.
(b) Payment by the Intercreditor Agent to the Lenders in respect of the
Credit Agreement Obligations shall be made to the Funding Agent for distribution
to the Lenders in accordance with the Credit Agreement. Payments by the
Intercreditor Agent to the Noteholders shall be made to the Trustee or
distribution to the Noteholders in accordance with the terms of the Indenture.
(c) Each Lender and the Trustee on behalf of each Noteholder and for each
subsequent holder of the Notes hereby agrees that (i) if at any time it shall
receive the proceeds of any Shared Collateral (other than through application by
the Intercreditor Agent in accordance with clauses (a) and (b) of this Section
5), it shall hold such proceeds in trust for the benefit of the Senior Creditors
and shall promptly turn the same over to the Intercreditor Agent for application
in accordance with said clauses (a) and (b) and (ii) it will not take or cause
to be taken any action, including, without limitation, the commencement of any
legal or equitable proceedings, the purpose of which is to give such Lender or
Noteholder any preference or priority against the other parties hereto with
respect to the Shared Collateral, except as provided for in this Agreement.
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(d) The Trustee acknowledges that, pursuant to Section 12.09 of the Credit
Agreement, the Collateral Agent is permitted (but not required) to make
Protective Advances (as defined in the Credit Agreement) for the purpose of
discharging the Issuers' obligations under Sections 3.07, 4.15, 6.02 and 8.01 of
the Indenture. The Trustee agrees that, upon notification by the Collateral
Agent that the Collateral Agent has determined to make such a Protective
Advance, (i) the Trustee shall deem notices given to the Trustee pursuant to
such sections of the Indenture by the Collateral Agent to be notices given by
the Issuers and (ii) the Trustee shall receive the proceeds of such Protective
Advances and apply such proceeds to the redemption or other payments of the
Existing Secured Debt Payment in accordance with the terms of the Indenture as
set forth in such notice from the Collateral Agent.
(e) The Trustee, on its own behalf, and on behalf of the Noteholders,
hereby agrees and acknowledges that the Credit Agreement constitutes a "Credit
Agreement" (as defined in the Indenture).
(f) The Trustee hereby waives any right it may have to require the
Administrative Agents or the Lenders to marshal the Credit Agreement Collateral
or any other Collateral (as defined in the Credit Agreement) of any Person or
entity in favor of the Trustee or the Noteholders.
(g) The Administrative Agents each hereby waives any right it may have to
require the Trustee or the Noteholders to marshal the Note Collateral in favor
of the Administrative Agents or the Lenders.
SECTION 6. Concerning the Intercreditor Agent and the Intercreditor
Collateral Agent. (a) The Administrative Agents, on behalf of the Lenders, and
the Trustee on behalf of the Noteholders, authorizes each of the Intercreditor
Agent and the Intercreditor Collateral Agent to act on its and such holders'
behalf under this Agreement and under the Senior Note Mortgages and the Credit
Agreement Mortgages pursuant to the provisions hereof and thereof. Each of the
Intercreditor Agent and the Intercreditor Collateral Agent accepts its
appointment as Intercreditor Agent and Intercreditor Collateral Agent,
respectively, hereunder and, subject to clause (b) below, agrees to act in
accordance with the terms hereof and the directions from time to time given to
it by the Required Senior Creditors or, in the circumstances contemplated in
Section 3(b), the Required Noteholders, as contemplated hereby.
(b) Neither the Intercreditor Agent nor the Intercreditor Collateral Agent
shall be under any duty to take any action, or to prosecute or defend any suit
with respect to this Agreement or the Senior Note Mortgages or the Credit
Agreement Mortgages, (A) except as specified in a direction from the Required
Senior Creditors or otherwise provided herein and (B) unless it shall have
received a written or other assurance, reasonably satisfactory to it, from the
Senior Creditors, or the Noteholders, as the case may be,
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<PAGE>
joining in such direction as to its indemnification from and against any and all
liabilities, obligations, losses, damages, penalties, judgments, suits, costs,
expenses, charges or disbursements (not including for this purpose, however, any
amounts in respect of fees or other remuneration for its services in so acting
as Intercreditor Agent or the Intercreditor Collateral Agent, as the case may
be), of any kind or nature whatsoever which may at any time be imposed on,
incurred by or asserted against the Intercreditor Agent or the Intercreditor
Collateral Agent in any way relating to or arising out of actions taken by it in
accordance with such direction.
(c) Neither the Intercreditor Agent, the Intercreditor Collateral Agent nor
any of its directors, officers, employees, or agents
(i) shall be liable to any Senior Creditor, the Trustee or any
Administrative Agent for any action taken or omitted to be taken by it
under this Agreement, any Senior Note Mortgages or any Credit Agreement
Mortgage or in connection therewith, except for its own willful misconduct
or gross negligence,
(ii) shall be responsible for any recitals or representations or
warranties in this Agreement, any Senior Note Mortgages or any Credit
Agreement Mortgage, or for the effectiveness, enforceability, validity, or
due execution of this Agreement (except by it), any Senior Note Mortgages
or any Credit Agreement Mortgages, including the liens purportedly created
by the Senior Note Mortgages or the Credit Agreement Mortgages, or
(iii) shall be obligated to make any inquiry respecting the
performance by the Borrowers or any of their subsidiaries of its
obligations hereunder or thereunder.
Each of the Intercreditor Agent and the Intercreditor Collateral Agent shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement, or writing which it believes to be
genuine and to have been presented by a proper person. Except as is expressly
set forth herein, neither the Intercreditor Agent nor the Intercreditor
Collateral Agent shall have any duty or responsibility to, or be considered in a
fiduciary relationship with, any Senior Creditor, the Trustee or any
Administrative Agent.
(d) The Intercreditor Agent or the Intercreditor Collateral Agent may (i)
be removed upon at least 30 days' prior notice provided or consented to by the
Required Senior Creditors to the Intercreditor Agent or the Intercreditor
Collateral Agent, as the case may be, or (ii) resign upon at least 30 days'
prior notice to the Senior Creditors, in each such case subject to the
acceptance and appointment of a successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, approved by the Required Senior Creditors.
If the Intercreditor Agent or the Intercreditor Collateral Agent shall
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resign and the Required Senior Creditors have not appointed within 30 days after
their receipt of the notice of resignation a successor Intercreditor Agent or
Intercreditor Collateral Agent, as the case may be, the resigning Intercreditor
Agent or the Intercreditor Collateral Agent, as the case may be, may, without
the consent of the Required Senior Creditors, appoint a successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be. The Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, agrees to cooperate
with the Senior Creditors in locating and appointing a successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, following its
removal or resignation. Any successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, whether appointed by the Required Senior
Creditors or the resigning Intercreditor Agent or Intercreditor Collateral
Agent, as the case may be, shall be a nationally recognized commercial banking
institution or trust institution organized in the United States of America (or
any State thereof) or a U.S. branch or agency of a foreign commercial banking
institution and having in each case a combined capital and surplus and undivided
profits of not less than $500,000,000 (or $250,000,000 if such successor
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be, shall
at the time of its appointment be a Senior Creditor). A removal of or a
resignation of the Intercreditor Agent or Intercreditor Collateral Agent, as the
case may be, and the appointment of a successor Intercreditor Agent or
Intercreditor Collateral Agent, as the case may be, shall become effective upon
receipt of acceptance by the successor Intercreditor Agent or Intercreditor
Collateral Agent, as the case may be, of its appointment by the Required Senior
Creditors or resigning Intercreditor Agent or Intercreditor Collateral Agent, as
the case may be. Upon the acceptance of any appointment as Intercreditor Agent
or Intercreditor Collateral Agent, as the case may be, by a successor
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be, such
successor Intercreditor Agent or Intercreditor Collateral Agent, as the case may
be, shall thereupon become the Intercreditor Agent or Intercreditor Collateral
Agent, as the case may be, hereunder, shall be entitled to receive from the
retiring Intercreditor Agent or Intercreditor Collateral Agent, as the case may
be, such documents of transfer and assignment as such successor Intercreditor
Agent or Intercreditor Collateral Agent, as the case may be, may reasonably
request, and the retiring Intercreditor Agent or Intercreditor Collateral Agent,
as the case may be, shall be discharged from its duties and obligations under
this Agreement.
SECTION 7. No Representations or Warranties. No Senior Creditor makes any
representation or warranty to any other Senior Creditor with respect to the
effectiveness, enforceability, validity or due execution of the Senior Note
Mortgages, the Credit Agreement Mortgages or as to any of the Shared Collateral.
SECTION 8. Notices. All notices, requests and other communications
(including directions and instructions by the Senior Creditors to the
Intercreditor Agent or Intercreditor Collateral Agent, as the case may be,)
provided for hereunder shall be in writing and personally delivered, mailed or
telecopied (all telecopier notices promptly to
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be confirmed by mail or courier notice) or delivered,
(a) if to the Administrative Agents or the Collateral Agent, at its address
or telecopier number specified in the Credit Agreement,
(b) if to the Intercreditor Agent or the Intercreditor Collateral Agent, at
its address or telecopier number specified on the signature page hereof, or at
such other address or telecopier number as it may designate by notice as herein
provided to the Administrative Agents and the Trustee, and
(c) if to the Trustee, at the address or telecopier number provided for in
the Indenture.
All such notices and communications shall be effective when received. Each
Senior Creditor which shall make any change in its notice information shall
promptly furnish the Intercreditor Agent with such correct notice information.
SECTION 9. Benefit of Agreement; Obligations Several; Execution by the
Agent; Notice of Obligations. (a) This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the Administrative Agents, the
Collateral Agent, the Funding Agent, each Lender, each Issuing Bank, each
Noteholder, the Intercreditor Agent, the Intercreditor Collateral Agent and
their respective successors and assigns, and is not for the benefit of any third
party beneficiary. The obligations of each party under this Agreement are
several and not joint, it being expressly agreed that no party shall be liable
for the failure of any other party to perform its obligations hereunder. Each of
the Administrative Agents hereby confirms that it has been authorized to enter
into this Agreement on behalf of the Lenders pursuant to the Credit Agreement.
The Trustee hereby confirms that it has been authorized to enter into this
Agreement on behalf of the Noteholders pursuant to the Indenture.
(b) The Administrative Agents and the Trustee each agrees that the terms
and conditions of this Agreement shall be absolute and unconditional
irrespective of:
(i) any lack of validity or enforceability of, or any default or event
of default occurring under, the Credit Agreement, the other Loan Documents
(as defined in the Credit Agreement), the Indenture, the Notes or the
Senior Note Mortgages;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Credit Agreement Obligations or the Note
Obligations, or any amendment or waiver of, or any consent to departure
from, the Credit Agreement, the other Credit Agreement Mortgages (as
defined in the Credit Agreement), the Indenture, the Notes or the Senior
Note Mortgages;
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(iii) any exchange, release or non-perfection of any Shared Collateral
or any "Collateral" (as defined in the Credit Agreement) or any release or
amendment or waiver of or consent to departure from any guaranty, for all
or any of the Credit Agreement Obligations or Note Obligations; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any guarantor.
SECTION 10. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
SECTION 11. Effectiveness. This Agreement shall become effective when
copies hereof executed by the Intercreditor Agent, the Administrative Agents,
the Intercreditor Collateral Agent and the Trustee on behalf of the Senior
Noteholders shall have been delivered to the Intercreditor Agent.
SECTION 12. Headings Descriptive. The headings of the several sections of
this Agreement are inserted for convenience only and shall not in any way affect
the meaning or construction of any provisions of this Agreement.
SECTION 13. Amendment or Waiver. This Agreement may be, as the case may be,
amended, supplemented, amended and restated, otherwise modified, waived,
discharged or terminated only with the written consent of each of the parties
hereto;
SECTION 14. Inconsistent Provisions. If any provision of this Agreement
shall be inconsistent with, or contrary to, any provision in the Credit
Agreement, any Credit Agreement Mortgage, the Indenture, the Notes, any Senior
Note Mortgages or any document entered into in connection therewith, the
provision in this Agreement shall be controlling and shall supersede such
inconsistent provision to the extent necessary to give full effect to all
provisions contained in this Agreement.
SECTION 15. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE ENTIRE
UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 16. Waiver of Jury Trial. EACH PARTY HEREIN HEREBY
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KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT. EACH PARTY HEREIN ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS
ENTERING INTO THE CREDIT AGREEMENT.
SECTION 17. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. EACH PARTY HEREIN EXPRESSLY AND IRREVOCABLY SUBMITS TO THE PERSONAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION, SUBJECT TO EACH SUCH
PARTY'S RIGHT TO CONTEST SUCH JUDGMENT BY MOTION OR APPEAL ON ANY GROUNDS NOT
EXPRESSLY WAIVED IN THIS SECTION 17. EACH PARTY HERETO FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH PARTY HERETO
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT ANY PARTY HEREIN HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS INTERCREDITOR
AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF, the Intercreditor Agent, the Intercreditor Collateral
Agent, the Administrative Agents, on behalf of the Lenders, and the Trustee have
caused this Agreement to be duly executed, and the Borrower has acknowledged and
consented to this Agreement, as of the day and year first above written.
THE BANK OF NOVA SCOTIA, as
Intercreditor Agent and Administrative Agent
By: /s/ Brian S. Allen
----------------------------------
Name: Brian S. Allen
Title: Senior Relationship Manager
Notice Address: The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Telecopier No.: 212-225-5090
Attention: Brian S. Allen
CITICORP USA, INC., as Administrative Agent
as Intercreditor Collateral Agent
By: /s/ Timothy L. Freeman
-------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address: Citicorp USA, Inc.
399 Park Avenue
New York, New York New York
Telecopier No.: 212-793-1290
Attention: Timothy L. Freeman
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FLEET NATIONAL BANK, as Trustee
By: /s/ Gerald P. Beezley
--------------------------
Name: Gerald P. Beezley
Title: Vice President
By: /s/ Robert L. Reynolds
--------------------------
Name: Robert L. Reynolds
Title: Vice President
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<PAGE>
ACKNOWLEDGED AND
CONSENTED TO:
TRACE FOAM COMPANY, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Name: Philip N. Smith, Jr., Esq.
Title: Vice President
FOAMEX, L.P.
By: FMXI, INC., its
Managing General Partner
FMXI, INC.
FOAMEX INTERNATIONAL, INC.
GENERAL FELT INDUSTRIES, INC.
By: /s/ George L. Karpinski
------------------------
Name: George L. Karpinski
Title: Vice President
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FOAMEX INTERNATIONAL GUARANTY
This FOAMEX INTERNATIONAL GUARANTY (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Guaranty"), dated as of
June 12, 1997, is made by Foamex International Inc., a Delaware corporation (the
"Guarantor"), in favor of Citicorp USA, Inc., as Collateral Agent (together with
any successor(s) thereto in such capacity, the "Collateral Agent") for each of
the Secured Parties, for the benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
<PAGE>
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of each Borrower under the
Credit Agreement, the Notes and the other Loan Documents to which it
is a party and all Obligations by each other Obligor under the Loan
Documents to which it is a party now or hereafter existing, whether
for principal, interest, fees, expenses or otherwise (including all
such amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. ss.362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. ss.502(b) and
ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each
holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Secured
Party or such holder, as the case may be, in enforcing any rights
under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against a Borrower or any other
Obligor (or any other Person) before or as a condition to the obligations of the
Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or the commencement
of any case or proceeding in respect of a Borrower, any other Obligor or the
Guarantor under any bankruptcy, insolvency or similar laws, and if such event
shall occur at a time when any of the Obligations of each Borrower and each
other Obligor may not then be due and payable, the Guarantor agrees that it will
pay to the Lenders forthwith the full amount
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<PAGE>
which would be payable hereunder by the Guarantor if all such Obligations were
then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to
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<PAGE>
or claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, any other Obligor or
otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters
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<PAGE>
of Credit and the termination of all Commitments. Any amount paid to the
Guarantor on account of any such subrogation rights prior to the payment in full
in cash of all Obligations of each Borrower and each other Obligor shall be held
in trust for the benefit of the Secured Parties and each holder of a Note and
shall immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations each Borrower and each other Obligor, whether matured or unmatured,
in accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or
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otherwise, subject, however, to any contrary provisions in such assignment or
transfer, and to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Guarantor hereby
represents and warrants unto the Collateral Agent as set forth in this Article
III acknowledging that the Collateral Agent is relying thereon without
independent inquiry.
SECTION 3.1.1. Corporate Existence; Compliance with Law. The Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware; (ii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber its
properties and to conduct its business as now and heretofore conducted; (iii) is
in compliance with its Constituent Documents; and (iv) is in compliance with all
material Requirements of Law.
SECTION 3.1.2. Corporate Power; Authorization. The execution and delivery
by the Guarantor of the Loan Documents and the Transaction Documents to which it
is a party and all instruments and documents to be delivered by the Guarantor
thereunder, and the performance of its obligations thereunder: (i) are within
the Guarantor's corporate power; (ii) have been duly authorized by all necessary
or proper corporate action; (iii) are not in contravention of any provision of
the Guarantor's Constituent Documents; (iv) will not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (v)
will not conflict with or result in the breach or termination of, constitute a
default under (with or without the giving of notice, the lapse of time or both)
or a tortious interference with or accelerate any performance required by, any
material indenture, mortgage, deed of trust, lease, agreement or other
instrument to which the Guarantor is a party or by which the Guarantor or any of
its property is bound; (vi) will not result in the creation or imposition of any
Lien upon any of the property of the Guarantor; and (vii) do not require the
consent or approval of any Governmental Authority, or any other Person which has
not been obtained.
SECTION 3.1.3. No Adverse Condition. No action has been taken by any
competent authority which restrains, prevents or imposes material adverse
conditions upon, or seeks to restrain, prevent or impose material adverse
conditions upon, the
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consummation of any of the transactions contemplated by the Loan Documents or
the Transaction Documents.
Section 3.1.4. Enforceability. The obligations of the Guarantor under this
Guaranty are enforceable against the Guarantor in accordance with their terms.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1. Covenants. The Guarantor covenants and agrees that the
Guarantor will perform the obligations set forth in this Article IV until all
Obligations of each Borrower and each other Obligor have been paid in full in
cash, all obligations of the Guarantor hereunder shall have been paid in full in
cash, all Letters of Credit have been terminated or expired and all Commitments
shall have terminated. The Guarantor shall comply with the following covenants
unless the Requisite Lenders shall otherwise give their prior written consent
thereto.
SECTION 4.1.1. Sale of Assets; Liens. The Guarantor shall not (A) sell,
assign, transfer, lease, convey or otherwise dispose of any Property, whether
now owned or hereafter acquired, or any income or profits therefrom, or enter
into any agreement to do so, except (i) as contemplated in the Foamex
International Supply Agreement, (ii) sales of assets for Fair Market Value, or
(iii) that certain Canadair Challenger Model CL600-2B16, or any replacement
thereof (the "Aircraft"), which Aircraft is currently leased to the Guarantor
pursuant to that certain Aircraft Lease and Operating Agreement, dated August
17, 1995, by and between Foamex Aviation, Inc. and Jet Solutions LLC, the
proceeds of which shall be retained by the Guarantor, or (B) directly or
indirectly create, incur, assume or permit to exist any Lien on or with respect
to any of its Property except (i) Liens securing the Obligations, (ii) Liens
permitted by the Credit Agreement or (iii) Liens securing the Aircraft.
SECTION 4.1.2. Conduct of Business. The Guarantor shall not engage in any
business other than acting as a holding company and holding the Investments of
the Guarantor permitted under Section 4.1.6 hereto.
SECTION 4.1.3. Transactions with Affiliates. Except in respect of
transactions described in the New Foamex Subordinated Debenture Offering
Memorandum under the heading "Certain Relationships and Related Transactions" or
Schedule 6.01-Z of the Credit Agreement, the Guarantor shall not directly or
indirectly enter into any transactions (including, without limitation, the
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purchase, sale, lease or exchange of any property or the rendering of any
service), with any holder or holders of more than five percent (5%) of any class
of Equity Interests in the Guarantor or with any of the Guarantor's Affiliates
(other than Foamex and its Subsidiaries) on terms that are less favorable to it
than terms that could be obtained in an arm's length transaction with an
unrelated party at that time.
SECTION 4.1.4. Indebtedness. Neither the Guarantor nor any of its
Subsidiaries (other than Foamex and its Subsidiaries) shall directly or
indirectly create, incur, assume or otherwise become or remain directly or
indirectly liable with respect to, any Indebtedness, except (A) Indebtedness in
respect of the Guaranty or the Obligations, (B) Indebtedness in respect of
Transaction Costs, (C) Indebtedness in respect of guaranties of the Senior
Secured Notes, the Senior Notes, the Subordinated Debentures or the Discount
Debentures, (D) Indebtedness in respect of loans constituting Investments of
Foamex permitted under Section 9.04 of the Credit Agreement, (E) Indebtedness in
respect of loans to the Guarantor from Persons other than Foamex and its
Subsidiaries for the purposes of funding taxes and ordinary operating and
general administrative expenses of the Guarantor and funding loan commitments to
DLJ Funding, Inc. under the DLJ Loan Commitment Agreement dated as of December
14, 1993 between the Guarantor and DLJ Funding, Inc. and to Marely I s.a. under
the Marely Loan Commitment Agreement dated as of December 14, 1993 between the
Guarantor and Marely I s.a., (F) other unsecured Indebtedness of the Guarantor
in an aggregate principal amount not to exceed $50,000,000 at any time,(G)
Indebtedness of the Foamex Mexico Group and its Subsidiaries and (H)
Indebtedness of the Guarantor to The CIT Group Equipment Financing, Inc. with
respect to the Aircraft.
SECTION 4.1.5. Restriction on Fundamental Changes. The Guarantor shall not
enter into any merger or consolidation, or liquidate, wind-up or dissolve (or
suffer any liquidation or dissolution), purchase or otherwise acquire, in one
transaction or series of transactions, all or substantially all of the Equity
Interests in, or other evidence of beneficial ownership of, or the business,
property or assets of, any Person except the merger of Foamex-JPS Capital
Corporation, New Partners and FJGP Inc. (the "Merger") with and into the
Guarantor.
SECTION 4.1.6. Investments. The Guarantor shall not directly or indirectly
make or own any Investment, except (i) Investments in cash and Cash Equivalents,
(ii) Investments held by the Guarantor set forth on Schedule I hereto, (iii)
other Investments in existence on the date hereof in an aggregate amount not to
exceed $1 million, (iv) direct cash Investments in any Borrower or Subsidiary
Guarantor and (v) other Investments in any Fiscal Year not in excess of
$25,000,000.
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SECTION 4.1.7. Constituent Documents. Neither the Guarantor nor any of its
Subsidiaries (other than Foamex and its Subsidiaries) shall amend, modify or
otherwise change any of the terms or provisions in any of its Constituent
Documents as in effect on the date hereof other than amendments or modifications
deemed immaterial by the Administrative Agents or in order to effect the Merger.
SECTION 4.1.8. Transaction Documents. Neither the Guarantor nor any of its
Subsidiaries (other than Foamex and its Subsidiaries) shall amend, supplement or
otherwise modify any of the terms or provisions in any of the Transaction
Documents to which it is a party other than amendments, supplements or
modifications deemed immaterial by the Administrative Agents.
ARTICLE V
SUBORDINATION
The Guarantor hereby agrees that any Indebtedness of the Borrowers now or
hereafter owing to the Guarantor (the "Guarantor Subordinated Debt") is hereby
subordinated to all of the Obligations and to all "Senior Indebtedness" as
defined in the Subordinated Debenture Indenture and the New Foamex Subordinated
Indenture, as the case may be, in each case whether heretofore, now or hereafter
created, on the terms set forth in Article 10 of the Subordinated Debenture
Indenture to the same extent as if such Indebtedness constituted Indebtedness
evidenced by the Subordinated Debentures and the New Foamex Subordinated
Indenture, as the case may be, and to the extent necessary to comply with
Section 4.15 of the Subordinated Debenture Indenture and the New Foamex
Subordinated Indenture, as the case may be, the terms of which section are
incorporated herein by reference. In addition, the Guarantor Subordinated Debt
is subordinated on the following terms: The Guarantor Subordinated Debt shall
not be paid in whole or in part except as otherwise permitted under the terms of
the Credit Agreement. The Guarantor will not accept any payment of or on account
of any Guarantor Subordinated Debt at any time in contravention of the
foregoing. The Guarantor agrees to file all claims against the Borrowers in any
bankruptcy or other proceeding in which the filing of claims is required by law
in respect of any Guarantor Subordinated Debt, and the Collateral Agent shall be
entitled to all of the Guarantor's rights thereunder. If for any reason the
Guarantor fails to file such claim at least thirty (30) days prior to the last
date on which such claim should be filed, the Collateral Agent, as the
Guarantor's attorney-in-fact, is hereby authorized to do so in the Guarantor's
name or, in the Collateral Agent's discretion, to assign such claim to and cause
proof of claim to be filed in the name of the Collateral Agent or its nominee.
In all such cases,
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whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to the Collateral Agent the full amount
payable on the claim in the proceeding, and, to the full extent necessary for
that purpose, the Guarantor hereby assigns to the Collateral Agent all the
Guarantor's rights to any payments or distributions to which the Guarantor
otherwise would be entitled. If the amount so paid is greater than the
Guarantor's liability hereunder, the Collateral Agent will pay the excess amount
to the party entitled thereto. In addition, the Guarantor hereby appoints the
Collateral Agent as its attorney-in-fact to exercise all of the Guarantor's
voting rights with respect to the Guarantor Subordinated Debt in connection with
any bankruptcy proceeding or any plan for the reorganization of the Borrowers.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 6.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and the Guarantor's successors, transferees and
assigns and shall inure to the benefit of and be enforceable by each Secured
Party and each holder of a Note and their respective successors, transferees and
assigns (to the full extent provided pursuant to Section 2.7); provided,
however, that the Guarantor may not assign any of its obligations hereunder
without the prior written consent of all Lenders.
SECTION 6.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 6.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a
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telecopy or telex or four (4) Business Days after deposit in the United States
mail with postage prepaid and properly addressed. For the purposes hereof, the
address of the Guarantor shall be the address specified on the signature page
hereof, or at such other address as may be designated by the Guarantor in a
written notice to the Collateral Agent.
SECTION 6.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 6.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 6.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 6.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 6.9. Senior Indebtedness. The parties hereto acknowledge that the
obligations owing under this Agreement constitute "Obligations" owing under the
"Credit Agreement" and "Parent Guarantor Senior Indebtedness" (as each term is
defined in the Subordinated Debenture Indenture).
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SECTION 6.10. Certain Consents and Waivers of the Guarantor.
SECTION 6.10.1. Personal Jurisdiction. (i) THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS GUARANTY, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY AGREEMENT, AND THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE GUARANTOR IRREVOCABLY DESIGNATES
AND APPOINTS CORPORATION SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK
10023, AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING ACKNOWLEDGED TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. THE GUARANTOR AGREES THAT A FINAL
JUDGEMENT ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY OTHER JURISDICTIONS
BY SUIT ON THE JUDGEMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT THEY MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
(ii) THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST EACH BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE ADMINISTRATIVE AGENTS, ANY LENDER OR
ANY ISSUING BANK MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 6.10.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE (5) FIVE DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY IN ANY JURISDICTION SET FORTH ABOVE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR
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SHALL LIMIT THE RIGHT OF THE COLLATERAL AGENT TO BRING PROCEEDINGS AGAINST THE
GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 6.11. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 6.12. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR SUCH GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
SECTION 6.13. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
Foamex International Inc.
By /s/ George L. Karpinski
-------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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PARTNERSHIP GUARANTY
This GUARANTY (as amended, supplemented, amended and restated or otherwise
modified from time to time, this "Guaranty"), dated as of June 12, 1997, is made
by Trace Foam Company, Inc., a Delaware corporation ("Trace Foam" or a
"Guarantor"), and FMXI, Inc., a Delaware corporation ("FMXI" or a "Guarantor";
and collectively with Trace Foam, the "Guarantors"), in favor of Citicorp USA,
Inc., as Collateral Agent (together with any successor(s) thereto in such
capacity, the "Collateral Agent") for each of the Secured Parties, for the
benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam, a
general partner of Foamex, FMXI, managing general partner of Foamex, the
Lenders, the Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the
Lenders and the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for
the Lenders and the Issuing Banks (together with the Collateral Agent, the
"Administrative Agents"), the Lenders and the Issuing Banks have extended
Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, each
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, each Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of each Guarantor to execute this
Guaranty inasmuch as each Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, each Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"FMXI" is defined in the preamble.
"Foamex" is defined in the first recital.
"Guarantor" and "Guarantors" are defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Trace Foam" is defined in the preamble.
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SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. Each Guarantor hereby absolutely, unconditionally
and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations by each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and each Guarantor specifically agrees that it shall not be necessary or
required that any Secured Party or any holder of any Note exercise any right,
assert any claim or demand or enforce any remedy whatsoever against a Borrower
or any other Obligor (or any other Person) before or as a condition to the
obligations of such Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. Each Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or such
Guarantor, or the inability or failure of a Borrower, any other Obligor or such
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or such Guarantor for the benefit of creditors, or the
commencement of any case or proceeding in respect of a Borrower, any other
Obligor or such Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and
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each other Obligor may not then be due and payable, such Guarantor agrees that
it will pay to the Lenders forthwith the full amount which would be payable
hereunder by such Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of each
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. Each
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of each Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including a Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including a Guarantor) of, or collateral securing, any Obligations of
a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver,
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release, surrender, alteration or compromise, and shall not be subject to
(and each Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Obligations of a Borrower, any other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non- perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. Each Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
SECTION 2.6. Postponement of Subrogation, etc. Each Guarantor agrees that
it will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior
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payment in full in cash of all Obligations of each Borrower and each other
Obligor, the termination or expiration of all Letters of Credit and the
termination of all Commitments. Any amount paid to any Guarantor on account of
any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations each Borrower and each other Obligor, whether matured or unmatured,
in accordance with the terms of the Credit Agreement; provided, however, that if
(a) any Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at such Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to such Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to such Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by such
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, each Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon each Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become
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vested with all rights and benefits in respect thereof granted to such Lender
under any Loan Document (including this Guaranty) or otherwise, subject,
however, to any contrary provisions in such assignment or transfer, and to the
provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Guarantor hereby
represents and warrants unto the Collateral Agent as set forth in this Article
III acknowledging that the Collateral Agent is relying thereon without
independent inquiry.
SECTION 3.1.1. Corporate Existence; Compliance with Law. Such Guarantor (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware; (ii) has the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber its
properties and to conduct its business as now and heretofore conducted; (iii) is
in compliance with its Constituent Documents; and (iv) is in compliance with all
material Requirements of Law.
SECTION 3.1.2. Corporate Power; Authorization. The execution and delivery
by such Guarantor of the Loan Documents and the Transaction Documents to which
it is a party and all instruments and documents to be delivered by such
Guarantor thereunder, and the performance of its obligations thereunder: (i) are
within such Guarantor's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of such Guarantor's Constituent Documents; (iv) will not violate any
law or regulation, or any order or decree of any court or Governmental
Authority; (v) will not conflict with or result in the breach or termination of,
constitute a default under (with or without the giving of notice, the lapse of
time or both) or a tortious interference with or accelerate any performance
required by, any material indenture, mortgage, deed of trust, lease, agreement
or other instrument to which such Guarantor is a party or by which such
Guarantor or any of its property is bound; (vi) will not result in the creation
or imposition of any Lien upon any of the property of such Guarantor; and (vii)
do not require the consent or approval of any Governmental Authority, or any
other Person which has not been obtained.
SECTION 3.1.3. No Adverse Condition. No action has been taken by any
competent authority which restrains, prevents or
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imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, the consummation of any of the
transactions contemplated by the Loan Documents or the Transaction Documents.
Section 3.1.4. Enforceability. The obligations of such Guarantor under this
Guaranty are enforceable against such Guarantor in accordance with their terms.
ARTICLE IV
COVENANTS, ETC.
Each Guarantor covenants and agrees that such Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of such
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. Each
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to which reference is made therein, together with all related
definitions and ancillary provisions, is hereby incorporated into this Guaranty
by reference as though specifically set forth in this Article IV, and each such
agreement, covenant and obligation shall, for purposes hereof, survive the
termination of the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of,
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Section 2.7, this Guaranty shall be binding upon each Guarantor and each
Guarantor's successors, transferees and assigns and shall inure to the benefit
of and be enforceable by each Secured Party and each holder of a Note and their
respective successors, transferees and assigns (to the full extent provided
pursuant to Section 2.7); provided, however, that no Guarantor may assign any of
its obligations hereunder without the prior written consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by a Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of each Guarantor shall be the address specified for such
Guarantor in the Credit Agreement or the address specified on the signature page
of any applicable Assignment and Acceptance, or at such other address as may be
designated by such Guarantor in a written notice to the Collateral Agent.
SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of each Guarantor owing to it
hereunder, whether or not then due, and each Guarantor hereby grants to each
Secured Party and
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each such holder a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of such Guarantor then or thereafter
maintained with such Secured Party, or such holder or any agent or bailee for
such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantors.
SECTION 5.9.1. Personal Jurisdiction. EACH GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH SUCH GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH GUARANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. EACH GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
EACH GUARANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
EACH GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST SUCH GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. EACH GUARANTOR WAIVES ANY
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OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL
AGENT MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. EACH GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR SUCH GUARANTOR'S NOTICE ADDRESS
SPECIFIED IN THE CREDIT AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5)
DAYS AFTER SUCH MAILING. EACH GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO
BRING PROCEEDINGS AGAINST A GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR SUCH GUARANTOR. EACH GUARANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND
THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE
CREDIT AGREEMENT.
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SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
Trace Foam Company, Inc.
By /s/ Philip N. Smith, Jr.
-----------------------------
Name: Philip N. Smith, Jr.
Title: Vice President
FMXI, Inc.
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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FOAMEX GUARANTY
This FOAMEX GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex L.P., a Delaware limited partnership (the "Guarantor" or
a "Borrower"), in favor of Citicorp USA, Inc., as Collateral Agent (together
with any successor(s) thereto in such capacity, the "Collateral Agent") for each
of the Secured Parties, for the benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Guarantor, General Felt Industries, Inc., a
Delaware corporation ("GFI" or a "Borrower"; and, if together with the
Guarantor, the "Borrowers"), Trace Foam Company, Inc., a Delaware corporation
and general partner of the Guarantor, FMXI, Inc., a Delaware corporation and
managing general partner of the Guarantor, the Lenders, the Issuing Banks and
Citicorp USA, Inc., as Collateral Agent for the Lenders and the Issuing Banks
and The Bank of Nova Scotia, as Funding Agent for the Lenders and the Issuing
Banks (together with the Collateral Agent, the "Administrative Agents"), the
Lenders and the Issuing Banks have extended Commitments to make Credit
Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to it and to GFI by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to GFI pursuant
to the Credit Agreement, the Guarantor agrees, for the benefit of each Secured
Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the preamble and the first
recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"GFI" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
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ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of GFI under the Credit Agreement, the
Notes and the other Loan Documents to which it is a party and all
Obligations of each other Obligor under the Loan Documents to which it is a
party now or hereafter existing, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against GFI or any other
Obligor (or any other Person) before or as a condition to the obligations of the
Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of GFI, any other Obligor or the
Guarantor, or the inability or failure of GFI, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by GFI, any other
Obligor or the Guarantor for the benefit of creditors, or the commencement of
any case or proceeding in respect of GFI, any other Obligor or the Guarantor
under any bankruptcy, insolvency or similar laws, and if such event shall occur
at a time when any of the Obligations of GFI and each other Obligor may not then
be due and payable, the Guarantor agrees that it will pay to the Lenders
forthwith the full amount which would be payable hereunder by the Guarantor if
all such Obligations were then due and payable.
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SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of GFI and each
other Obligor have been paid in full in cash, all obligations of the Guarantor
hereunder shall have been paid in full in cash, all Letters of Credit have been
terminated or expired and all Commitments shall have terminated. The Guarantor
guarantees that the Obligations of GFI and each other Obligor will be paid
strictly in accordance with the terms of the Credit Agreement and each other
Loan Document under which they arise, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Secured Party or any holder of any Note with respect thereto.
The liability of the Guarantor under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against GFI, any other Obligor or any other Person (including
any other guarantor (including the Guarantor)) under the provisions of
the Credit Agreement, any Note, any other Loan Document or otherwise,
or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of GFI or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of GFI or any other Obligor,
or any other extension, compromise or renewal of any Obligation of GFI or
any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of GFI or any other Obligor for any reason, including any claim
of waiver, release, surrender, alteration or compromise, and shall not be
subject to (and the Guarantor hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence
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affecting, any Obligations of GFI, any other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non- perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of GFI or any other
Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, GFI, any other Obligor,
any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of GFI, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of GFI or any other Obligor and this Guaranty and any requirement
that the Collateral Agent, any other Secured Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against GFI,
any other Obligor or any other Person (including any other guarantor) or entity
or any collateral securing the Obligations of GFI or any other Obligor, as the
case may be.
SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of GFI and each other
Obligor, the termination or expiration of all Letters of Credit and the
termination of all Commitments. Any amount paid to the Guarantor on account of
any such subrogation rights prior to the payment in full in cash of all
Obligations of GFI and each other Obligor shall be held in trust for the benefit
of the Secured Parties and each holder of a Note and shall immediately be paid
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<PAGE>
to the Collateral Agent for the benefit of the Secured Parties and each holder
of a Note and credited and applied against the Obligations of GFI and each other
Obligor, whether matured or unmatured, in accordance with the terms of the
Credit Agreement; provided, however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of GFI or any other
Obligor, and
(b) all Obligations of GFI and each other Obligor have been paid in
full in cash, all Letters of Credit have been terminated or expired and all
Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of GFI and each other Obligor resulting from such payment by the Guarantor. In
furtherance of the foregoing, for so long as any Obligations or Commitments
remain outstanding, the Guarantor shall refrain from taking any action or
commencing any proceeding against GFI or any other Obligor (or its successors or
assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under this Guaranty to any
Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
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<PAGE>
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 3.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 3.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 3.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be the address specified for the
Guarantor in the Credit Agreement or the address specified on the signature page
of any applicable Assignment and Acceptance, or, at such other address as may be
designated by the Guarantor in a written notice to the Collateral Agent.
SECTION 3.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or
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<PAGE>
the exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 3.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 3.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 3.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 3.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 3.10. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX L.P.
BY FMXI, INC.,
the Managing General Partner
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
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GFI GUARANTY
This GFI GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by General Felt Industries, Inc., a Delaware corporation (the
"Guarantor" or a "Borrower"), in favor of Citicorp USA, Inc., as Collateral
Agent (together with any successor(s) thereto in such capacity, the "Collateral
Agent"), for the benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Guarantor, Foamex L.P., a Delaware limited
partnership ("Foamex" or a "Borrower"; and, if together with the Guarantor, the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks (together with
the Collateral Agent, the "Administrative Agents"), the Lenders and the Issuing
Banks have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to it and to Foamex
by the Lenders and the Issuing Banks pursuant to the Credit Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce
<PAGE>
the Lenders and the Issuing Banks to make Credit Extensions (including the
initial Credit Extension) to Foamex pursuant to the Credit Agreement, the
Guarantor agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the preamble and the first
recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
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<PAGE>
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of Foamex under the Credit Agreement, the
Notes and the other Loan Documents to which it is a party and all
Obligations of each other Obligor under the Loan Documents to which it is a
party now or hereafter existing, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the Guarantor specifically agrees that it shall not be necessary or required
that any Secured Party or any holder of any Note exercise any right, assert any
claim or demand or enforce any remedy whatsoever against Foamex or any other
Obligor (or any other Person) before or as a condition to the obligations of the
Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of Foamex, any other Obligor or the
Guarantor, or the inability or failure of Foamex, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by Foamex, any other
Obligor or the Guarantor for the benefit of creditors, or the commencement of
any case or proceeding in respect of Foamex, any other Obligor or the Guarantor
under any bankruptcy, insolvency or similar laws, and if such event shall occur
at a time when any of the Obligations of Foamex and each other Obligor may not
then be due and payable, the Guarantor agrees that it will pay to the Lenders
forthwith the full amount which would be payable hereunder by the Guarantor if
all such Obligations were then due and payable.
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SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of Foamex and each
other Obligor have been paid in full in cash, all obligations of the Guarantor
hereunder shall have been paid in full in cash, all Letters of Credit have been
terminated or expired and all Commitments shall have terminated. The Guarantor
guarantees that the Obligations of Foamex and each other Obligor will be paid
strictly in accordance with the terms of the Credit Agreement and each other
Loan Document under which they arise, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Secured Party or any holder of any Note with respect thereto.
The liability of the Guarantor under this Guaranty shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against Foamex, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of Foamex or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of Foamex or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
Foamex or any other Obligor;
(d) any reduction, limitation, impairment or termination of any
Obligations of Foamex or any other Obligor for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall
not be subject to (and the Guarantor hereby waives any right to or claim
of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence
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<PAGE>
affecting, any Obligations of Foamex, the Guarantor, any other Obligor or
otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of Foamex or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, Foamex, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of Foamex, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of Foamex or any other Obligor and this Guaranty and any requirement
that the Collateral Agent, any other Secured Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against
Foamex, any other Obligor or any other Person (including any other guarantor) or
entity or any collateral securing the Obligations of Foamex or any other
Obligor, as the case may be.
SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of Foamex and each
other Obligor, the termination or expiration of all Letters of Credit and the
termination of all Commitments. Any amount paid to the Guarantor on account of
any such subrogation rights prior to the payment in full in cash of all
Obligations of Foamex and each other Obligor shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
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<PAGE>
be paid to the Collateral Agent for the benefit of the Secured Parties and each
holder of a Note and credited and applied against the Obligations of Foamex and
each other Obligor, whether matured or unmatured, in accordance with the terms
of the Credit Agreement; provided, however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of Foamex or any
other Obligor, and
(b) all Obligations of Foamex and each other Obligor have been paid in
full in cash, all Letters of Credit have been terminated or expired and all
Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of Foamex and each other Obligor resulting from such payment by the Guarantor.
In furtherance of the foregoing, for so long as any Obligations or Commitments
remain outstanding, the Guarantor shall refrain from taking any action or
commencing any proceeding against Foamex or any other Obligor (or its successors
or assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under this Guaranty to any
Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
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<PAGE>
ARTICLE III
MISCELLANEOUS PROVISIONS
SECTION 3.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 3.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 3.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Required Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 3.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be the address specified for the
Guarantor in the Credit Agreement or the address specified on the signature page
of any applicable Assignment and Acceptance, or, at such other address as may be
designated by the Guarantor in a written notice to the Collateral Agent.
SECTION 3.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or
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<PAGE>
the exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 3.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 3.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Required Lenders, any Event of Default, have the right to appropriate and
apply to the payment of the obligations of the Guarantor owing to it hereunder,
whether or not then due, and the Guarantor hereby grants to each Secured Party
and each such holder a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Guarantor then or thereafter
maintained with such Secured Party, or such holder or any agent or bailee for
such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 3.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 3.9. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 3.10. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
General Felt Industries, Inc.
By /s/ George L. Karpinski
----------------------------------
Name: George L. Karpinski
Title: Vice President
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Fibers, Inc., a Delaware corporation (the "Guarantor"),
in favor of Citicorp USA, Inc., as Collateral Agent (together with any
successor(s) thereto in such capacity, the "Collateral Agent"), for the benefit
of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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<PAGE>
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX FIBERS, INC.
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Latin America, Inc., a Delaware corporation (the
"Guarantor"), in favor of Citicorp USA, Inc., as Collateral Agent (together with
any successor(s) thereto in such capacity, the "Collateral Agent"), for the
benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX LATIN AMERICA, INC.
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
-----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Mexico, Inc., a Delaware corporation (the "Guarantor"),
in favor of Citicorp USA, Inc., as Collateral Agent (together with any
successor(s) thereto in such capacity, the "Collateral Agent"), for the benefit
of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX MEXICO, INC.
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
-----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Capital Corporation, a Delaware corporation (the
"Guarantor"), in favor of Citicorp USA, Inc., as Collateral Agent (together with
any successor(s) thereto in such capacity, the "Collateral Agent"), for the
benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX CAPITAL CORPORATION
By /s/ George L. Karpinski
------------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Mexico II, Inc., a Delaware corporation (the
"Guarantor"), in favor of Citicorp USA, Inc., as Collateral Agent (together with
any successor(s) thereto in such capacity, the "Collateral Agent"), for the
benefit of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX MEXICO II, INC.
By /s/ George L. Karpinski
------------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY (as amended, supplemented, amended and restated or
otherwise modified from time to time, this "Guaranty"), dated as of June 12,
1997, is made by Foamex Asia, Inc., a Delaware corporation (the "Guarantor"), in
favor of Citicorp USA, Inc., as Collateral Agent (together with any successor(s)
thereto in such capacity, the "Collateral Agent"), for the benefit of the
Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc. a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the
Guarantor is required to execute and deliver this Guaranty;
WHEREAS, the Guarantor has duly authorized the execution, delivery and
performance of this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor to execute this
Guaranty inasmuch as the Guarantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuing Banks pursuant to the Credit Agreement;
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NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders and the Issuing Banks to
make Credit Extensions (including the initial Credit Extension) to the Borrowers
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" is defined in the first recital.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Foamex" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Obligations" means all Obligations (as defined in the Credit Agreement) of
the Borrowers and all obligations (monetary or otherwise) of each other Obligor
arising under or in connection with the Credit Agreement or any other Loan
Document.
"Process Agent" is defined in Section 3.9.1.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Collateral Agent, the Funding Agent and the Administrative Agents, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms
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used in this Guaranty, including its preamble and recitals, have the meanings
provided in the Credit Agreement.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1. Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand
or otherwise, of all Obligations of each Borrower under the Credit
Agreement, the Notes and the other Loan Documents to which it is a party
and all Obligations of each other Obligor under the Loan Documents to which
it is a party now or hereafter existing, whether for principal, interest,
fees, expenses or otherwise (including all such amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. ss.362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
ss.502(b) and ss.506(b)), and
(b) indemnifies and holds harmless each Secured Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Secured Party or such
holder, as the case may be, in enforcing any rights under this Guaranty;
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Secured Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against a Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2. Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of a Borrower, any other Obligor or the
Guarantor, or the inability or failure of a Borrower, any other Obligor or the
Guarantor to pay debts as they become due, or an assignment by a Borrower, any
other Obligor or the Guarantor for the benefit of creditors, or
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the commencement of any case or proceeding in respect of a Borrower, any other
Obligor or the Guarantor under any bankruptcy, insolvency or similar laws, and
if such event shall occur at a time when any of the Obligations of each Borrower
and each other Obligor may not then be due and payable, the Guarantor agrees
that it will pay to the Lenders forthwith the full amount which would be payable
hereunder by the Guarantor if all such Obligations were then due and payable.
SECTION 2.3. Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor guarantees that the Obligations of each Borrower and each other
Obligor will be paid strictly in accordance with the terms of the Credit
Agreement and each other Loan Document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Secured Party or any holder of
any Note with respect thereto. The liability of the Guarantor under this
Guaranty shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note or any other Loan Document;
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person
(including any other guarantor (including the Guarantor)) under the
provisions of the Credit Agreement, any Note, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
(including the Guarantor) of, or collateral securing, any Obligations
of a Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of a Borrower or any other
Obligor, or any other extension, compromise or renewal of any Obligation of
a Borrower or any other Obligor;
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(d) any reduction, limitation, impairment or termination of any
Obligations of a Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Obligations of a Borrower, the Guarantor, any
other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Secured Party or
any holder of any Note securing any of the Obligations of a Borrower or any
other Obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, a Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.4. Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Secured Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of a Borrower, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 2.5. Waiver, etc. The Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of a Borrower or any other Obligor and this Guaranty and any
requirement that the Collateral Agent, any other Secured Party or any holder of
any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against a
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of a Borrower or any other
Obligor, as the case may be.
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SECTION 2.6. Postponement of Subrogation, etc. The Guarantor agrees that it
will not exercise any rights which it may acquire by way of rights of
subrogation under this Guaranty, by any payment made hereunder or otherwise,
until the prior payment in full in cash of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to the Guarantor on account
of any such subrogation rights prior to the payment in full in cash of all
Obligations of each Borrower and each other Obligor shall be held in trust for
the benefit of the Secured Parties and each holder of a Note and shall
immediately be paid to the Collateral Agent for the benefit of the Secured
Parties and each holder of a Note and credited and applied against the
Obligations of each Borrower and each other Obligor, whether matured or
unmatured, in accordance with the terms of the Credit Agreement; provided,
however, that if
(a) the Guarantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Obligations of a Borrower or any
other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full in cash, all Letters of Credit have been terminated or expired
and all Commitments have been permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Guarantor's
request, the Collateral Agent, on behalf of the Secured Parties and the holders
of the Notes, will execute and deliver to the Guarantor appropriate documents
(without recourse and without representation or warranty) necessary to evidence
the transfer by subrogation to the Guarantor of an interest in the Obligations
of each Borrower and each other Obligor resulting from such payment by the
Guarantor. In furtherance of the foregoing, for so long as any Obligations or
Commitments remain outstanding, the Guarantor shall refrain from taking any
action or commencing any proceeding against a Borrower or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in the respect of payments made under this
Guaranty to any Secured Party or any holder of a Note.
SECTION 2.7. Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Collateral Agent
and each other Secured Party.
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Without limiting the generality of the foregoing clause (b), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all rights and benefits in respect thereof granted
to such Lender under any Loan Document (including this Guaranty) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer, and
to the provisions of Article XIII of the Credit Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Guarantor hereby represents and warrants unto the Collateral Agent as
set forth in this Article III, acknowledging that the Collateral Agent is
relying thereon without independent inquiry, that to all matters contained in
Article VI of the Credit Agreement (or other article in any successor agreement
which shall principally relate to representations and warranties made by such
Guarantor), insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under any Loan Document to which it is a party,
each such representation and warranty set forth in such Article (insofar as so
applicable) and all other terms of the Credit Agreement to which reference is
made therein, together with all related definitions and ancillary provisions,
are hereby incorporated into this Guaranty by reference with respect to such
Guarantor as though specifically set forth in this Article III.
ARTICLE IV
COVENANTS, ETC.
The Guarantor covenants and agrees that the Guarantor will perform the
obligations set forth in this Article IV until all Obligations of each Borrower
and each other Obligor have been paid in full in cash, all obligations of the
Guarantor hereunder shall have been paid in full in cash, all Letters of Credit
have been terminated or expired and all Commitments shall have terminated. The
Guarantor shall cause its Subsidiaries to comply with and be bound by all of the
agreements, covenants and obligations contained in the Credit Agreement (or
other sections in any successor agreement which shall principally relate to
covenants binding on such Guarantor). Except as specifically limited hereby,
each such agreement, covenant and obligation contained in such Sections and all
other terms of the Credit Agreement and the documents executed in connection
therewith to
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which reference is made therein, together with all related definitions and
ancillary provisions, is hereby incorporated into this Guaranty by reference as
though specifically set forth in this Article IV, and each such agreement,
covenant and obligation shall, for purposes hereof, survive the termination of
the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article XIII thereof.
SECTION 5.2. Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Secured Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7); provided, however, that the Guarantor
may not assign any of its obligations hereunder without the prior written
consent of all Lenders.
SECTION 5.3. Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be) and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 5.4. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United States certified mail and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the address of the Guarantor shall be as set forth below the Guarantor's
name on the signature page hereof or at such other address as may be designated
by the Guarantor in a written notice to the Collateral Agent.
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SECTION 5.5. No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Secured Party or any
holder of a Note to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6. Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7. Setoff. In addition to, and not in limitation of, any rights
of any Secured Party or any holder of a Note under applicable law, each Secured
Party and each such holder shall, upon the occurrence of any Default described
in any Section 11.01(f) or 11.01(g) of the Credit Agreement or with the consent
of the Requisite Lenders, any Event of Default, have the right to appropriate
and apply to the payment of the obligations of the Guarantor owing to it
hereunder, whether or not then due, and the Guarantor hereby grants to each
Secured Party and each such holder a continuing security interest in, any and
all balances, credits, deposits, accounts or moneys of the Guarantor then or
thereafter maintained with such Secured Party, or such holder or any agent or
bailee for such Secured Party or such holder; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
13.06 of the Credit Agreement.
SECTION 5.8. Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9. Certain Consents and Waivers of the Guarantor.
SECTION 5.9.1. Personal Jurisdiction. THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENT TO WHICH THE GUARANTOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY
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JUDGMENT, AND THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE GUARANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY,
15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE "PROCESS AGENT")
FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE GUARANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE GUARANTOR
WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT CONSIDERING THE DISPUTE.
THE GUARANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GUARANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GUARANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 5.9.2. Service of Process. THE GUARANTOR IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GUARANTOR'S NOTICE ADDRESS
SPECIFIED HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE GUARANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 5.10. Governing Law, Entire Agreement, etc. THIS GUARANTY SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). THIS GUARANTY AND THE OTHER
LOAN
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DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
SECTION 5.11. Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
THE SECURED PARTIES OR THE GUARANTOR. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
SECTION 5.12. Counterparts. This Guaranty may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
FOAMEX ASIA, INC.
By /s/ George L. Karpinski
------------------------------
Name: George L. Karpinski
Title: Vice President
Notice address
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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PARTNERSHIP PLEDGE AGREEMENT
THIS PARTNERSHIP PLEDGE AGREEMENT (this "Partnership Pledge Agreement"),
dated as of June 12, 1997, is made by Trace Foam Company, Inc, a Delaware
corporation (a "Grantor" or "Trace Foam"), FMXI, Inc., a Delaware corporation (a
"Grantor" or "FMXI") and Foamex International Inc., a Delaware corporation (a
"Grantor" or "FII"; and, if together with Trace Foam and FMXI, the "Grantors")
in favor of Citicorp USA, Inc., as Collateral Agent (together with any
successor(s) thereto in such capacity, the "Collateral Agent") for each of the
Secured Parties (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership (the
"Partnership" or a "Borrower"), General Felt Industries, Inc., a Delaware
corporation (a "Borrower"; and, if together with the Partnership, the
"Borrowers"), Trace Foam, a general partner of the Partnership, FMXI, a managing
general partner of the Partnership, the Lenders, the Issuing Banks and Citicorp
USA, Inc., as Collateral Agent for the Lenders and the Issuing Banks and The
Bank of Nova Scotia, as Funding Agent for the Lenders and the Issuing Banks
(together with the Collateral Agent, the "Administrative Agents"), the Lenders
and the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers;
WHEREAS, as a condition precedent to the making of Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, each
Grantor is required to execute and deliver this Partnership Pledge Agreement;
WHEREAS, each Grantor has duly authorized the execution, delivery and
performance of this Partnership Pledge Agreement;
WHEREAS, it is in the best interests of each Grantor to execute this
Partnership Pledge Agreement inasmuch as such Grantor will derive substantial
direct and indirect benefits from the Credit Extensions made from time to time
to the Borrowers by the Secured Parties pursuant to the Credit Agreement; and
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WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Secured Parties to make
Credit Extensions to the Borrowers pursuant to the Credit Agreement, each
Grantor agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Partnership Pledge Agreement, including its
preamble and recitals, shall have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and Letters of Credit.
"FII" is defined in the preamble.
"FMXI" is defined in the preamble.
"Grantor" and "Grantors" are defined in the preamble.
"Partnership" is defined in the first recital.
"Partnership Pledge Agreement" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Trace Foam" is defined in the preamble.
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"U.C.C." means the Uniform Commercial Code, as in effect in the State of
New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Partnership Pledge
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Partnership Pledge Agreement, including its preamble and
recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. As collateral security for the payment and
performance of the Secured Obligations, each Grantor hereby grants, pledges,
hypothecates, assigns, charges, mortgages, delivers and transfers to the
Collateral Agent for its benefit and the ratable benefit of each of the other
Secured Parties a continuing security interest in all right, title and interest
of such Grantor, whether now existing or hereafter arising or acquired, in, to
and under the Partnership Agreement, including, without limitation, such
Grantor's rights, now existing or hereafter arising or acquired, to receive from
time to time its share of profits, income, surplus, compensation, return of
capital, distributions and other reimbursements and payments from the
Partnership (including, without limitation, specific properties of the
Partnership upon dissolution and otherwise), in respect of any and all of the
following (the "Collateral"):
(a) all general or limited partnership interests now owned or
hereafter acquired by such Grantor in the Partnership as a result of
exchange offers, direct investments or contributions or otherwise;
(b) such Grantor's accounts, general intangibles and other rights to
payment or reimbursement, now existing or hereafter arising or acquired,
from its ownership of an interest in the Partnership; and
(c) the proceeds of and from any and all of the foregoing.
SECTION 2.2. Security for Obligations. This Partnership Pledge Agreement
secures the payment of all obligations of each
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Grantor now or hereafter existing under the Credit Agreement, the Partnership
Guaranty, the Foamex International Guaranty and each other Loan Document to
which such Grantor is or may become a party, all Obligations of each Borrower
now or hereafter existing under the Credit Agreement and each other Loan
Document to which such Borrower is or may become a party, and all other
obligations of each other Obligor now or hereinafter existing under each Loan
Document to which such other Obligor is or may become a party, whether for
principal, interest, costs, fees, expenses or otherwise (all such Obligations of
such Grantor and all such obligations such Borrower and such other Obligor being
the "Secured Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This
Partnership Pledge Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full of all
Secured Obligations;
(b) be binding upon each Grantor, their respective successors,
transferees and assigns, and
(c) inure, together with the rights and remedies of the Secured
Parties hereunder, to the benefit of the Secured Parties.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the respective Grantor. Upon any such
termination, the Collateral Agent will, at each Grantor's sole expense, execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination. Upon any sale or other transfer of
Collateral permitted by the terms of the Credit Agreement, the security interest
created hereunder in such Collateral (but not in the proceeds thereof) shall be
deemed to be automatically released and the Collateral Agent will, at each
Grantor's sole expense, execute and deliver to such Grantor such documents as
such Grantor shall reasonably request to evidence such release.
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SECTION 2.4. Each Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) each Grantor shall remain liable under the Partnership Agreement
to the extent set forth therein and shall perform all of its duties and
obligations under the Partnership Agreement to the same extent as if this
Partnership Pledge Agreement had not been executed;
(b) the exercise by any Secured Party of any of its rights hereunder
shall not release any Grantor from any of its respective duties or
obligations under the Partnership Agreement; and
(c) the Secured Parties shall not have any obligation or liability
under the Partnership Agreement by reason of this Partnership Pledge
Agreement, nor shall the Secured Parties be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Secured Parties
and the security interests granted to the Secured Parties hereunder, and all
obligations of each Grantor hereunder, shall be absolute and unconditional,
irrespective of
(a) any lack of validity or enforceability of any Loan Document;
(b) the failure of any Secured Party
(i) to assert any claim or demand or to enforce any right or
remedy against the Partnership, any other Obligor or any other Person
under the provisions of any Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any of the Secured Obligations;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligations;
(d) any reduction, limitation, impairment or termina tion of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and each
Grantor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations;
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(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of any Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations; or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Partnership, any
other Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation. Each Grantor agrees that it will
not exercise any rights which it may acquire by way of subrogation under this
Partnership Pledge Agreement, by any payment made hereunder or otherwise, until
the prior payment, in full and in cash, of all Obligations of each Borrower and
each other Obligor, the termination or expiration of all Letters of Credit and
the termination of all Commitments. Any amount paid to each Grantor on account
of any such subrogation rights prior to the payment in full of all Obligations
of each Borrower and each other Obligor, the termination or expiration of all
Letters of Credit and the termination of all Commitments shall be held in trust
for the benefit of the Secured Parties and shall immediately be paid to the
Collateral Agent and credited and applied against the Obligations of each
Borrower and each other Obligor, whether matured or unmatured, in accordance
with the terms of the Credit Agreement; provided, however, that if
(a) any Grantor has made payment to the Secured Parties of all or any
part of the Obligations of a Borrower or any other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full, all Letters of Credit have expired or been terminated and all
Commitments have been terminated,
each Secured Party agrees that, at such Grantor's request, the Secured Parties
will execute and deliver to such Grantor appropriate documents (without recourse
and without representation or warranty) necessary to evidence the transfer by
subrogation to such Grantor of an interest in the Secured Obligations resulting
from such payment by such Grantor. In furtherance of the foregoing, for so long
as any Secured Obligations, Letters of Credit or Commitments remain outstanding,
each Grantor shall refrain from taking any action or commencing
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any proceeding against a Borrower or any other Obligor (or its successors or
assigns, whether in connection with a bankruptcy proceeding or otherwise) to
recover any amounts in the respect of payments made under this Partnership
Pledge Agreement to any Secured Party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. Each Grantor represents and
warrants to each Secured Party as set forth in this Article.
SECTION 3.1.1. Filing. Except as contemplated by the Discount Debenture
Intercreditor Agreement, no presently effective Uniform Commercial Code
financing statement (other than any which may have been filed for the benefit of
the Secured Parties) covering any of the Collateral is on file in any public
office.
SECTION 3.1.2. Ownership of Collateral. Such Grantor is and will be the
lawful owner of all Collateral owned by such Grantor, free and clear of all
Liens and claims whatsoever except as contemplated by the Discount Debenture
Intercreditor Agreement, other than the security interest hereunder, and has
full power and authority to execute this Partnership Pledge Agreement and
perform such Grantor's obligations hereunder, and to subject the Collateral to
the security interest hereunder.
SECTION 3.1.3. Validity, etc. Such Grantor has furnished to the Secured
Parties a true and correct copy of the Partnership Agreement and all amendments
thereto, which Partnership Agreement, as so amended, constitutes the valid,
binding and enforceable obligations of such Grantor, sets forth the entire
agreement of the parties thereto with respect to the subject matter thereof, has
not been further amended or modified and remains in full force and effect.
SECTION 3.1.4. Partnership Interests, Profits. The character (general
and/or limited partner) of such Grantor's interest in the Partnership, and such
Grantor's percentage interest in the Partnership's profits (with profit
interests as a general and as a limited partner separately stated) are as set
forth in Schedule I hereto (with such changes thereto as are expressly permitted
by the Credit Agreement or as otherwise consented to in writing by the
Collateral Agent). Except as expressly permitted by the Credit Agreement, no
changes in any Grantor's percentage interest in the Partnership or the
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Partnership's profits shall be made without the prior written consent of the
Collateral Agent.
SECTION 3.1.5. Certificate. No interest of such Grantor in the Partnership
is represented by a certificate of interest or similar instrument, except such
certificates or instruments, if any, as have been delivered to the Collateral
Agent and are held in its possession (and such Grantor covenants and agrees that
any such certificates or instruments hereafter received by such Grantor with
respect to any of the Collateral will be promptly delivered to the Collateral
Agent).
SECTION 3.1.6. Performance of Obligations. Such Grantor has substantially
performed all of its respective obligations to date under the Partnership
Agreement and has not received notice of the failure of any other party thereto
to perform substan tially its obligations thereunder.
SECTION 3.1.7. Location, Records, etc. The place(s) of business and chief
executive office of such Grantor and the office(s) where such Grantor keeps its
records concerning the Collateral are located at the addresses specified in
Schedule II hereto. Such Grantor has no trade name nor has such Grantor been
known by any legal name different from the one set forth on the signature page
hereto.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. Each Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, such Grantor
will, unless the Requisite Lenders shall otherwise consent in writing, perform
the obligations set forth in this Section.
SECTION 4.1.1. Maintenance of Records. Subject to the provisions of Section
4.1.2 hereof, such Grantor will keep, at its address indicated on Schedule II
hereto, all its records concerning the Collateral, which records will be of such
character as will enable the Collateral Agent or its designees to determine at
any time the status thereof.
SECTION 4.1.2. Notice of Change of Address, etc. Such Grantor will furnish
notice in writing to the Collateral Agent, as soon as practicable and in any
event within five days after the occurrence and during the continuance from time
to time of any change in the address of such Grantor's location (as described on
Schedule II hereto) or in the name of such Grantor.
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SECTION 4.1.3. Information. Such Grantor will furnish the Collateral Agent
such information concerning the Collateral as the Collateral Agent may from time
to time reasonably request, and permit the Collateral Agent and its designees
from time to time to inspect, audit and make copies of and extracts from all
records and all other papers in the possession of such Grantor which pertain to
the Collateral, and, upon request of the Collateral Agent (which may be made
only on and after the occurrence of an Event of Default), deliver to the
Collateral Agent all of such original records and papers.
SECTION 4.1.4. Amendment of Partnership Agreement. Such Grantor will
provide the Collateral Agent, not less than ten days prior to entering into the
same, a copy of any amendment or supplement to, or modification or waiver of,
any term or provision of the Partnership Agreement, provided that none of the
Grantors will enter into any such amendment, supplement or modification, or
execute any such waiver, except as permitted by the terms of the Credit
Agreement.
SECTION 4.1.5. Notice of Litigation. Such Grantor will notify the
Collateral Agent of the institution of any litigation or governmental proceeding
against or affecting any of the Collateral, to the extent and as soon as
practicable after such Grantor shall have knowledge thereof.
SECTION 4.1.6. Withdrawal from Partnership. Such Grantor will not, without
the express written consent of the Collateral Agent and the Lenders, actively
cause itself to withdraw as a general partner or limited partner, as the case
may be, of the Partnership.
SECTION 4.1.7. Notice of Dissolution. Such Grantor will notify the
Collateral Agent in writing promptly upon learning of the occurrence of any
event which is reasonably likely to cause termination and/or dissolution of The
Partnership.
SECTION 4.1.8. Liens. No Grantor shall
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral; or
(b) create or suffer to exist any Lien upon or with respect to any of
the Collateral to secure Indebtedness of any Person or entity, except for
the security interest created by this Partnership Pledge Agreement and as
permitted by the Credit Agreement.
SECTION 4.1.9. Further Assurances, etc. Such Grantor agrees that, from time
to time at its own expense, such Grantor will promptly execute and deliver all
further instruments and
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documents, and take all further action, that may be necessary or desirable, or
that the Collateral Agent may reasonably request, in order to perfect, preserve
and protect any security interest granted or purported to be granted hereby or
to enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, such Grantor will
(a) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Collateral Agent may request, in order to
perfect and preserve the security interests and other rights granted or
purported to be granted to the Collateral Agent hereby; and
(b) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
such Grantor hereby authorizes the Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law. A photographic or other reproduction of this Partnership Pledge
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
SECTION 4.1.10. Transfer of Interests. Such Grantor agrees that it will not
transfer, sell or otherwise dispose of an interest in the Partnership if (i) a
Change of Control would occur as a result of such transfer, sale or other
disposition or (ii) an Event of Default shall have occurred and be continuing at
the time of the consummation of such transfer, sale or other disposition or an
Event of Default would be caused thereby. Such Grantor shall cause each
transferee of such Grantor of an interest in the Partnership to agree in writing
in form and substance satisfactory to the Collateral Agent that (i) such
transferee will not further transfer, sell or otherwise dispose of such an
interest if such transfer, sale, or other disposition would cause an Event of
Default under the Credit Agreement, (ii) such transferee shall cause each of its
subsequent transferees to agree in writing to comply with the obligation set
forth in the preceding clause (i) and (iii) such transferee shall become a party
hereto by executing and delivering to the Collateral Agent a counterpart of this
Partnership Pledge Agreement.
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ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. Each Grantor
hereby irrevocably appoints the Collateral Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise, if an Event of Default shall have
occurred and be continuing, from time to time in the Collateral Agent's
discretion, to take any action and to execute any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of
this Partnership Pledge Agreement, including, without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Secured Parties with respect to any of the Collateral; and
(d) to perform the affirmative obligations of such Grantor hereunder.
Each Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If any Grantor fails to perform
any agreement contained herein, after the occurrence of an Event of Default the
Collateral Agent may itself perform, or cause performance of, such agreement,
and the expenses of the Collateral Agent incurred in connection therewith shall
be payable by such Grantor pursuant to Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the
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Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as any Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing the Collateral Agent may exercise from time to time any rights
and remedies available to it under applicable law. Without limiting the
foregoing, upon the occurrence and continuance of an Event of Default, the
Collateral Agent may, to the fullest extent permitted by applicable law, without
notice, advertisement, hearing or process of law of any kind, (x) sell any or
all of the Collateral, free of all rights and claims of each Grantor therein and
thereto at any public or private sale or broker's board, and (y) bid for and
purchase any or all of the Collateral at any such public or private sale or
broker's board. Any notification of intended disposition of any of the
Collateral required by law shall be deemed reasonably and properly given if
given at least ten days (or such longer period required by law) before such
disposition. Each Grantor agrees that in any sale of the Collateral after an
Event of Default (where such Collateral may be deemed to constitute a security),
the Collateral Agent is hereby authorized to comply with any limitation or
restriction in connection with such sale as it may be advised by counsel is
necessary in order to avoid any violation of applicable law or in order to
obtain any required approval of the purchaser by any Regulatory Authority, and
each Grantor further agrees that such compliance shall not result in such sale
being considered or deemed not to have been made in a commercially reasonable
manner. Any proceeds of any disposition of any of the Collateral shall be
applied, subject to the terms of the Discount Debenture Intercreditor Agreement,
by the Collateral Agent in accordance with Section 3.02(b)(iii) of the Credit
Agreement.
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SECTION 6.2. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to indemnify the
Collateral Agent and each Secured Party from and against any and all
claims, losses and liabilities arising out of or resulting from this
Partnership Pledge Agreement (including, without limitation, enforcement of
this Partnership Pledge Agreement), except claims, losses or liabilities
resulting from the Collateral Agent's or such Secured Party's gross
negligence or willful misconduct.
(b) Each Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Partnership Pledge Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or
(iv) the failure by any of the Grantors to perform or observe any
of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Partnership Pledge Agreement is a Loan
Document and shall (unless otherwise expressly indicated herein) be construed,
administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Partnership Pledge Agreement nor consent to any departure by any Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Collateral Agent, with the consent of the Requisite Lenders,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 7.3. Notices. All notices and other communications provided for
hereunder shall be in writing and may be personally served, telecopied, telexed
or sent by courier service or United
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States certified mail and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of a telecopy or telex or four (4)
Business Days after deposit in the United States mail with postage prepaid and
properly addressed. For the purposes hereof, the address of each Grantor shall
be the address specified on the signature page of such Grantor hereto, or at
such other address as may be designated by such Grantor in a written notice to
the Collateral Agent.
SECTION 7.4. Section Captions. Section captions used in this Partnership
Pledge Agreement are for convenience of reference only, and shall not affect the
construction of this Partnership Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Partnership Pledge Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Partnership Pledge Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Partnership Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Grantors.
SECTION 7.6.1. Personal Jurisdiction. EACH GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
PARTNERSHIP PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH SUCH GRANTOR IS
A PARTY, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND SUCH GRANTOR IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH GRANTOR IRREVOCABLY DESIGNATES AND
APPOINTS CORPORATION SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK
10023, AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH GRANTOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. EACH GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
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EACH GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST SUCH GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE
AGENTS, ANY LENDER OR ANY ISSUING BANK. EACH GRANTOR WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY
COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. EACH GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR SUCH GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. EACH
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS PARTNERSHIP PLEDGE AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO
BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PARTNERSHIP PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR ITEM OF COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. THIS PARTNERSHIP PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Waiver of Jury Trial. THE COLLATERAL AGENT AND EACH GRANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS PARTNERSHIP PLEDGE AGREEMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS
OF THE COLLATERAL AGENT OR SUCH GRANTOR. EACH GRANTOR ACKNOWLEDGES AND AGREES
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND
EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND
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THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE SECURED PARTIES ENTERING
INTO THE LOAN DOCUMENTS TO WHICH THEY ARE A PARTY.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Partnership Pledge Agreement and the applicable Intercreditor Agreement,
the terms of the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, each Grantor has caused this Partnership Pledge
Agreement to be duly executed and delivered by its respective authorized officer
thereunto duly authorized as of the date first above written.
Trace Foam Company, Inc.
By /s/ Philip N. Smith, Jr.
------------------------------
Name: Philip N. Smith, Jr.
Title: Vice President
375 Park Avenue
New York, New York 10152
Attn:
Telecopier: 212 593-1363
FMXI, Inc.
By /s/ George L. Karpinski
------------------------------
Name: George L. Karpinski
Title: Vice President
Foamex International Inc.
By /s/ George L. Karpinski
------------------------------
Name: George L. Karpinski
Title: Vice President
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn: Kenneth R. Fuette
Telecopier: 610-859-3085
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Partnership Pledge Agreement
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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FOAMEX PLEDGE AGREEMENT
This FOAMEX PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by FOAMEX, L.P., a Delaware limited
partnership (the "Pledgor" or a "Borrower"), in favor of CITICORP USA, INC., as
collateral agent (together with any successor(s) thereto in such capacity, the
"Collateral Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Pledgor, General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with the Pledgor, the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and general
partner of the Pledgor, FMXI, Inc., a Delaware corporation and managing general
partner of the Pledgor, the Lenders, the Issuing Banks and Citicorp USA, Inc.,
as Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks (together with
the Collateral Agent, the "Administrative Agents"), the Lenders and the Issuing
Banks have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the Borrowers pursuant to the Credit Agreement, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the preamble and first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged Property hereunder, as such promissory notes, in
accordance with Section 4.5, are amended, modified or supplemented from time to
time, together with any promissory note of any Pledged Note
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Issuer taken in extension or renewal thereof or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or are required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
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ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing; and
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of the Pledgor now or hereafter
existing under the Credit Agreement, the Notes, the Foamex Guaranty, and each
other Loan Document to which the Pledgor is or may become a party, whether for
principal, interest, costs, fees, expenses, or otherwise, and all obligations of
each other Obligor now or hereafter existing under each Loan Document to which
such Obligor is or may become a party (all such Obligations of the Pledgor and
all such obligations of such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
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case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
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representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or
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any amendment to or waiver or release of or addition to or consent to
departure from any guaranty, for any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all liens
(except as contemplated by the Senior Secured Note Intercreditor Agreement),
security interests, options, or other charges or encumbrances, except any lien
or security interest granted pursuant hereto in favor of the Collateral Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock (or 65% of the issued and outstanding
shares of capital stock of each Pledged Share Issuer that is organized in a
jurisdiction outside of the United States) of each Pledged Share Issuer. The
Pledgor has no Subsidiaries other than the Pledged Share Issuers, except as set
forth in Item C of Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the
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legal, valid and binding obligation of the issuers thereof, and are not in
default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
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SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral Agent as additional Collateral for use in
accordance with Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to
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any Pledged Shares or other shares of capital stock constituting
Collateral and the Pledgor hereby grants the Collateral Agent an
irrevocable proxy, exercisable under such circumstances, to vote the
Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
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ARTICLE V
The Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
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(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at least ten days'
prior notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such
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sale may, without further notice, be made at the time and place to which it
was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the
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related prospectus which, in the opinion of the Collateral Agent, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Collateral Agent be liable nor accountable to
the Pledgor for any
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discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent and subject to the terms of the Senior Secured Note
Intercreditor Agreement, be applied as set forth in Section 3.02(b)(iii) of the
Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral
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Agent (on behalf of the Lenders or the Requisite Lenders, as the case may be),
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Addresses for Notices. All notices and other communications
provided for hereunder shall be made as set forth in Section 13.08 of the Credit
Agreement.
SECTION 7.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.7. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
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SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX L.P.
By:FMXI, INC., the Managing
General Partner
By /s/ George L. Karpinski
---------------------------
Name: George L. Karpinski
Title: Vice President
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Foamex Pledge Agreement
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
---------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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EXHIBIT A
to Foamex
Pledge Agreement
PROMISSORY NOTE
$__________________ ____________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including , 19 , the principal sum of DOLLARS ($ ),
representing the aggregate principal amount of an intercompany loan made by the
Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit
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Extensions to the Borrowers. Upon the occurrence and continuance of an Event of
Default under the Credit Agreement, and notice thereof by the Collateral Agent
to the Maker, the Collateral Agent shall have all rights of the Payee to collect
and accelerate, and enforce all rights with respect to, the Indebtedness
evidenced by this Note. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
-----------------------------
Name:
Title:
Pay to the order of CITICORP
USA, INC., as Collateral
Agent
[NAME OF PAYEE]
By
-----------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
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Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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<PAGE>
ATTACHMENT 1
to Foamex
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
Item B. Pledged Shares
Common Stock
---------------------------------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ---------- ----------- -----------
Item C. Additional Subsidiaries
GFI PLEDGE AGREEMENT
This GFI PLEDGE AGREEMENT (as amended, supplemented, amended and restated
or otherwise modified from time to time, this "Pledge Agreement"), dated as of
June 12, 1997, is made by General Felt Industries, Inc., a Delaware corporation
(the "Pledgor" or a "Borrower"), in favor of CITICORP USA, INC., as collateral
agent (together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Pledgor, Foamex L.P., a Delaware limited
partnership ("Foamex" or a "Borrower"; and, if together with the Pledgor, the
"Borrowers")), Trace Foam Company, Inc., a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks (together with
the Collateral Agent, the "Administrative Agents"), the Lenders and the Issuing
Banks have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the preamble and first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are
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delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder,
as such promissory notes, in accordance with Section 4.5, are amended, modified
or supplemented from time to time, together with any promissory note of any
Pledged Note Issuer taken in extension or renewal thereof or substitution
therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
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ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of the Pledgor now or hereafter
existing under the Credit Agreement, the Notes, the GFI Guaranty, and each other
Loan Document to which the Pledgor is or may become a party, whether for
principal, interest, costs, fees, expenses, or otherwise, and all obligations of
each other Obligor now or hereafter existing under each Loan Document to which
such Obligor is or may become a party (all such Obligations of the Pledgor and
such Obligations of such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for
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<PAGE>
transfer by delivery, and shall be accompanied by all necessary instruments of
transfer or assignment, duly executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral
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<PAGE>
Agent hereunder, and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or
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consent to departure from any guaranty, for any of the Secured Obligations,
or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all liens
(except as contemplated by the Senior Secured Note Intercreditor Agreement),
security interests, options, or other charges or encumbrances, except any lien
or security interest granted pursuant hereto in favor of the Collateral Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock of each Pledged Share Issuer. The
Pledgor has no Subsidiaries other than the Pledged Share Issuers, except as set
forth in Item C of Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
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(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Collateral Agent may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged
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Shares or other shares of common stock constituting Collateral into the name of
any nominee designated by the Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral Agent as additional Collateral for use in
accordance with Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held
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by the Pledgor but which the Pledgor is then obligated to deliver to the
Collateral Agent, shall, until delivery to the Collateral Agent, be held by the
Pledgor separate and apart from its other property in trust for the Collateral
Agent. The Collateral Agent agrees that unless an Event of Default shall have
occurred and be continuing and the Collateral Agent shall have given the notice
referred to in Section 4.4(b), the Pledgor shall have the exclusive voting power
with respect to any shares of capital stock (including any of the Pledged
Shares) constituting Collateral and the Collateral Agent shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any such share of
capital stock (including any of the Pledged Shares) constituting Collateral;
provided, however, that no vote shall be cast, or consent, waiver, or
ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is issued) or compromising or releasing or
extending the time for payment of any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
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(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as
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the Pledgor reasonably requests in writing at times other than upon the
occurrence and during the continuance of any Event of Default, but failure of
the Collateral Agent to comply with any such request at any time shall not in
itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at least ten days'
prior notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Collateral Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or
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<PAGE>
extend or renew for any period (whether or not longer than the
original period) any obligations of any nature of any party with
respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion of
the Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
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(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Collateral Agent be liable nor accountable to
the Pledgor for any discount allowed by the reason of the fact that such
Collateral is sold in compliance with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent, and subject to the terms of the Senior Secured Note
Intercreditor Agreement, be applied as set forth in Section 3.02(b)(iii) of the
Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
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misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
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SECTION 7.4. Addresses for Notices. All notices and other communications
provided for hereunder shall be made as set forth in Section 13.08 of the Credit
Agreement.
SECTION 7.5. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.7. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.8. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
General Felt Industries, Inc.
By /s/ George L. Karpinski
-----------------------------
Name: George L. Karpinski
Title: Vice President
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GFI Pledge Agreement
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
-----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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EXHIBIT A
to GFI
Pledge Agreement
PROMISSORY NOTE
$_________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including , 19 , the principal sum of DOLLARS ($ ),
representing the aggregate principal amount of an intercompany loan made by the
Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit
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Extensions to the Borrowers. Upon the occurrence and continuance of an Event of
Default under the Credit Agreement, and notice thereof by the Collateral Agent
to the Maker, the Collateral Agent shall have all rights of the Payee to collect
and accelerate, and enforce all rights with respect to, the Indebtedness
evidenced by this Note. Unless otherwise defined herein or the context otherwise
requires, terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
--------------------------
Name:
Title:
Pay to the order of CITICORP
USA, INC., as Collateral
Agent
[NAME OF PAYEE]
By
--------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
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Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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<PAGE>
ATTACHMENT 1
to GFI
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
Foamex Fibers, Inc. [ ] [ ] [ ]
Item C. Additional Subsidiaries
SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Capital Corporation, a Delaware
corporation (the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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<PAGE>
not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX CAPITAL CORPORATION
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Fibers Inc., a Delaware corporation
(the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent (together
with any successor(s) thereto in such capacity, the "Collateral Agent") for each
of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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<PAGE>
Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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<PAGE>
and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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<PAGE>
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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<PAGE>
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX FIBERS, INC.
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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<PAGE>
Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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<PAGE>
EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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<PAGE>
the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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<PAGE>
GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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================================================================================
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<PAGE>
ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Latin America, Inc., a Delaware
corporation (the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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<PAGE>
Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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<PAGE>
Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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<PAGE>
and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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<PAGE>
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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<PAGE>
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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<PAGE>
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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<PAGE>
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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<PAGE>
represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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<PAGE>
SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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<PAGE>
not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX LATIN AMERICA, INC.
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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================================================================================
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ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Asia, Inc., a Delaware
corporation (the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX ASIA, INC.
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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================================================================================
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ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Mexico, Inc., a Delaware
corporation (the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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<PAGE>
and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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<PAGE>
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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<PAGE>
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX MEXICO, INC.
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
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Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
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Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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SUBSIDIARY PLEDGE AGREEMENT
This SUBSIDIARY PLEDGE AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Pledge Agreement"),
dated as of June 12, 1997, is made by Foamex Mexico II, Inc., a Delaware
corporation (the "Pledgor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Pledgor
is required to execute and deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuing Banks to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Pledgor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1.
"Collateral Agent" is defined in the preamble.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Distributions" means all stock dividends, liquidating dividends, shares of
stock resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock or other Equity Interests constituting Collateral, but shall not
include Dividends.
"Dividends" means cash dividends and cash distributions with respect to any
Pledged Shares or other Pledged Property made in the ordinary course of business
and not a liquidating dividend.
"Foamex" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Note Issuer" means each Person identified in Item A of Attachment
1 hereto as the issuer of the Pledged Note identified opposite the name of such
Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
substantially the form of Exhibit A hereto which are delivered by the Pledgor to
the Collateral Agent as Pledged
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Property hereunder, as such promissory notes, in accordance with Section 4.5,
are amended, modified or supplemented from time to time, together with any
promissory note of any Pledged Note Issuer taken in extension or renewal thereof
or substitution therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and all
other pledged shares of capital stock or other Equity Interests or promissory
notes, all other securities, all assignments of any amounts due or to become
due, all other instruments which are now being delivered or requested to be
delivered by the Pledgor to the Collateral Agent or may from time to time
hereafter be delivered or required to be delivered by the Pledgor to the
Collateral Agent for the purpose of pledge under this Pledge Agreement or any
other Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of Attachment
1 hereto as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all shares of capital stock or other Equity
Interests of any Pledged Share Issuer which are delivered or required to be
delivered by the Pledgor to the Collateral Agent as Pledged Property hereunder;
[provided, however, that notwithstanding any other provision of this Pledge
Agreement, the Pledged Shares, in the case of any Pledged Share Issuer that is
organized in a jurisdiction outside the United States, shall not include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer] [provided however, that notwithstanding any other provision of this
Pledge Agreement, the Pledged Shares, in the case of any Pledged Share Issuer
that is organized in a jurisdiction outside of the United States, shall not,
after all such Pledged Shares are aggregated with the Equity Interests of such
Pledged Share Issuer pledged by the Sister Holding Company under the Subsidiary
Pledge Agreement to which the Sister Holding Company is a party, include more
than 65% of the issued and outstanding Equity Interests of such Pledged Share
Issuer].
"Pledgor" is defined in the preamble.
"Process Agent" is defined in Section 7.6.1.
"Secured Obligations" is defined in Section 2.2.
"Securities Act" is defined in Section 6.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent
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and the Funding Agent, and any Lender in its capacity as a counterparty to a
Hedging Obligation.
["Sister Holding Company" means [Foamex Mexico, Inc.] [Foamex Latin
America, Inc.], a Delaware corporation.]
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Pledge Agreement, including its preamble
and recitals, with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Collateral Agent, for its benefit and the ratable benefit of each of the Secured
Parties, and hereby grants to the Collateral Agent, for its benefit and the
ratable benefit of the Secured Parties, a continuing security interest in, all
of the following property (the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto;
(b) all other Pledged Notes issued from time to time;
(c) all issued and outstanding shares of capital stock of each Pledged
Share Issuer identified in Item B of Attachment 1 hereto;
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered or
required to be delivered to the Collateral Agent in connection with this
Pledge Agreement;
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(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property; and
(g) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement secures the
payment in full in cash of all Obligations of each Borrower now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document to
which such Borrower is or may become a party, whether for principal, interest,
costs, fees, expenses, or otherwise, and all obligations of the Pledgor and each
other Obligor now or hereafter existing under this Pledge Agreement and each
Loan Document to which the Pledgor or such other Obligor is or may become a
party (all such Obligations of such Borrower, and all such obligations of the
Pledgor and such other Obligors being the "Secured Obligations").
SECTION 2.3. Delivery of Pledged Property. All certificates or instruments
representing or evidencing any Collateral, including all Pledged Shares and all
Pledged Notes, shall be delivered to and held by or on behalf of (and, in the
case of the Pledged Notes, endorsed to the order of) the Collateral Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares and Payments on Pledged Notes. In
the event that any Dividend is to be paid on any Pledged Share or any payment of
principal or interest is to be made on any Pledged Note at a time when no
Default of the nature referred to in Section 11.01(f) or 11.01(g) of the Credit
Agreement or Event of Default has occurred and is continuing, such Dividend or
payment may be paid directly to the Pledgor. If any such Default or Event of
Default has occurred and is continuing, then any such Dividend or payment shall
be paid directly to the Collateral Agent.
SECTION 2.5. Continuing Security Interest; Transfer of Note. This Pledge
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit, the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
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(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the foregoing clause (c), any Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan held by it to any other Person
or entity, and such other Person or entity shall thereupon become vested with
all the rights and benefits in respect thereof granted to such Lender under any
Loan Document (including this Pledge Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Article XIII of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
payment in full in cash of all Secured Obligations, the termination or
expiration of all Letters of Credit and the termination of all Commitments, the
security interest granted herein shall automatically terminate with respect to
(x) such Collateral (in the case of clause (i)) or (y) all Collateral (in the
case of clause (ii)). Upon any such termination, the Collateral Agent will, at
the Pledgor's sole expense, deliver to the Pledgor, without any representations,
warranties or recourse of any kind whatsoever, all certificates and instruments
representing or evidencing all Pledged Shares and all Pledged Notes, together
with all other Collateral held by the Collateral Agent hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against a Borrower, any other Obligor or any other Person under
the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
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(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
Obligor, any surety or any guarantor.
SECTION 2.7. Postponement of Subrogation, etc. The Pledgor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Pledgor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Pledgor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
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(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Pledgor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Pledgor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Pledgor of an interest in the Secured Obligations resulting from such
payment by the Pledgor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Pledgor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Pledge Agreement to any Secured Party or
any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties, etc. The Pledgor represents
and warrants unto each Secured Party, as at the date of each pledge and delivery
hereunder (including each pledge and delivery of Pledged Shares and each pledge
and delivery of a Pledged Note) by the Pledgor to the Collateral Agent of any
Collateral, as set forth in this Article.
SECTION 3.1.1. Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) such Collateral, free and clear of all
liens, security interests, options, or other charges or encumbrances, except any
lien or security interest granted pursuant hereto in favor of the Collateral
Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such Collateral to
the Collateral Agent is effective to create a valid, perfected, first priority
security interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly authorized and
validly issued, fully paid, and
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non-assessable, and constitute all of the issued and outstanding shares of
capital stock (or 65% of the issued and outstanding shares of capital stock of
each Pledged Share Issuer that is organized in a jurisdiction outside of the
United States) of each Pledged Share Issuer. The Pledgor has no Subsidiaries
other than the Pledged Share Issuers, except as set forth in Item C of
Attachment 1.
SECTION 3.1.4. As to Pledged Notes. In the case of each Pledged Note, all
of such Pledged Notes have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuer
thereof, and are not in default.
SECTION 3.1.5. Authorization, Approval, etc. No authorization, approval, or
other action by, and no notice to or filing with, any governmental authority,
regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Collateral Agent of the voting or other
rights provided for in this Pledge Agreement, or, except with respect to
any Pledged Shares, as may be required in connection with a disposition of
such Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.6. Compliance with Laws. The Pledgor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect or materially
adversely affect the value of the Collateral or the worth of the Collateral as
collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The Pledgor will
not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Collateral Agent hereunder). The Pledgor will
warrant and defend the right and title herein granted unto the Collateral Agent
in and to the Collateral (and all right, title, and interest
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represented by the Collateral) against the claims and demands of all Persons
whomsoever. The Pledgor agrees that at any time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all Pledged Shares
(and all other shares of capital stock constituting Collateral) delivered by the
Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed
undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Collateral Agent. The Pledgor will, from time to time upon the
request of the Collateral Agent, promptly deliver to the Collateral Agent such
stock powers, instruments, and similar documents, satisfactory in form and
substance to the Collateral Agent, with respect to the Collateral as the
Collateral Agent may reasonably request and will, from time to time upon the
request of the Collateral Agent after the occurrence of any Event of Default,
promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the
Collateral Agent.
SECTION 4.3. Continuous Pledge. The Pledgor will, at all times, keep
pledged to the Collateral Agent pursuant hereto all Pledged Shares and all other
shares of capital stock constituting Collateral, all Dividends and Distributions
with respect thereto, all Pledged Notes, all interest, principal and other
proceeds received by the Collateral Agent with respect to the Pledged Notes, and
all other Collateral and other securities, instruments, proceeds, and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral and will not permit any Pledged Share Issuer to issue any capital
stock which shall not have been immediately duly pledged hereunder on a first
priority perfected basis.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing,
promptly upon receipt of notice thereof by the Pledgor and without any
request therefor by the Collateral Agent, to deliver (properly endorsed
where required hereby or requested by the Collateral Agent) to the
Collateral Agent all Dividends, Distributions, all interest, all principal,
all other cash payments, and all proceeds of the Collateral, all of which
shall be held by the Collateral
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Agent as additional Collateral for use in accordance with
Section 6.4; and
(b) after any Event of Default shall have occurred and be continuing
and the Collateral Agent has notified the Pledgor of the Collateral Agent's
intention to exercise its voting power under this Section 4.4(b)
(i) the Collateral Agent may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of ownership
with respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Collateral
Agent an irrevocable proxy, exercisable under such circumstances, to
vote the Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Collateral Agent such additional
proxies and other documents as may be necessary to allow the
Collateral Agent to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Collateral Agent, shall, until
delivery to the Collateral Agent, be held by the Pledgor separate and apart from
its other property in trust for the Collateral Agent. The Collateral Agent
agrees that unless an Event of Default shall have occurred and be continuing and
the Collateral Agent shall have given the notice referred to in Section 4.4(b),
the Pledgor shall have the exclusive voting power with respect to any shares of
capital stock (including any of the Pledged Shares) constituting Collateral and
the Collateral Agent shall, upon the written request of the Pledgor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Pledgor which are necessary to allow the Pledgor to exercise
voting power with respect to any such share of capital stock (including any of
the Pledged Shares) constituting Collateral; provided, however, that no vote
shall be cast, or consent, waiver, or ratification given, or action taken by the
Pledgor that would impair any Collateral or be inconsistent with or violate any
provision of the Credit Agreement or any other Loan Document (including this
Pledge Agreement).
SECTION 4.5. Additional Undertakings. The Pledgor will not, without the
prior written consent of the Collateral Agent:
(a) enter into any agreement amending, supplementing, or waiving any
provision of any Pledged Note (including any underlying instrument pursuant
to which such Pledged Note is
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issued) or compromising or releasing or extending the time for payment of
any obligation of the maker thereof; or
(b) take or omit to take any action the taking or the omission of
which would result in any impairment or alteration of any obligation of the
maker of any Pledged Note or other instrument constituting Collateral.
ARTICLE V
THE Collateral Agent
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Collateral Agent the Pledgor's attorney-in-fact,
with full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Pledge Agreement,
including after the occurrence and continuance of a Default of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 6.4.
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SECTION 5.3. Collateral Agent Has No Duty. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest (on behalf of the
Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or responsibility for
(a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Property, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or
(b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may, without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Pledgor agrees that,
to the extent notice of sale shall be
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required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(b) The Collateral Agent may
(i) transfer all or any part of the Collateral into the name of
the Collateral Agent or its nominee, with or without disclosing that
such Collateral is subject to the lien and security interest
hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Collateral Agent of any amount due or to become
due thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section 6.1,
the Pledgor agrees that, upon request of the Collateral Agent, the Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Collateral
contemplated to be sold and the directors and officers thereof to execute
and deliver, all such instruments and documents, and do or cause to be done
all
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such other acts and things, as may be necessary or, in the opinion of the
Collateral Agent, advisable to register such Collateral under the
provisions of the Securities Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement relating thereto
to become effective and to remain effective for such period as prospectuses
are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion of
the Collateral Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Collateral under the state
securities or "Blue Sky" laws and to obtain all necessary governmental
approvals for the sale of the Collateral, as requested by the Collateral
Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement that will satisfy the
provisions of Section 11(a) of the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Collateral or any part thereof valid and
binding and in compliance with applicable law.
The Pledgor further acknowledges the impossibility of ascertaining the amount of
damages that would be suffered by the Collateral Agent or the Secured Parties by
reason of the failure by the Pledgor to perform any of the covenants contained
in this Section and, consequently, agrees that, if the Pledgor shall fail to
perform any of such covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value (as determined by the Collateral Agent) of
the Collateral on the date the Collateral Agent shall demand compliance with
this Section.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Collateral Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and
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<PAGE>
not with a view to the distribution or resale of such Collateral), or in order
to obtain any required approval of the sale or of the purchaser by any
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the
Collateral Agent be liable nor accountable to the Pledgor for any discount
allowed by the reason of the fact that such Collateral is sold in compliance
with any such limitation or restriction.
SECTION 6.4. Application of Proceeds. All cash proceeds received by the
Collateral Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Collateral Agent shall be applied as set forth in Section 3.02(b)(iii) of
the Credit Agreement.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Collateral Agent from and against any and all claims, losses,
and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Collateral Agent's gross negligence or wilful
misconduct. Upon demand, the Pledgor will pay to the Collateral Agent the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Collateral
Agent may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Collateral
Agent hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed,
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administered and applied in accordance with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as the case
may be), and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Collateral Agent may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Collateral Agent may from time to time take any other action which the
Collateral Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
SECTION 7.5. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.5) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
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address as may be designated by such party in a written notice to the other
party to this Pledge Agreement.
SECTION 7.6. Certain Consents and Waivers of the Pledgor.
SECTION 7.6.1. Personal Jurisdiction. THE PLEDGOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS PLEDGE
AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE PLEDGOR IS A PARTY, WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE PLEDGOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE PLEDGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE PLEDGOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE PLEDGOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE PLEDGOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY LENDER
OR ANY ISSUING BANK. THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.
SECTION 7.6.2. Service of Process. THE PLEDGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE PLEDGOR'S NOTICE ADDRESS SPECIFIED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
PLEDGOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT
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MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE
AGENTS, THE LENDERS AND ISSUING BANKS TO BRING PROCEEDINGS AGAINST THE PLEDGOR
IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Counterparts. This Pledge Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.9. Conflicts. In the event of any conflict between the terms of
this Pledge Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX MEXICO II, INC.
By /s/ George L. Karpinski
----------------------------
Name: George L. Karpinski
Title: Vice President
Notice Address:
c/o Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attn.: Kenneth R. Fuette
Telecopier No.: 610-859-3085
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Subsidiary Pledge Agreement
CITICORP USA INC., as
Collateral Agent
By /s/ Timothy L. Freeman
----------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice Address:
Citicorp USA, INC.
399 Park Avenue
New York, New York 10043
Attn.: Timothy L. Freeman
Telecopier No. (212) 793-1290
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EXHIBIT A
to Subsidiary
Pledge Agreement
PROMISSORY NOTE
$______________________ ___________, 19__
FOR VALUE RECEIVED, the undersigned, [Name of Maker], a _______________
__________ (the "Maker"), promises to pay to the order of ___________________, a
__________ __________ (the "Payee"), in equal ________ installments, commencing
_________, 19__ to and including _______________, 19__ , the principal sum of
_____________ DOLLARS ($_________ ), representing the aggregate principal amount
of an intercompany loan made by the Payee to the Maker.
The unpaid principal amount of this promissory note (this "Note") from time
to time outstanding shall bear interest at a rate of interest equal to
____________, which the Maker represents to be a lawful and commercially
reasonable rate, payable __________, and all payments of principal of and
interest on this Note shall be payable in lawful currency of the United States
of America. All such payments shall be made by the Maker to an account
established by the Payee at _______________ and shall be recorded on the grid
attached hereto by the holder hereof (including the Collateral Agent as
pledgee). Upon notice from the Collateral Agent (hereinafter defined) that a
Default (as defined in the Credit Agreement, hereinafter defined) of the nature
referred to in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default (as defined in the Credit Agreement) has occurred and is continuing
under the Credit Agreement, the Maker shall make such payments, in same day
funds, to such other account as the Collateral Agent shall direct in such
notice.
This Note is one of the Pledged Notes referred to in, and evidences
Indebtedness incurred pursuant to Section 9.01 of the Credit Agreement, dated as
of June 12, 1997 (as amended, supplemented, amended and restated or modified
from time to time, the "Credit Agreement"), among Foamex L.P., a Delaware
limited partnership ("Foamex" or a "Borrower"), General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with Foamex, the
"Borrowers"), Trace Foam Company, Inc, a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks, the Lenders and
the Issuing Banks have extended Commitments to make Credit Extensions to the
Borrowers. Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, and notice thereof by the Collateral Agent to the Maker,
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the Collateral Agent shall have all rights of the Payee to collect and
accelerate, and enforce all rights with respect to, the Indebtedness evidenced
by this Note. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the Pledge
Agreement pursuant to which this Note has been pledged to the Collateral Agent
as security for the Secured Obligations outstanding from time to time under the
Credit Agreement and each other Loan Document.
In addition to, but not in limitation of, the foregoing, the Maker further
agrees to pay all expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder (including the Collateral Agent as pledgee) of
this Note endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
THE MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS NOTE.
THE MAKER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PAYEE TO ACCEPT THIS NOTE.
[NAME OF MAKER]
By
------------------------------
Name:
Title:
Pay to the order of CITICORP USA,
INC., as Collateral Agent
[NAME OF PAYEE]
By
------------------------------
Name:
Title:
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GRID
Intercompany Loans made by [Name of Payee] to [Name of Maker] and payments
of principal of such Loans.
================================================================================
Amount of Amount of Outstanding
Intercompany Principal Principal Notation
Date Loan Payment Balance Made By
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ATTACHMENT 1
to Subsidiary
Pledge Agreement
Item A. Pledged Notes
Pledged Note Issuer Description
- ------------------- -----------
Item B. Pledged Shares
Common Stock
------------
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
- -------------------- ------ ------ -------
[ ] [ ] [ ]
Item C. Additional Subsidiaries
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FOAMEX SECURITY AGREEMENT
This FOAMEX SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by FOAMEX L.P., a Delaware limited
partnership (the "Grantor" or a "Borrower"), in favor of CITICORP USA, INC., as
collateral agent (together with any successor(s) thereto in such capacity, the
"Collateral Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Grantor, General Felt Industries, Inc., a
Delaware corporation (a "Borrower"; and, if together with the Grantor, the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and general
partner of the Grantor, FMXI, Inc., a Delaware corporation and managing general
partner of the Grantor, the Lenders, the Issuing Banks and Citicorp USA, Inc.,
as Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks (together with
the Collateral Agent, the "Administrative Agents"), the Lenders and the Issuing
Banks have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the Borrowers pursuant to the Credit Agreement, the Grantor
agrees, for the benefit of each Secured Party, as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the preamble and the first
recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect to such hardware, software and
firmware described in the preceding clauses (a) through (c); and
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(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
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<PAGE>
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to an Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or agency of the United States of America or any State thereof or
any foreign country, including those referred to in Item A of Schedule III
attached hereto;
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<PAGE>
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
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ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating to
any such accounts, contracts, contract rights, chattel paper, documents,
instruments, and general intangibles (any and all such accounts, contracts,
contract rights, chattel paper, documents, instruments, and general
intangibles being the "Receivables", and any and all
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such security agreements, guaranties, leases and other contracts being the
"Related Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account, and in any lock boxes
or Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment in full in cash of all Obligations of the Grantor now or hereafter
existing under the Credit Agreement, the Notes, the Foamex Guaranty and each
other Loan Document to which the Grantor is or may become a party, whether for
principal, interest, costs, fees, expenses, or otherwise, and all obligations of
each other Obligor now or hereafter existing under each Loan Document to which
such Obligor is or may become a party (all such Obligations of the Grantor and
all such obligations of such other Obligor being the "Secured Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
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(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements to the same extent as if this Security Agreement had not been
executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
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(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
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(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Grantor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Security Agreement to any Secured Party
or any holder of a Note.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having a value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent relating to this Security Agreement or as have been filed in connection
with Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
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SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and
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all filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places therefor specified in
Section 3.1.1 or, upon 30 days' prior written notice to the Collateral
Agent, at such other places in a jurisdiction where all representations and
warranties set forth in Article III (including Section 3.1.6) shall be true
and correct, and all action required pursuant to the first sentence of
Section 4.1.7 shall have been taken with respect to the Equipment and
Inventory;
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(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express
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trust for the benefit of the Collateral Agent until delivery thereof is
made to the Collateral Agent. The Collateral Agent will not give the notice
referred to in the preceding sentence unless there shall have occurred and
be continuing a Default of the nature set forth in Section 11.01(f) or
11.01(g) of the Credit Agreement or an Event of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
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valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
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(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
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(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory
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in the ordinary course of business or as permitted by the Credit Agreement;
or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices (including any
assignment of claim form under or pursuant to the federal assignment of
claims statute, 31 U.S.C. ss. 3726, any successor or amended version
thereof or any regulation promulgated under or pursuant to any version
thereof), as may be necessary or desirable, or as the Collateral Agent may
request, in order to perfect and preserve the security interests and other
rights granted or purported to be granted to the Collateral Agent hereby;
and
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(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
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(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the
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U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting from
the Collateral Agent's gross negligence or wilful misconduct.
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(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or
(iv) the failure by the Grantor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Required Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if
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any provision of this Security Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8. Conflicts. In the event of any conflict between the terms of
this Security Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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Foamex Security Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
FOAMEX L.P.
By: FMXI, INC., the Managing
General Partner
By /s/ George L. Karpinski
---------------------------------------
Name: George L. Karpinski
Title: Vice President
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Foamex Security Agreement
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
---------------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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GFI SECURITY AGREEMENT
This GFI SECURITY AGREEMENT (as amended, supplemented, amended and restated
or otherwise modified from time to time, this "Security Agreement"), dated as of
June 12, 1997, is made by GENERAL FELT INDUSTRIES, INC., a Delaware corporation
(the "Grantor" or a "Borrower"), in favor of CITICORP USA, INC., as collateral
agent (together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among the Grantor, Foamex L.P., a Delaware limited
partnership (a "Foamex" or a "Borrower"; and, if together with the Grantor, the
"Borrowers"), Trace Foam Company, Inc., a Delaware corporation and general
partner of Foamex, FMXI, Inc., a Delaware corporation and managing general
partner of Foamex, the Lenders, the Issuing Banks and Citicorp USA, Inc., as
Collateral Agent for the Lenders and the Issuing Banks and The Bank of Nova
Scotia, as Funding Agent for the Lenders and the Issuing Banks (together with
the Collateral Agent, the "Administrative Agents"), the Lenders and the Issuing
Banks have extended Commitments to make Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the Borrowers pursuant to the Credit Agreement, the Grantor
agrees,
<PAGE>
for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agents" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the preamble and the first
recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect to such hardware, software and
firmware described in the
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preceding clauses (a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
(a) all letters patent and applications for letters patent throughout
the world, including all patent
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applications in preparation for filing anywhere in the world and including
each patent and patent application referred to in Item A of Schedule II
attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any
office or
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agency of the United States of America or any State thereof or any foreign
country, including those referred to in Item A of Schedule III attached
hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement. SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or
in the Credit Agreement or the context otherwise requires, terms for which
meanings are provided in the U.C.C. are
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used in this Security Agreement, including its preamble and recitals, with such
meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security agreements,
guaranties, leases and other contracts securing or otherwise relating to
any such accounts, contracts, contract rights, chattel paper, documents,
instruments, and
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general intangibles (any and all such accounts, contracts, contract rights,
chattel paper, documents, instruments, and general intangibles being the
"Receivables", and any and all such security agreements, guaranties, leases
and other contracts being the "Related Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, Cash Collateral Account and in any lock boxes or any
Lockbox Account of the Grantor, and, to the extent not otherwise included,
all payments under insurance (whether or not the Collateral Agent is the
loss payee thereof), or any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment in full in cash of all Obligations of the Grantor now or hereafter
existing under the Credit Agreement, the Notes, the GFI Guaranty and each other
Loan Document to which the Grantor is or may become a party, whether for
principal, interest, costs, fees, expenses, or otherwise, and all obligations of
each other Obligor now or hereafter existing under and each Loan Document to
which such Obligor is or may become a party (all such Obligations of the Grantor
and all such obligations of such other Obligor being the "Secured Obligations")
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SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements to the same extent as if this Security Agreement had not been
executed,
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(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any
Secured Obligations or otherwise,
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(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the foregoing, for so long as any
Secured Obligations, Letters of Credit or Commitments remain outstanding, the
Grantor shall refrain from taking any action or commencing any proceeding
against a Borrower or any other Obligor (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made
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under this Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having a value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent relating to this Security Agreement or as have been filed in connection
with Liens permitted pursuant to Section 9.03 of the Credit Agreement.
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SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the
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Senior Note Intercreditor Agreement, this Security Agreement creates a valid
first priority security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance
with the requirements of all applicable laws (including the provisions of the
Fair Labor Standards Act), rules, regulations and orders of every governmental
authority, the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the places therefor specified in
Section 3.1.1 or, upon 30 days' prior written notice to the Collateral
Agent, at such other places in a jurisdiction where all representations and
warranties set forth in Article III (including Section 3.1.6) shall be true
and correct, and all action required pursuant to the first sentence of
Section 4.1.7 shall have been taken with respect to the Equipment and
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Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and
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apart from all other property, all such proceeds in express trust for the
benefit of the Collateral Agent until delivery thereof is made to the
Collateral Agent. The Collateral Agent will not give the notice referred to
in the preceding sentence unless there shall have occurred and be
continuing a Default of the nature set forth in Section 11.01(f) or
11.01(g) of the Credit Agreement or an Event of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
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valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do
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any act whereby any of the Copyright Collateral or any of the Trade Secrets
Collateral may lapse or become invalid or unenforceable or placed in the
public domain except upon expiration of the end of an unrenewable term of a
registration thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith,
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execute and deliver to the Collateral Agent a Patent Security Agreement, a
Trademark Security Agreement and a Copyright Security Agreement in the
forms of Exhibit A, Exhibit B and Exhibit C hereto, respectively, and shall
execute and deliver to the Collateral Agent any other document required to
acknowledge or register or perfect the Collateral Agent's interest in any
part of the Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the
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Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices (including any
assignment of claim form under or pursuant to the federal assignment of
claims statute, 31 U.S.C. ss. 3726, any successor or amended version
thereof or any regulation promulgated under or pursuant to any version
thereof), as may be necessary or desirable, or as the Collateral Agent may
request, in order to perfect and preserve the security interests and other
rights granted or purported to be granted to the Collateral Agent hereby;
and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules
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further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Collateral Agent may reasonably
request, all in reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the
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power of attorney granted pursuant to this Section is irrevocable and coupled
with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral
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Agent and make it available to the Collateral Agent at a place to be
designated by the Collateral Agent which is reasonably convenient to
both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting from
the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
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(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
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SECTION 7.7. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.8 Conflicts. In the event of any conflict between the terms of
this Security Agreement and the applicable Intercreditor Agreement, the terms of
the applicable Intercreditor Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
GENERAL FELT INDUSTRIES, INC.
By /s/ George L. Karpinski
---------------------------------------
Name: George L. Karpinski
Title: Vice President
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GFI Security Agreement
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
---------------------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
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SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Fibers, Inc., a Delaware
corporation (the "Grantor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX FIBERS, INC.
By /s/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Latin America, Inc., a Delaware
corporation (the "Grantor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX LATIN AMERICA, INC.
By /S/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Mexico, Inc., a Delaware
corporation (the "Grantor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX MEXICO, INC.
By /s/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Mexico II, Inc., a Delaware
corporation (the "Grantor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
26
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX MEXICO II, INC.
By /s/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Asia, Inc., a Delaware corporation
(the "Grantor"), in favor of CITICORP USA, INC., as collateral agent (together
with any successor(s) thereto in such capacity, the "Collateral Agent") for each
of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX ASIA, INC.
By /s/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
SUBSIDIARY SECURITY AGREEMENT
This SUBSIDIARY SECURITY AGREEMENT (as amended, supplemented, amended and
restated or otherwise modified from time to time, this "Security Agreement"),
dated as of June 12, 1997, is made by Foamex Capital Corporation, a Delaware
corporation (the "Grantor"), in favor of CITICORP USA, INC., as collateral agent
(together with any successor(s) thereto in such capacity, the "Collateral
Agent") for each of the Secured Parties.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of June 12, 1997 (as
amended, supplemented, amended and restated or modified from time to time, the
"Credit Agreement"), among Foamex L.P., a Delaware limited partnership ("Foamex"
or a "Borrower"), General Felt Industries, Inc., a Delaware corporation (a
"Borrower"; and, if together with Foamex, the "Borrowers"), Trace Foam Company,
Inc., a Delaware corporation and general partner of Foamex, FMXI, Inc., a
Delaware corporation and managing general partner of Foamex, the Lenders, the
Issuing Banks and Citicorp USA, Inc., as Collateral Agent for the Lenders and
the Issuing Banks and The Bank of Nova Scotia, as Funding Agent for the Lenders
and the Issuing Banks (together with the Collateral Agent, the "Administrative
Agents"), the Lenders and the Issuing Banks have extended Commitments to make
Credit Extensions to the Borrowers;
WHEREAS, as a condition precedent to the making of the Credit Extensions
(including the initial Credit Extension) under the Credit Agreement, the Grantor
is required to execute and deliver this Security Agreement;
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Security Agreement; and
WHEREAS, some or all of the Collateral may be pledged to third parties and
reference is made to the applicable Intercreditor Agreement for the terms of the
rights of the Secured Parties, on the one hand, and the other parties thereto,
on the other hand;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
and the Issuer to make Credit Extensions (including the initial Credit
Extension) to the
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Borrowers pursuant to the Credit Agreement, the Grantor agrees, for the benefit
of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Security Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the first recital.
"Borrower" and "Borrowers" are defined in the first recital.
"Collateral" is defined in Section 2.1; provided, however, that Collateral
hereunder shall not include any securities (including partnership interests and
limited liability company interests), it being understood that other Loan
Documents may, subject to certain limitations set forth therein, provide a
pledge of such assets.
"Collateral Account" is defined in Section 4.1.2(b).
"Collateral Agent" is defined in the preamble.
"Computer Hardware and Software Collateral" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned, licensed or
leased or hereafter acquired by the Grantor, designed for use on the
computers and electronic data processing hardware described in clause (a)
above;
(c) all firmware associated therewith;
(d) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect
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to such hardware, software and firmware described in the preceding clauses
(a) through (c); and
(e) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions or model conversions of any of the foregoing.
"Copyright Collateral" means all copyrights (including all copyrights for
semi-conductor chip product mask works) of the Grantor, whether statutory or
common law, registered or unregistered, now or hereafter in force throughout the
world including all of the Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere else in
the world and also including the copyrights referred to in Item A of Schedule IV
attached hereto, and all applications for registration thereof, whether pending
or in preparation, all copyright licenses, including each copyright license
referred to in Item B of Schedule IV attached hereto, the right to sue for past,
present and future infringements of any thereof, all rights corresponding
thereto throughout the world, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.
"Credit Agreement" is defined in the first recital.
"Credit Extensions" means the Loans and the Letters of Credit.
"Equipment" is defined in clause (a) of Section 2.1.
"Foamex" is defined in the first recital.
"Grantor" is defined in the preamble.
"Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"Inventory" is defined in clause (b) of Section 2.1
"Lender" and "Lenders" are defined in the first recital.
"Patent Collateral" means:
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(a) all letters patent and applications for letters patent throughout
the world, including all patent applications in preparation for filing
anywhere in the world and including each patent and patent application
referred to in Item A of Schedule II attached hereto;
(b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in
clause (a);
(c) all patent licenses, including each patent license referred to in
Item B of Schedule II attached hereto; and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right
to sue third parties for past, present or future infringements of any
patent or patent application, including any patent or patent application
referred to in Item A of Schedule II attached hereto, and for breach or
enforcement of any patent license, including any patent license referred to
in Item B of Schedule II attached hereto, and all rights corresponding
thereto throughout the world.
"Receivables" is defined in clause (c) of Section 2.1.
"Related Contracts" is defined in clause (c) of Section 2.1.
"Secured Obligations" is defined in Section 2.2.
"Secured Parties" means, collectively, the Lenders, the Issuing Banks, the
Administrative Agents, the Collateral Agent and the Funding Agent, and any
Lender in its capacity as a counterparty to a Hedging Obligation.
"Security Agreement" is defined in the preamble.
"Trademark Collateral" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have appeared
or appear, designs and general intangibles of a like nature (all of the
foregoing items in this clause (a) being collectively called a
"Trademark"), now existing anywhere in the world or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including
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registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America
or any State thereof or any foreign country, including those referred to in
Item A of Schedule III attached hereto;
(b) all Trademark licenses, including each Trademark license referred
to in Item B of Schedule III attached hereto;
(c) all reissues, extensions or renewals of any of the items described
in clauses (a) and (b);
(d) all of the goodwill of the business connected with the use of, and
symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark registration
or Trademark license, including any Trademark, Trademark registration or
Trademark license referred to in Item A and Item B of Schedule III attached
hereto, or for any injury to the goodwill associated with the use of any
such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means all common law and statutory trade secrets
and all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
the Grantor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form, including all documents and things embodying, incorporating or referring
in any way to such Trade Secret, all Trade Secret licenses, including each Trade
Secret license referred to in Schedule V attached hereto, and including the
right to sue for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"U.C.C." means the Uniform Commercial Code, as in effect from time to time
in the State of New York.
SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
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SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or in the
Credit Agreement or the context otherwise requires, terms for which meanings are
provided in the U.C.C. are used in this Security Agreement, including its
preamble and recitals, with such meanings.
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Grant of Security. The Grantor hereby assigns and pledges to
the Collateral Agent for its benefit and the ratable benefit of each of the
Secured Parties, and hereby grants to the Collateral Agent for its benefit and
the ratable benefit of each of the Secured Parties, a security interest in all
of the following, whether now or hereafter existing or acquired by the Grantor
(the "Collateral"):
(a) all equipment in all of its forms of the Grantor, wherever
located, including all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and
therefor and all accessories related thereto (any and all of the foregoing
being the "Equipment");
(b) all inventory in all of its forms of the Grantor, wherever
located, including
(i) all raw materials and work in process therefor, finished
goods thereof, and materials used or consumed in the manufacture or
production thereof,
(ii) all goods in which the Grantor has an interest in mass or a
joint or other interest or right of any kind (including goods in which
the Grantor has an interest or right as consignee), and
(iii) all goods which are returned to or repossessed by the
Grantor,
and all accessions thereto, products thereof and documents therefor (any
and all such inventory, materials, goods, accessions, products and
documents being the "Inventory");
(c) all accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (including tax refunds) of
the Grantor, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services, and all rights of the
Grantor now or hereafter existing in and to all security
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agreements, guaranties, leases and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
documents, instruments, and general intangibles (any and all such accounts,
contracts, contract rights, chattel paper, documents, instruments, and
general intangibles being the "Receivables", and any and all such security
agreements, guaranties, leases and other contracts being the "Related
Contracts");
(d) all Intellectual Property Collateral of the Grantor;
(e) all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this
Section 2.1;
(f) all of the Grantor's other property and rights of every kind and
description and interests therein; and
(g) all products, offspring, rents, issues, profits, returns, income
and proceeds of and from any and all of the foregoing Collateral (including
proceeds which constitute property of the types described in clauses (a),
(b), (c), (d), (e) and (f), proceeds deposited from time to time in the
Concentration Account, the Cash Collateral Account and in any lock boxes or
any Lockbox Account of the Grantor, and, to the extent not otherwise
included, all payments under insurance (whether or not the Collateral Agent
is the loss payee thereof), or any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral).
Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained. The
Grantor agrees to use its best efforts to obtain any such required consent.
SECTION 2.2. Security for Obligations. This Security Agreement secures the
payment of all Obligations of each Borrower now or hereafter existing under the
Credit Agreement, the Notes and each other Loan Document to which such Borrower
is or may become a party, whether for principal, interest, costs, fees, expenses
or otherwise, and all obligations of the Grantor and each other Obligor now or
hereafter existing under each Loan Document to which the Grantor or such other
Obligor is or may become a party (all such Obligations of such Borrower and all
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such obligations of the Grantor and such other Obligor being the "Secured
Obligations").
SECTION 2.3. Continuing Security Interest; Transfer of Notes. This Security
Agreement shall create a continuing security interest in the Collateral and
shall
(a) remain in full force and effect until payment in full in cash of
all Secured Obligations, the termination or expiration of all Letters of
Credit and the termination of all Commitments,
(b) be binding upon the Grantor, its successors, transferees and
assigns, and
(c) inure, together with the rights and remedies of the Collateral
Agent hereunder, to the benefit of the Collateral Agent and each other
Secured Party.
Without limiting the generality of the foregoing clause (c), any Lender may
assign or otherwise transfer (in whole or in part) any Note or Credit Extension
held by it to any other Person or entity, and such other Person or entity shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Lender under any Loan Document (including this Security
Agreement) or otherwise, subject, however, to any contrary provisions in such
assignment or transfer, and to the provisions of Article XIII of the Credit
Agreement. Upon the payment in full in cash of all Secured Obligations, the
termination or expiration of all Letters of Credit and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Collateral Agent will, at the Grantor's sole expense, execute and deliver to the
Grantor such documents as the Grantor shall reasonably request to evidence such
termination. Upon any sale or other transfer of Collateral permitted by the
terms of the Credit Agreement, the security interest created hereunder in such
Collateral (but not in the proceeds thereof) shall be deemed to be automatically
released and the Collateral Agent will, at the Grantor's sole expense, execute
and deliver to the Grantor such documents as the Grantor shall reasonably
request to evidence such release.
SECTION 2.4. Grantor Remains Liable. Anything herein to the contrary
notwithstanding
(a) the Grantor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein, and shall
perform all of its duties and obligations under such contracts and
agreements
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to the same extent as if this Security Agreement had not been executed,
(b) the exercise by the Collateral Agent of any of its rights
hereunder shall not release the Grantor from any of its duties or
obligations under any such contracts or agreements included in the
Collateral, and
(c) neither the Collateral Agent nor any other Secured Party shall
have any obligation or liability under any such contracts or agreements
included in the Collateral by reason of this Security Agreement, nor shall
the Collateral Agent or any other Secured Party be obligated to perform any
of the obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
SECTION 2.5. Security Interest Absolute. All rights of the Collateral Agent
and the security interests granted to the Collateral Agent hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional with
respect to the Secured Obligations, irrespective of
(a) any lack of validity or enforceability of the Credit Agreement,
any Note or any other Loan Document,
(b) the failure of any Secured Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against the Grantor, any other Obligor or any other Person
under the provisions of the Credit Agreement, any Note, any other Loan
Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations or any other
extension, compromise or renewal of any Secured Obligation,
(d) any reduction, limitation, impairment or termination of any
Secured Obligations for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to (and the
Pledgor hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination
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whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, any Secured Obligations or otherwise,
(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note or any other Loan Document,
(f) any addition, exchange, release, surrender or non-perfection of
any collateral (including the Collateral), or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for
any of the Secured Obligations, or
(g) any other circumstances which might otherwise constitute a defense
available to, or a legal or equitable discharge of, the Grantor, any other
Obligor, any surety or any guarantor.
SECTION 2.6. Postponement of Subrogation, etc. The Grantor will not
exercise any rights which it may acquire by reason of any payment made
hereunder, whether by way of subrogation, reimbursement or otherwise, until the
prior payment, in full and in cash, of all Secured Obligations, the termination
or expiration of all Letters of Credit, and the termination of all Commitments.
Any amount paid to the Grantor on account of any payment made hereunder prior to
the payment in full of all Secured Obligations shall be held in trust for the
benefit of the Secured Parties and each holder of a Note and shall immediately
be paid to the Secured Parties and each holder of a Note and credited and
applied against the Secured Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if
(a) the Grantor has made payment to the Secured Parties and each
holder of a Note of all or any part of the Secured Obligations, and
(b) all Secured Obligations have been paid in full, all Letters of
Credit have been terminated or expired and all Commitments have been
permanently terminated,
each Secured Party and each holder of a Note agrees that, at the Grantor's
request, the Secured Parties and the holders of the Notes will execute and
deliver to the Grantor appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the Grantor of an interest in the Secured Obligations resulting from such
payment by the Grantor. In furtherance of the
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foregoing, for so long as any Secured Obligations, Letters of Credit or
Commitments remain outstanding, the Grantor shall refrain from taking any action
or commencing any proceeding against a Borrower or any other Obligor (or its
successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Security Agreement to any Secured Party or any holder of a Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. The Grantor represents and
warrants to each Secured Party as set forth in this Section.
SECTION 3.1.1. Location of Collateral, etc. All of the Equipment, Inventory
and lock boxes of the Grantor are located at the places specified in Item A,
Item B and Item C, respectively, of Schedule I hereto. None of the Equipment and
Inventory has, within the four months preceding the date of this Security
Agreement, been located at any place other than the places specified in Item A
and Item B, respectively, of Schedule I hereto except as set forth in a footnote
thereto. The place(s) of business and chief executive office of the Grantor and
the office(s) where the Grantor keeps its records concerning the Receivables,
and all originals of all chattel paper which evidence Receivables, are located
at the address set forth in Item D of Schedule I hereto. The Grantor has no
trade names other than those set forth in Item E of Schedule I hereto. During
the four months preceding the date hereof, the Grantor has not been known by any
legal name different from the one set forth on the signature page hereto, nor
has the Grantor been the subject of any merger or other corporate
reorganization, except as set forth in Item F of Schedule I hereto. All
Receivables having a value of at least $500,000 evidenced by a promissory note
or other instrument, negotiable document or chattel paper have been duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Collateral Agent and delivered and
pledged to the Collateral Agent pursuant to Section 4.1.7. As of the Effective
Date, the Grantor is not a party to any Federal, state or local government
contract having value in excess of $500,000 except as set forth in Item G of
Schedule I hereto.
SECTION 3.1.2. Ownership, No Liens, etc. The Grantor owns its Collateral
free and clear of any Lien, security interest, charge or encumbrance except for
the security interest created by this Security Agreement and except as permitted
by the Credit
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Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except such as may have been filed in favor of the Collateral Agent
relating to this Security Agreement or as have been filed in connection with
Liens permitted pursuant to Section 9.03 of the Credit Agreement.
SECTION 3.1.3. Possession and Control. The Grantor has exclusive possession
and control of its Equipment and Inventory.
SECTION 3.1.4. Negotiable Documents, Instruments and Chattel Paper. The
Grantor has, contemporaneously herewith, delivered to the Collateral Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by the Grantor (duly endorsed in blank, if
requested by the Collateral Agent) having a value of at least $500,000.
SECTION 3.1.5. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral the loss, impairment or infringement of which
might have a Material Adverse Effect:
(a) such Intellectual Property Collateral is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and enforceable;
(c) the Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property Collateral, including
recordations of all of its interests in the Patent Collateral and Trademark
Collateral in the United States Patent and Trademark Office and in
corresponding offices throughout the world and its claims to the Copyright
Collateral in the United States Copyright Office and in corresponding
offices throughout the world;
(d) the Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral
and no claim has been made that the use of such Intellectual Property
Collateral does or may violate the asserted rights of any third party; and
(e) the Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every item of Intellectual Property Collateral in full
force and effect throughout the world, as applicable.
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The Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, mask works, licenses,
technology, know-how, processes and rights with respect to any of the foregoing
used in, necessary for or of importance to the conduct of the Grantor's
business.
SECTION 3.1.6. Validity, etc. Subject to the terms of the Senior Note
Intercreditor Agreement, this Security Agreement creates a valid first priority
security interest in the Collateral, securing the payment of the Secured
Obligations, and all filings and other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
SECTION 3.1.7. Authorization, Approval, etc. Except as have been obtained
or made and are in full force and effect, no authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either
(a) for the grant by the Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Security
Agreement by the Grantor, or
(b) for the perfection of or the exercise by the Collateral Agent of
its rights and remedies hereunder.
SECTION 3.1.8. Compliance with Laws. The Grantor is in compliance with the
requirements of all applicable laws (including the provisions of the Fair Labor
Standards Act), rules, regulations and orders of every governmental authority,
the non-compliance with which might have a Material Adverse Effect.
ARTICLE IV
COVENANTS
SECTION 4.1. Certain Covenants. The Grantor covenants and agrees that, so
long as any portion of the Secured Obligations shall remain unpaid, any Letters
of Credit shall be outstanding or any Lender shall have any outstanding
Commitment, the Grantor will, unless the Requisite Lenders shall otherwise
consent in writing, perform, comply with and be bound by the obligations set
forth in this Section.
SECTION 4.1.1. As to Equipment and Inventory. The Grantor hereby agrees
that it shall
(a) keep all the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) at the
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places therefor specified in Section 3.1.1 or, upon 30 days' prior written
notice to the Collateral Agent, at such other places in a jurisdiction
where all representations and warranties set forth in Article III
(including Section 3.1.6) shall be true and correct, and all action
required pursuant to the first sentence of Section 4.1.7 shall have been
taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual; and forthwith,
or in the case of any loss or damage to any of the Equipment, as quickly as
practicable after the occurrence thereof, make or cause to be made all
repairs, replacements, and other improvements in connection therewith which
are necessary or desirable to such end; and promptly furnish to the
Collateral Agent a statement respecting any loss or damage to any of the
Equipment; and
(c) pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP have been set aside.
SECTION 4.1.2. As to Receivables.
(a) The Grantor shall keep its place(s) of business and chief
executive office and the office(s) where it keeps its records concerning
the Receivables, and all originals of all chattel paper which evidenced
Receivables, located at the address(es) set forth in Item D of Schedule I
hereto, or, upon 30 days' prior written notice to the Collateral Agent, at
such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.1.7 shall have been taken with respect to the
Receivables; not change its name except upon 30 days' prior written notice
to the Collateral Agent; hold and preserve such records and chattel paper;
and permit representatives of the Collateral Agent at any time during
normal business hours to inspect and make abstracts from such records and
chattel paper. In addition, the Grantor shall give the Collateral Agent a
supplement to Schedule I hereto on each date a Compliance Certificate is
required to be delivered to the Collateral Agent under the Credit
Agreement, which shall set forth any changes to the information set forth
in Section 3.1.1.
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(b) Upon written notice by the Collateral Agent to the Grantor
pursuant to this Section 4.1.2(b), all proceeds of Collateral received by
the Grantor shall be delivered in kind to the Collateral Agent for deposit
to a deposit account (the "Collateral Account") of the Grantor maintained
with the Collateral Agent, and the Grantor shall not commingle any such
proceeds, and shall hold separate and apart from all other property, all
such proceeds in express trust for the benefit of the Collateral Agent
until delivery thereof is made to the Collateral Agent. The Collateral
Agent will not give the notice referred to in the preceding sentence unless
there shall have occurred and be continuing a Default of the nature set
forth in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event
of Default.
(c) Subject to the terms of the Senior Note Intercreditor Agreement,
the Collateral Agent shall have the right to apply any amount in the
Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured
Obligations at any time that an Event of Default shall exist.
SECTION 4.1.3. As to Collateral.
(a) The Collateral Agent, however, may, at any time following a
Default of the nature set forth in Section 11.01(f) or 11.01(g) of the
Credit Agreement or an Event of Default, notify any parties obligated on
any of the Collateral to make payments to the Collateral Agent of any
amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release, or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) any indebtedness
thereunder or evidenced thereby. Upon request of the Collateral Agent
following a Default of the nature set forth in Section 11.01(f) or 11.01(g)
of the Credit Agreement or an Event of Default, the Grantor will, at its
own expense, notify any parties obligated on any of the Collateral to make
payment to the Collateral Agent of any amounts due or to become due
thereunder.
(b) The Collateral Agent is authorized to endorse, in the name of the
Grantor, any item, howsoever received by the Collateral Agent, representing
any payment on or other proceeds of any of the Collateral.
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SECTION 4.1.4. As to Intellectual Property Collateral. The Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of the Grantor that:
(a) the Grantor shall not, unless the Grantor shall either (i)
reasonably and in good faith determine (and notice of such determination
shall have been delivered to the Collateral Agent) that any of the Patent
Collateral is of negligible economic value to the Grantor, or (ii) have a
valid business purpose to do otherwise, do any act, or omit to do any act,
whereby any of the Patent Collateral may lapse or become abandoned or
dedicated to the public or unenforceable.
(b) the Grantor shall not, and the Grantor shall not permit any of its
licensees to, unless the Grantor shall either (i) reasonably and in good
faith determine (and notice of such determination shall have been delivered
to the Collateral Agent) that any of the Trademark Collateral is of
negligible economic value to the Grantor, or (ii) have a valid business
purpose to do otherwise,
(i) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full force free
from any claim of abandonment for non-use,
(ii) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral,
(iii) fail to employ all of the Trademark Collateral registered
with any Federal or state or foreign authority with an appropriate
notice of such registration,
(iv) adopt or use any other Trademark which is confusingly
similar or a colorable imitation of any of the Trademark Collateral,
(v) use any of the Trademark Collateral registered with any
Federal or state or foreign authority except for the uses for which
registration or application for registration of all of the Trademark
Collateral has been made, and
(vi) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
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(c) the Grantor shall not, unless the Grantor shall either
(i) reasonably and in good faith determine (and notice of such
determination shall have been delivered to the Collateral Agent) that
any of the Copyright Collateral or any of the Trade Secrets Collateral
is of negligible economic value to the Grantor, or
(ii) have a valid business purpose to do otherwise, do or permit
any act or knowingly omit to do any act whereby any of the Copyright
Collateral or any of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration
thereof.
(d) the Grantor shall notify the Collateral Agent immediately if it
knows, or has reason to know, that any application or registration relating
to any material item of the Intellectual Property Collateral may become
abandoned or dedicated to the public or placed in the public domain or
invalid or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or development in,
any proceeding in the United States Patent and Trademark Office, the United
States Copyright Office or any foreign counterpart thereof or any court)
regarding the Grantor's ownership of any of the Intellectual Property
Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) in no event shall the Grantor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, unless
it promptly informs the Collateral Agent, and upon request of the
Collateral Agent, executes and delivers any and all agreements,
instruments, documents and papers as the Collateral Agent may reasonably
request to evidence the Collateral Agent's security interest in such
Intellectual Property Collateral and the goodwill and general intangibles
of the Grantor relating thereto or represented thereby.
(f) the Grantor shall take all necessary steps, including in any
proceeding before the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue any
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application (and to obtain the relevant registration) filed with respect
to, and to maintain any registration of, the Intellectual Property
Collateral, including the filing of applications for renewal, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings and the payment of fees and taxes (except to the
extent that dedication, abandonment or invalidation is permitted under the
foregoing clauses (a), (b) and (c)).
(g) the Grantor shall, contemporaneously herewith, execute and deliver
to the Collateral Agent a Patent Security Agreement, a Trademark Security
Agreement and a Copyright Security Agreement in the forms of Exhibit A,
Exhibit B and Exhibit C hereto, respectively, and shall execute and deliver
to the Collateral Agent any other document required to acknowledge or
register or perfect the Collateral Agent's interest in any part of the
Intellectual Property Collateral.
SECTION 4.1.5. Insurance. The Grantor will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
business and properties (including the Equipment and Inventory) against such
casualties and contingencies and of such types and in such amounts as is
required pursuant to the Credit Agreement and will, upon the request of the
Collateral Agent, furnish a certificate of a reputable insurance broker setting
forth the nature and extent of all insurance maintained by the Grantor in
accordance with this Section. Without limiting the foregoing, the Grantor
further agrees as follows:
(a) Each policy for property insurance shall show the Collateral Agent
as loss payee.
(b) Each policy for liability insurance shall show the Collateral
Agent as an additional insured.
(c) With respect to each life insurance policy, the Grantor shall
execute and deliver to the Collateral Agent a collateral assignment, notice
of which has been acknowledged in writing by the insurer.
(d) Each insurance policy shall provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the Collateral
Agent by the insured.
(e) The Grantor shall, if so requested by the Collateral Agent,
deliver to the Collateral Agent a copy of each insurance policy.
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(f) All payments in respect of property insurance and life insurance
shall be deposited to the Collateral Account and if there shall be no
Collateral Account shall be paid to the Grantor.
SECTION 4.1.6. Transfers and Other Liens. The Grantor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except Inventory in the ordinary course
of business or as permitted by the Credit Agreement; or
(b) create or suffer to exist any Lien or other charge or encumbrance
upon or with respect to any of the Collateral to secure Indebtedness of any
Person or entity, except for the security interest created by this Security
Agreement and except as permitted by the Credit Agreement.
SECTION 4.1.7. Further Assurances, etc. The Grantor agrees that, from time
to time at its own expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Collateral Agent may request, in order to perfect,
preserve and protect any security interest granted or purported to be granted
hereby or to enable the Collateral Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Grantor will
(a) at the request of the Collateral Agent, mark conspicuously each
document included in the Inventory, each chattel paper included in the
Receivables and each Related Contract and, at the request of the Collateral
Agent, each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Collateral Agent, indicating that
such document, chattel paper, Related Contract or Collateral is subject to
the security interest granted hereby;
(b) if any Receivable having a value of at least $500,000 shall be
evidenced by a promissory note or other instrument, negotiable document or
chattel paper, deliver and pledge to the Collateral Agent hereunder such
promissory note, instrument, negotiable document or chattel paper duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Collateral Agent;
(c) execute and file such financing or continuation statements, or
amendments thereto, and such other
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instruments or notices (including any assignment of claim form under or
pursuant to the federal assignment of claims statute, 31 U.S.C. ss. 3726,
any successor or amended version thereof or any regulation promulgated
under or pursuant to any version thereof), as may be necessary or
desirable, or as the Collateral Agent may request, in order to perfect and
preserve the security interests and other rights granted or purported to be
granted to the Collateral Agent hereby; and
(d) furnish to the Collateral Agent, from time to time at the
Collateral Agent's request, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security interest hereunder,
the Grantor hereby authorizes the Collateral Agent to file one or more financing
or continuation statements, and amendments thereto, relative to all or any part
of the Collateral without the signature of the Grantor where permitted by law. A
carbon, photographic or other reproduction of this Security Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
ARTICLE V
THE COLLATERAL AGENT
SECTION 5.1. Collateral Agent Appointed Attorney-in-Fact. The Grantor
hereby irrevocably appoints the Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor or otherwise, from time to time in the Collateral Agent's discretion,
following the occurrence and continuation of a Default of the nature set forth
in Section 11.01(f) or 11.01(g) of the Credit Agreement or an Event of Default,
to take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including:
(a) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above;
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(c) to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Collateral Agent with respect to any of the Collateral; and
(d) to perform the affirmative obligations of the Grantor hereunder
(including all obligations of the Grantor pursuant to Section 4.1.7).
The Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Collateral Agent May Perform. If the Grantor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 6.2.
SECTION 5.3. Collateral Agent Has No Duty. In addition to, and not in
limitation of, Section 2.4, the powers conferred on the Collateral Agent
hereunder are solely to protect its interest (on behalf of the Secured Parties)
in the Collateral and shall not impose any duty on it to exercise any such
powers. Except for reasonable care of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Collateral Agent
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.
SECTION 5.4. Reasonable Care. The Collateral Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Collateral Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Grantor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Collateral Agent to
comply with any such request at any time shall not in itself be deemed a failure
to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred
and be continuing:
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(a) The Collateral Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the U.C.C. (whether or not the U.C.C. applies to the affected
Collateral) and also may
(i) require the Grantor to, and the Grantor hereby agrees that it
will, at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the
Collateral Agent and make it available to the Collateral Agent at a
place to be designated by the Collateral Agent which is reasonably
convenient to both parties, and
(ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' prior notice to the Grantor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Collateral Agent shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Subject to the terms of the Senior Note Intercreditor Agreement,
all cash proceeds received by the Collateral Agent in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral shall, subject to the terms of any applicable Intercreditor
Agreement, be applied (after payment of any amounts payable to the
Collateral Agent pursuant to Section 6.2) pursuant to Section 3.02(b)(iii)
of the Credit Agreement.
SECTION 6.2. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities arising out of or
resulting from this Security Agreement (including enforcement of this
Security Agreement), except claims, losses or liabilities resulting
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from the Collateral Agent's gross negligence or wilful misconduct.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all reasonable expenses, including the reasonable fees
and disbursements of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with
(i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
and
(iii) the exercise or enforcement of any of the rights of the
Collateral Agent or the Secured Parties hereunder, or (iv) the failure
by the Grantor to perform or observe any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Security Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2. Amendments; etc. No amendment to or waiver of any provision of
this Security Agreement nor consent to any departure by the Grantor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Collateral Agent (on behalf of the Lenders or the Requisite Lenders, as
the case may be), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.3. Addresses for Notices. All notices and other communications
provided for hereunder shall be made in accordance with Section 13.08 of the
Credit Agreement.
SECTION 7.4. Section Captions. Section captions used in this Security
Agreement are for convenience of reference only, and shall not affect the
construction of this Security Agreement.
SECTION 7.5. Severability. Wherever possible each provision of this
Security Agreement shall be interpreted in such
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manner as to be effective and valid under applicable law, but if any provision
of this Security Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement.
SECTION 7.6. Counterparts. This Security Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed an
original and all of which shall constitute together but one and the same
agreement.
SECTION 7.7. Notices. Unless otherwise specifically pro vided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. Notices to the Collateral Agent shall
not be effective until received by the Collateral Agent. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof is
delivered as provided in this Section 7.7) shall be as set forth below each
party's name on the signature pages hereof, or, as to each party, at such other
address as may be designated by such party in a written notice to the other
party to this Security Agreement.
SECTION 7.8. Certain Consents and Waivers of the Grantor.
SECTION 7.8.1. Personal Jurisdiction. THE GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK,
NEW YORK, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN
SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED
TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH THIS
SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT TO WHICH THE GRANTOR IS A PARTY,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. THE GRANTOR IRREVOCABLY DESIGNATES AND APPOINTS CORPORATION
SERVICE COMPANY, 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023, AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
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ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE GRANTOR WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
THE GRANTOR AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENTS, THE LENDERS AND THE ISSUING BANKS TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE ADMINISTRATIVE AGENTS, ANY
LENDER OR ANY ISSUING BANK. THE GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE COLLATERAL AGENT MAY COMMENCE A
PROCEEDING DESCRIBED IN THIS SECTION.
SECTION 7.8.2. Service of Process. THE GRANTOR IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE GRANTOR'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
GRANTOR IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF THE ADMINISTRATIVE AGENTS, THE LENDERS AND ISSUING BANKS TO BRING
PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 7.9. Governing Law, Entire Agreement, etc. THIS SECURITY AGREEMENT
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ANY
PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.10. Conflicts. In the event of any conflict between the terms of
this Subsidiary Security Agreement and the
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applicable Intercreditor Agreement, the terms of the applicable Intercreditor
Agreement shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
FOAMEX CAPITAL CORPORATION
By /s/ George L. Karpinski
--------------------------
Name: George L. Karpinski
Title: Vice President
Notice address:
CITICORP USA, INC., as
Collateral Agent
By /s/ Timothy L. Freeman
--------------------------
Name: Timothy L. Freeman
Title: Attorney-in-Fact
Notice address:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attn: Timothy L. Freeman
Telecopier No.:(212)793-1290
27
PROMISSORY NOTE
$5,000,000.00 New York, New York
June 12, 1997
FOR VALUE RECEIVED, THE UNDERSIGNED TRACE INTERNATIONAL HOLDINGS, INC.,
a Delaware corporation ("Maker"), HEREBY PROMISES TO PAY to the order of FOAMEX
L.P., a Delaware limited partnership ("Payee"), on demand, or if no demand is
made, then on July 7, 2001, the principal amount of FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00), or, if less, the outstanding principal amount hereof
that has been advanced to, or for the account of, Maker by Payee together, in
each case, with all accrued and outstanding interest in respect of such
principal amount.
Maker promises to pay interest on the unpaid principal amount
outstanding hereunder from the date hereof until such principal amount is paid
in full at an interest rate equal at all times to the sum of 2-3/8% plus
Three-Month LIBOR per annum. Interest on the outstanding principal amount shall
be payable quarterly in arrears on the first date of each calendar quarter, for
the immediately preceding calendar quarter, commencing October 1, 1997.
Both principal and interest are payable in lawful money of the United
States of America in same day or immediately available funds to the account of
Payee at 1000 Columbia Avenue, Linwood, Pennsylvania 19061, or at such other
place or places as the Holder may, from time to time, designate in writing. All
computations of interest under this Note shall be made on the basis of a year of
360 days for the actual number of days (including the first but excluding the
last day) occurring in the period for which such interest is payable. Whenever
any payment to be made hereunder shall be stated to be due on a day that is not
a Business Day, such payment shall be due instead on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of such payment of interest and not in the computation of the
succeeding payment of interest.
Payee or any Holder shall have the right to assign its rights hereunder
or any interest herein without the prior written consent of Maker.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
All the covenants, stipulations, promises and agreements made by or
contained in this Note on behalf of the undersigned shall bind its successors,
whether so expressed or not.
No failure on the part of Payee to exercise, and no delay in
exercising, any right under this Note shall operate as a waiver thereof, nor
shall any single or partial exercise of any such
<PAGE>
right preclude any other or further exercise thereof or the exercise of any
other right.
DEFINED TERMS
As used in this Note, the following terms have the following meanings
(which meanings are equally applicable to both the singular and plural forms of
the terms defined):
"Business Day" shall mean a day that is not a Saturday, Sunday or a day
on which banking institutions are not required to be open in the State of New
York.
"Holder" means Payee or any subsequent holder of this Note.
"Three-Month LIBOR" shall mean an interest rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of one-sixteenth of one
percent (0.0625%) per annum) determined for each calendar quarter two Business
Days prior to the commencement of such calendar quarter (or if such date is not
a business day in London as of the preceding business day in London) equal to
the composite London interbank offered rate for Dollar deposits of comparable
size for a maturity period of three (3) months, as published by The Bank of Nova
Scotia or, if not so published, as otherwise determined in good faith by Payee.
[Remainder of page intentionally left blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note as
of the date first set forth above.
TRACE INTERNATIONAL HOLDINGS, INC.
/s/ Karl H. Winters
----------------------------------
By: Karl H. Winters
Title: Vice President
-3-
PROMISSORY NOTE
$4,794,828 New York, New York
June 12, 1997
FOR VALUE RECEIVED, THE UNDERSIGNED TRACE INTERNATIONAL HOLDINGS, INC., a
Delaware corporation formerly known as '21' International Holdings, Inc.
("Maker"), HEREBY PROMISES TO PAY to the order of FOAMEX L.P., a Delaware
limited partnership ("Payee"), on demand, or if no demand is made, then on July
7, 2001, the principal amount of FOUR MILLION SEVEN HUNDRED NINETY FOUR THOUSAND
EIGHT HUNDRED TWENTY EIGHT AND NO/100 DOLLARS ($4,794,828), or, if less, the
outstanding principal amount hereof that has been advanced to, or for the
account of, Maker by Payee together, in each case, with all accrued and
outstanding interest in respect of such principal amount. This Note amends,
restates, and renews the Promissory Note dated June 27, 1994 from Maker to Payee
in the principal amount of Three Million Dollars ($3,000,000) as amended by the
Promissory Note dated July 7, 1995 from Maker to Payee in the principal amount
of Four Million Three Hundred Seventy Two Thousand Five Hundred and Sixteen
Dollars ($4,372,516) and as further amended by the Promissory Note dated July 7,
1996 from Maker to Payee in the principal amount of Four Million Three Hundred
Seventy Two Thousand Five Hundred and Sixteen Dollars ($4,372,516)
(collectively, the "Prior Note") and has been executed and delivered by Maker
and accepted by Payee in substitution for the Prior Note and certain other
obligations of Maker to Payee, but not in payment, satisfaction of cancellation
of the indebtedness outstanding thereunder.
Maker promises to pay interest on the unpaid principal amount outstanding
hereunder from June 12, 1997 until such principal amount is paid in full at an
interest rate equal at all times to the sum of 2-3/8% plus Three-Month LIBOR per
annum. Interest on the outstanding principal amount shall be payable quarterly
in arrears on the first date of each calendar quarter, for the immediately
preceding calendar quarter, commencing July 1, 1997; provided, however, that
interest payable on July 1, 1997 shall be for the period commencing on the date
of this Note and shall include interest on the Prior Note from the most recent
interest payment date to, but not including, the date hereof.
Both principal and interest are payable in lawful money of the United
States of America in same day or immediately available funds to the account of
Payee at 1000 Columbia Avenue, Linwood, Pennsylvania 19061, or at such other
place or places as the Holder may, from time to time, designate in writing. All
computations of interest under this Note shall be made on the basis of a year of
360 days for the actual number of days (including the first but excluding the
last day) occurring in the period for which such interest is payable. Whenever
any payment to be made hereunder shall be stated to be due on a day that is not
a Business Day, such payment shall be due instead on the next succeeding
Business Day, and such extension of time shall in such
<PAGE>
case be included in the computation of such payment of interest and not in the
computation of the succeeding payment of interest.
Payee or any Holder shall have the right to assign its rights hereunder or
any interest herein without the prior written consent of Maker.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
All the covenants, stipulations, promises and agreements made by or
contained in this Note on behalf of the undersigned shall bind its successors,
whether so expressed or not.
No failure on the part of Payee to exercise, and no delay in exercising,
any right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.
DEFINED TERMS
As used in this Note, the following terms have the following meanings
(which meanings are equally applicable to both the singular and plural forms of
the terms defined):
"Business Day" shall mean a day that is not a Saturday, Sunday or a day on
which banking institutions are not required to be open in the State of New York.
"Holder" means Payee or any subsequent holder of this Note.
"Three-Month LIBOR" shall mean an interest rate per annum (rounded upwards,
if necessary, to the nearest whole multiple of one-sixteenth of one percent
(0.0625%) per annum) determined for each calendar quarter two Business Days
prior to the commencement of such calendar quarter (or if such date is not a
business day in London as of the preceding business day in London) equal to the
composite London interbank offered rate for Dollar deposits of comparable size
for a maturity period of three (3) months, as published by The Bank of Nova
Scotia or, if not so published, as otherwise determined in good faith by Payee.
[Remainder of page intentionally left blank]
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first set forth above.
TRACE INTERNATIONAL HOLDINGS, INC.
/s/ Philip N. Smith, Jr.
--------------------------
By: Philip N. Smith, Jr.
Title: Vice President
-3-
Exhibit 5.1
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
September 10, 1997
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Re: $150,000,000 9-7/8% Senior Subordinated Notes Due 2007
Exchange Offer
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Foamex L.P., a Delaware limited partnership
("Foamex"), Foamex Capital Corporation, a Delaware corporation ("FCC", and
together with Foamex, the "Issuers") and General Felt Industries, Inc., a
Delaware corporation ("General Felt") and Foamex Fibers, Inc., a Delaware
corporation ("Foamex Fibers", and together with General Felt, the "Subsidiary
Guarantors") in connection with the filing by the Issuers and the Subsidiary
Guarantors of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering under the Securities Act of 1933, as amended, an aggregate principal
amount of $150,000,000 of the Issuers' 9-7/8% Senior Subordinated Notes due 2007
(the "New Notes") offered in exchange for a like principal amount of the
Issuers' outstanding 9-7/8 Senior Subordinated Notes due 2007 of which
$150,000,000 is outstanding. The New Notes are to be issued pursuant to an
indenture dated as of June 12, 1997 (the "Indenture"), among the Issuers, the
Subsidiary Guarantors and The Bank of New York, as trustee (the "Trustee").
Capitalized terms used herein and not
<PAGE>
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
September 10, 1997
Page 2
otherwise defined herein have the meanings ascribed thereto in the Indenture.
In that connection, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of such documents, corporate records and other
instruments as we have deemed necessary or appropriate for purposes of this
opinion, including the Indenture, the Registration Rights Agreement, dated as of
June 12, 1997 (the "Registration Rights Agreement"), among the Company and the
Initial Purchasers, the form of the New Notes and the Registration Statement.
In rendering the opinions contained herein, we have assumed (a) the due
authorization, execution and delivery of each of the Indenture, the Registration
Rights Agreement and the New Notes by each of the parties thereto, (b) that each
of such parties has the legal power to act in the respective capacity or
capacities in which it is to act thereunder, (c) the authenticity of all
documents submitted to us as original, (d) the conformity to the original
documents of all documents submitted to us as copies and (e) the genuineness of
all signatures on all documents submitted to us.
Based on the foregoing, we are of the opinion that (i) the New Notes, when duly
issued and authenticated in accordance with the provisions of the Indenture and
delivered in exchange for the Old Notes pursuant to the Registration Rights
Agreement, will constitute valid and binding obligations of the Issuers
enforceable against the Issuers in accordance with their terms (subject in each
case to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether considered in a proceeding in equity or at law);
and (ii) the Guarantees, upon the due issuance and authentication of the New
Notes with the Guarantees endorsed thereon in accordance with the provisions of
the Indenture and when the New Notes with the Guarantees endorsed thereon are
delivered in exchange for the Old Notes pursuant to the Registration Rights
Agreement, will constitute valid and binding obligations of the Guarantors
enforceable against the Guarantors in accordance with their
<PAGE>
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
September 10, 1997
Page 3
terms (subject in each case to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, regardless of whether considered in
a proceeding in equity of at law).
We do not express any opinion with respect to matters governed by any laws other
than the laws of the State of New York and the federal laws of the United States
of America.
We know that we are referred to as counsel who has passed upon the legality of
the issuance of the New Notes and the Guarantees on behalf of the Company in the
Registration Statement filed with the Commission, and we hereby consent to such
use of our name in said Registration Statement and to the filing of this opinion
with said Registration Statement as Exhibit 5.1 thereto.
Very truly yours,
/s/ Willkie Farr & Gallagher
- ----------------------------
Exhibit 8.1
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
September 10, 1997
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Re: $150,000,000 9-7/8% Senior Subordinated Notes Due 2007
Exchange Offer
------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Foamex L.P., a Delaware limited partnership
("Foamex"), Foamex Capital Corporation, a Delaware corporation ("FCC", and
together with Foamex, the "Issuers") and General Felt Industries, Inc., a
Delaware corporation ("General Felt") and Foamex Fibers, Inc., a Delaware
corporation ("Foamex Fibers", and together with General Felt, the "Subsidiary
Guarantors") in connection with the filing by the Issuers and the Subsidiary
Guarantors of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering under the Securities Act of 1933, as amended, an aggregate principal
amount of $150,000,000 of the Issuers' 9 7/8% Senior Subordinated Notes due 2007
(the "New Notes") offered in exchange for a like principal amount of the
Issuers' outstanding 9 7/8 Senior Subordinated Notes due 2007 of which
$150,000,000 is outstanding. The New Notes are to be issued pursuant to an
indenture dated as of June 12, 1997 (the "Indenture"), among the Issuers, the
Subsidiary Guarantors and The Bank of New York, as trustee (the "Trustee").
<PAGE>
Foamex L.P.
Foamex Capital Corporation
General Felt Industries, Inc.
Foamex Fibers, Inc.
September 10, 1997
Page 2
Capitalized terms used herein and not otherwise defined herein have the meanings
ascribed thereto in the Indenture.
We hereby confirm that the statements set forth in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the heading
"Tax Considerations" accurately describe the material Federal income tax
consequences to holders of the New Notes issued pursuant to the Prospectus.
We know that we are referred to under the heading "Legal Matters" in the
Prospectus, and we hereby consent to such use of our name therein and to the use
of this opinion for filing with the Registration Statement as Exhibit 8.1
thereto.
Very truly yours,
/s/ Willkie Farr & Gallagher
- ----------------------------
AMENDMENT
TO
MASTER AGREEMENT
AMENDMENT (the "Amendment") dated as of June 5, 1997 to the Master
Agreement dated as of March 31, 1994 (as amended from time to time, the
"Agreement") between Citibank, N.A. and Foamex L.P. whereby the parties agree as
follows:
1. Sections (1), (3) and (4) of Part I of the Schedule to the
Agreement are amended to read in their entirety as follows:
(1) "Credit Agreement" means the Credit Agreement dated as of June 12, 1997
among Foamex L.P., General Felt Industries, Inc., Trace Foam Company, Inc.,
FMXI, Inc., the institutions from time to time party thereto as lenders and
issuing banks, Citicorp USA, Inc., as collateral agent, and The Bank of
Nova Scotia, as funding agent, as such agreement may be amended,
supplemented or otherwise modified from time to time.
(3) "Indentures" means the New Foamex Subordinated Note Indenture, the
Senior Note Indenture, the Senior Secured Note Indenture, the Subordinated
Debenture Indenture and the 1993 Subordinated Debenture Indenture (each as
defined in the Credit Agreement), as each such indenture may be amended,
supplemented or otherwise modified from time to time.
(4) "Specified Entity" means in relation to Party B for all purposes, each
Subsidiary Guarantor (as defined in the Credit Agreement) of Party B and
the Managing General Partner.
2. Subsections (vii) and (ix) of Section (11) of Part 1 of the
Schedule to the Agreement are amended to read in their entirety as follows:
(vii) A payment default shall have occurred under the Credit Agreement or
under any of the obligations issued pursuant to the Indentures beyond any
applicable grace period.
(ix) Citibank, N.A. or Citicorp USA, Inc. is no longer a party to the
Credit Agreement for any reason or the Credit Agreement has been
terminated.
<PAGE>
3. Section (5) of Part 4 of the Schedule to the Agreement as it
pertains to Foamex L.P. is amended to read in its entirety as follows:
Address: Foamex L.P.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attention: George L. Karpinski, Vice President and
Treasurer
Telefax No.: (610) 859-3032
(For all purposes)
4. Sections (8) and (9) of Part 4 of the Schedule to the Agreement
are amended to read in their entirety as follows:
(8) Credit Support Document. With respect to Party B, each of the Loan
Documents (as defined in the Credit Agreement) pursuant to which Party B or
any of the Loan Parties has granted a Lien to the Collateral Agent or any
Lender or Issuing Bank (as each such capitalized term is defined in the
Credit Agreement).
(9) Credit Support Provider. With respect to Party B, each Loan Party
(other than Party B) party to a Credit Support Document.
5. Section (9) of Part 5 of the Schedule to the Agreement is amended
to read in its entirety as follows:
(9) The parties hereto acknowledge that the obligations of Party B under
this Agreement (i) shall constitute "Senior Indebtedness" as defined in the
New Foamex Subordinated Indenture, the Subordinated Debenture Indenture and
the 1993 Subordinated Debenture Indenture, (ii) shall constitute
Obligations (as defined in the Credit Agreement) and (iii) shall be secured
on a pari passu basis with all of such other Obligations (as defined in the
Credit Agreement) by the Collateral (as defined in the Credit Agreement)
pursuant to the Credit Support Documents.
6. The parties hereto acknowledge that (i) although the Credit
Agreement and the New Foamex Subordinated Indenture may not have been executed
on the date this Amendment becomes effective, forms of such documents have been
agreed upon as of the date hereof, and prior to such execution, any reference to
such documents shall be to the June 4, 1997 draft of the Credit Agreement and
the June 2, 1997 draft of the New Foamex Subordinated Indenture, and (ii) each
Transaction is being entered into by Party A in reliance on (A) the execution of
the Credit Agreement in substantially the form of the draft thereof dated June
4, 1997 by no later than June 16, 1997 (or as such later date as shall be agreed
to by Party A and Party B) and (B) the grant by Party B and each Subsidiary
Guarantor (as defined in the Credit Agreement) of a lien on
<PAGE>
substantially all of the assets of Party B and each such Subsidiary Guarantor as
security for Party B's obligations under such Transaction and the other
Obligations (as defined in the Credit Agreement) as contemplated in the Credit
Agreement and (iii) the grant of such collateral is intended by the parties
hereto to be a contemporaneous exchange for new value given to Party B by Party
A hereunder.
7. Miscellaneous
(a) Definitions. All capitalized terms used in this Amendment but not
defined herein shall have the meanings given to them in the Agreement.
(b) Evidence of Incumbency. Each party shall deliver to the other, at
the time of its execution of this Amendment, certified evidence of the specimen
signature and incumbency of each person who is executing this Amendment on the
party's behalf, unless such evidence has previously been supplied in connection
with the Agreement and remains true and in effect.
(c) Agreement Continuation; Entire Agreement. Upon execution and
delivery of this Amendment, the Agreement shall be modified and amended in
accordance with the terms herein, and shall continue in full force and effect.
The terms and conditions of the Agreement, as amended by this Amendment,
constitute the entire agreement and understanding of the parties, with respect
to its subject matter and supersedes all oral communications and prior writings
with respect thereto. In the case of conflict the provisions of this Amendment
will control.
(d) Headings. The headings used in this Amendment are for convenience
of reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Amendment.
(e) Governing Law. This Amendment will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
IN WITNESS WHEREOF the parties have caused this Amendment to be duly
executed and delivered as of the day and year first written above.
CITIBANK, N.A., NEW YORK FOAMEX L.P.
By: FMXI, Inc., its Managing
General Partner
By: /s/ Barbara A. Schweizer By: /s/ G.L. Karpinski
------------------------ ------------------
Print Name: Barbara A. Schweizer Print Name: G.L. Karpinski
Title: Vice President Title: Vice President
DATE: 6/21/97 DATE: 6/26/97
<PAGE>
I, PATRICIA A. SAFUTO, Assistant Secretary of CITIBANK, N.A. having its
principal office in the City and State of New York, DO HEREBY CERTIFY that the
following is a true and correct copy of Section 2 of Article X of the existing
By-Laws of CITIBANK, N.A. in full force and effect as of the date hereof:
"Execution of Instruments. All agreements, indentures, mortgages, deeds,
conveyances, transfers, certificates, declarations, receipts, discharges,
releases, satisfactions, settlements, petitions, schedules, accounts,
affidavits, bonds, undertakings, proxies and other instruments or
documents, may be signed, executed, acknowledged, verified, delivered or
accepted in behalf of the Association by the Chairman, the President, any
Vice Chairman, any Sector Executive, or any Senior Executive Vice
President, or any Executive Vice President/Group Executive/Senior Corporate
Officer, or the Chairman Credit Policy Committee, or any Senior Vice
President, or the Secretary, or the Chief Auditor, or any Vice President,
or any Deputy Chief Auditor, or anyone holding a position equivalent to the
foregoing pursuant to provisions of these By-Laws, or, if in connection
with the exercise of any of the fiduciary powers of the Association, by any
of said officers or by any Senior Trust Officer. Any such instruments may
also be executed, acknowledged, verified, delivered or accepted in behalf
of the Association in such other manner and by such other officers as the
Board of Directors may from time to time direct. The provisions of this
Section 2 are supplementary to any other provisions of these By-Laws."
I FURTHER CERTIFY that Barbara A. Schweizer is a Vice President of CITIBANK,
N.A., duly constituted as such, and the following is a facsimile of her
signature as it appears in the Citicorp/Citibank, N.A. Authorized Signature
System:
--------------------------------
Schweizer, Barbara A.
Vice President
/s/ Barbara A. Schweizer
--------------------------------
IN WITNESS WHEREOF, I have hereunto affixed my offical signature and seal of the
said Bank in the City of New York on this 9th day of May, 1997.
/s/ Patricia A Safuto
---------------------
Patricia A. Safuto
(SEAL)
<PAGE>
FMXI, INC.
SECRETARY'S CERTIFICATE
-----------------------
I, Philip N. Smith, Jr., hereby certify that I am the Secretary of FMXI,
Inc. of which is a Delaware corporation (the "Company") and that, as such, I am
duly authorized to, and do hereby certify that the following named individual is
a duly elected, qualified and acting officer of the Company holding the office
set forth opposite his name as of the date hereof, and the signature set
opposite his name and title of said officer is a true, authentic signature and
said individual is authorized by the Board of Directors of the Company to sign
any documents on behalf of the Company:
Name Title Signature
- ---- ----- ---------
George L. Karpinski Vice President /s/ G.L. Karpinski
------------------
IN WITNESS THEREOF, I have hereunto set my hand and affixed the seal of the
Company this 26th day of June, 1997.
/s/ Philip N. Smith, Jr.
------------------------
Philip N. Smith, Jr.
Secretary
I, Tambra S. King, Assistant Secretary of the Company, hereby certify that
on this 26th day of June 1997, Philip N. Smith, Jr. is the duly elected,
qualified and acting Secretary of the Company and that the signature above is
his genuine signature.
/s/ Tambra S. King
------------------
Tambra S. King
Assistant Secretary
<PAGE>
June 5, 1997
Foamex L.P.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Gentlemen:
Reference is made to the Interest Rate Swap Confirmation in respect of
an Interest Rate Swap Agreement in a notional principal amount of $150,000,000
to be entered into between Foamex L.P. ("Foamex") and Citibank, N.A.
("Citibank") (the "New Transaction").
As a condition of our entering into the New Transaction, you
acknowledge and agree that (i) in connection with the New Transaction, the
Schedule to the Master Agreement dated as of March 31, 1984 (the "Master
Agreement") between Foamex and Citibank will be amended to, among other things,
change the definition of "Credit Agreement" to refer to the new $480,000,000
Credit Agreement to be entered into on or about June 12, 1997 (substantially in
the form of the draft thereof dated June 4, 1997) among Foamex, certain of its
affiliates, the institutions party thereto as lenders and issuing banks and
Citicorp USA, Inc. and the Bank of Nova Scotia, as Administrative Agents (the
"New Credit Agreement") and (ii) the New Transaction is being entered into by
Citibank in reliance on (A) the execution of the New Credit Agreement in
substantially the form of the draft thereof dated June 4, 1997 by no later than
June 16, 1997 (or such later date as shall be agreed to between Foamex and
Citibank) and (B) the grant by Foamex and each of the Subsidiary Guarantors (as
defined in the New Credit Agreement) of a lien on substantially all of the
assets of Foamex and each of such Subsidiary Guarantors as security for Foamex's
obligations under the New Transaction and the other Obligations (as defined in
the New Credit Agreement) as contemplated in the New Credit Agreement.
As a condition of our entering into the New Transaction, you also
acknowledge and agree that it shall constitute a "Termination Event" as defined
under the New Transaction if (i) the initial funding under the New Credit
Agreement has not occurred by the close of business on June 16, 1997 (or such
later date as shall be agreed to between Foamex and Citibank), (ii) the
condition set forth in clause (ii) (B) of the preceding paragraph has not been
met concurrently with such initial funding or (iii) the Schedule to the Master
Agreement has
<PAGE>
not been amended to reflect the understanding of Citibank set forth in the
preceding paragraph on terms satisfactory to Citibank within 30 days (or such
longer period as shall be agreed to between Foamex and Citibank) after the date
of the New Transaction.
If this letter becomes the subject of a dispute, each of Foamex and
Citibank hereby waives trial by jury. This letter shall be governed by and
construed in accordance with the laws of the State of New York.
Please evidence your agreement to the above terms by signing the
enclosed copy of this letter and returning it to the undersigned as a condition
to our entering into the New Transaction.
Very truly yours,
CITIBANK, N.A.
By: /s/ Timothy L. Freeman
----------------------
Attorney-in-fact
Accepted and Agreed to:
FOAMEX L.P.
By: FMXI, Inc.
Its Managing General Partner
By: /s/ Kenneth R. Fuette
---------------------
Title: Senior Vice President of Finance
AMENDED CONFIRMATION
Date: June 13, 1997
To: Foamex L.P. ("Foamex")
Attention: George Karpinski
Tel: 610-859-3107
Fax: 610-859-3032
From: Citibank, N.A. New York ("Citibank")
Fax No: 416-941-7432
Transaction Reference Numbers: 97L100, 96L205/96P047/94F98/94A93 and 96L206
The purpose of this letter agreement is to set forth the terms and
conditions of the Transaction entered into between us on the Trade Date referred
to below. This letter constitutes a "Confirmation" as referred to in the Master
Agreement specified below. This Confirmation amends, restates and supersedes any
prior Confirmation for Transaction Reference Numbers 97L100,
96L205/96P047/94F98/94A93 and 96L206.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
1. This Confirmation supplements, forms a part of, and is subject to,
the Master Agreement dated as of March 21, 1994 (the "Agreement") between you
and us. All provisions contained in the Agreement shall govern this Confirmation
except as expressly modified below.
This will confirm our agreement to modify the following Transactions:
Our Transaction Reference Number: 96L205/96P047/94F98/94A93
Original Maturity Date: December 14, 2001
Notional Amount: USD 150,000,000
Our Transaction Reference Number: 96L206
Original Maturity Date: December 14, 2001
Notional Amount: USD 150,000,000
Page 1 of 5
<PAGE>
Amendment date for this modification: June 5, 1997
Effective Date for this modification: June 12, 1997
All obligations of both parties with respect to these Transactions will be
terminated, except as provided below for Transaction Reference Number 97L100.
Any Termination Amount that would have been payable for the termination of the
above referenced Transactions has been incorporated into the Transaction
identified below.
Citibank pays Foamex USD 1,800,000 for value June 16, 1997.
3. The terms of the particular Transaction to which this
Confirmation relates are as follows:
Transaction Reference Number: 97L100
Notional Amount USD 150,000,000
Trade Date: June 5, 1997
Effective Date: June 12, 1997
Termination Date: June 12, 2007
Fixed Amounts:
- --------------
Fixed Rate Payer: Citibank
Fixed Rate Payer Payment Dates: December 2, 1997 and thereafter each
June 12 and December 12 to and
including the Termination Date, subject
to adjustment in accordance with the
Modified Following Business Day
Convention
Fixed Rate: 6.44 percent
Fixed Rate Day Count Fraction: 30/360
Page 2 of 5
<PAGE>
Floating Amounts:
- -----------------
Floating Rate Payer: Foamex
Floating Rate Payer Payment Dates: December 12, 1997 and thereafter each
June 12 and December 12 to and
including the Termination Date, subject
to adjustment in accordance with the
Modified Following Business Day
Convention
Initial Calculation Period: From and including June 12, 1997 to but
excluding December 12, 1997
Floating Rate for the Initial
Calculation Period: 5.75 percent
Floating Rate for all Calculation
Periods commencing on
or after December 12, 1997: Either (1) the rate determined pursuant
to the USDA-LIBOR-BBA Floating Rate
Option with the Reset Date
corresponding to the first day of the
subject Calculation Period or (2) the
rate determined pursuant to the
USD-LIBOR-BBA Floating Rate Option with
the Reset Date corresponding to the
last day of the subject Calculation
Period, whichever is higher.
Designated Maturity: 6 Months
Floating Rate Day Count Fraction
for the Initial Calculation Period: 30/360
Floating Rate Day Count Fraction
for all Calculation Periods
commencing on or after
December 12, 1997: Actual 360
Business Days: New York and London
Calculation Agent: Citibank
Page 3 of 5
<PAGE>
4. Cash Settlement Provision:
--------------------------
Provided that no Early Termination Date has occurred or been designated
with respect to this Transaction, each party may require this Transaction
to be terminated and the remaining payment obligations under this
Transaction to be settled and discharged on June 12, 2002 or any June 12
thereafter (the "Cash Settlement Date") by written or telephonic notice to
the other party at approximately 11:00 a.m., New York time, on the day that
is five Business Days prior to the Cash Settlement Date (the "Cash
Settlement Determination Date"). If such notice is given, Foamex shall pay
to Citibank (or Citibank shall pay to Foamex) such amount in respect of the
termination of this Transaction as Citibank shall determine in its sole
discretion (the "Cash Settlement Amount"). The remaining payment
obligations of each party under this Transaction shall be settled and
discharged by payment of the Cash Settlement Amount on the Cash Settlement
Date.
Upon payment of the Cash Settlement Amount and settlement of the Fixed
Amount and Floating Amount (if any) payable on the Cash Settlement Date,
this Transaction shall terminate and neither party shall have any further
rights or obligations hereunder.
5. Addition Provision:
-------------------
The parties hereto acknowledged that (i) the Schedule to the Master
Agreement dated as of March 21, 1994 between Foamex and Citibank will be
amended to, among other things, change the definition of "Credit Agreement"
to refer to the new USD 480,000,000 Credit Agreement to be entered into on
or about June 12, 1997 (substantially in the form of the draft thereof
dated June 4, 1997) among Foamex, certain of its affiliates, the
institutions party thereto as lenders and issuing banks and Citicorp USA,
Inc. and The Bank of Nova Scotia, as Administrative Agents (the "New Credit
Agreement") and (ii) this Transaction is being entered into by Citibank in
reliance on (A) the execution of the New Credit Agreement in substantially
the form of the draft thereof dated June 4, 1997 by no later than June 16,
1997 (or such later date as shall be agreed to between Foamex and Citibank)
and (B) the grant by Foamex and each of its Subsidiaries incorporated in
the United States of a lien on substantially all of the assets of Foamex
and each of such Subsidiaries as security for Foamex's obligations under
this Transaction and the other Obligations under, and as defined in, the
New Credit Agreement.
If Foamex fails to execute and deliver or to negotiate in good faith the
New Credit Agreement by June 16, 1997 (or such later date as shall be
agreed to between Foamex and Citibank), Citibank may give Foamex notice
that an Additional Termination Event has occurred and is continuing with
respect to Foamex, in which event Foamex will be the only Affected Party.
Page 4 of 5
<PAGE>
6. Account Details
---------------
Payments to Citibank: Account for payments:
Citibank, N.A. New York
ABA #021000089
Account No. 00167679
Financial Futures
Reference Swap 97L100
Payments to Foamex: Account for payments:
Citibank, N.A. New York
ABA #021000089
Account No. 4059-7235
Account Name: Foamex L.P.
Reference: Swap 97L100
Foamex hereby agrees (a) to check this Confirmation (Reference No.
97L100) carefully and immediately upon receipt so that errors or discrepancies
can be promptly identified and rectified and (b) to confirm that the foregoing
correctly sets forth the terms of the agreement between Citibank and Foamex with
respect to the particular Transaction to which this Confirmation relates, by
manually signing this Confirmation and providing the other information requested
herein and immediately returning an executed copy to Facsimile No. 416-941-7432.
Very truly yours,
CITIBANK, N.A. NEW YORK
By: /s/ Nitin Gupta
---------------
Name: NITIN GUPTA, AVP
GRB O&T
399 Park Ave./11th Fl./Zn. 1
(212) 559-0476
Agreed and Accepted By:
FOAMEX L.P.
By: /s/ G.L. Karpinski
------------------
Name: G.L. Karpinski
------------------
Title: Vice President
------------------
Page 5 of 5
EXHIBIT 12.1--Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
<TABLE>
<CAPTION>
Six months ended
Year ended June
Foamex --------------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
--------- ------------ --------- ------------- ---------- --------- ---------
(Dollars in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
Consolidated pretax income (loss)
from continuing operations ............... $22,175 $ (7,665) $44,536 $ (46,721) $ 61,363 $26,884 $35,859
Interest ................................. 18,178 47,375 41,532 44,550 43,211 20,724 21,509
Interest portion of rental expense ...... 1,467 3,867 4,533 4,533 3,767 1,885 1,825
Amortization of Capitalized Interest ...... 47 67 108 152 171 88 88
-------- -------- -------- --------- --------- -------- --------
Earnings ................................. $41,867 $ 43,644 $90,709 $ 2,514 $108,512 $49,581 $59,281
======== ======== ======== ========= ========= ======== ========
Interest ................................. $18,178 $ 47,375 $41,532 $ 44,550 $ 43,211 $20,724 $21,509
Interest portion of rental expense ...... 1,467 3,867 4,533 4,533 3,767 1,885 1,825
Capitalized Interest ..................... 64 425 576 468 -- -- --
-------- -------- -------- --------- --------- -------- --------
Fixed charges ........................... $19,709 $ 51,667 $46,641 $ 49,551 $ 46,978 $22,609 $23,334
======== ======== ======== ========= ========= ======== ========
Ratio of earnings to fixed charges ...... 2.12 1.94 2.31 2.19 2.54
======== ======== ========= ======== ========
Deficiency .............................. $ 8,023 $ 47,037
======== =========
</TABLE>
Pro Forma
------------------------------
Fiscal Yr. Six months ended
1996 June 1997
------------ -----------------
Ratio of earnings to fixed charges
Consolidated pretax income from
continuing operations .................. $ 55,543 $33,524
Interest ................................. 49,031 23,844
Interest portion of rental expense ...... 3,767 1,825
Amortization of Capitalized Interest ...... 171 88
--------- --------
Earnings ................................. $108,512 $59,281
========= ========
Interest ................................. $ 49,031 $23,844
Interest portion of rental expense ...... 3,767 1,825
Capitalized Interest ..................... -- --
--------- --------
Fixed charges ........................... $ 52,798 $25,669
========= ========
Ratio of earnings to fixed charges ...... 2.06 2.31
========= ========
Deficiency ..............................
II-13
EXHIBIT 12.2--Statement Regarding Computation of Ratio of Earnings to Fixed
Charges
<TABLE>
<CAPTION>
Six months ended
Year ended June
General Felt ----------------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------------ ------------ --------- ------------- --------- --------- -------
(Dollars in thousands, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
Consolidated pretax income (loss)
from continuing operations ......... $ (1,086) $ (4,133) $13,977 $ (11,048) $24,809 $ 9,235 $6,088
Interest ........................... 7,686 6,068 1,178 1,164 2,179 755 596
Interest portion of rental expense 1,116 1,268 1,175 944 706 380 315
-------- -------- -------- --------- -------- -------- -------
Earnings ........................... $ 7,716 $ 3,203 $16,330 $ (8,940) $27,694 $10,370 $6,999
======== ======== ======== ========= ======== ======== =======
Interest ........................... $ 7,686 $ 6,068 $ 1,178 $ 1,164 $ 2,179 $ 755 $ 596
Interest portion of rental expense 1,116 1,268 1,175 944 706 380 315
-------- -------- -------- --------- -------- -------- -------
Fixed charges ..................... $ 8,802 $ 7,336 $ 2,353 $ 2,108 $ 2,885 $ 1,135 $ 911
======== ======== ======== ========= ======== ======== =======
Ratio of earnings to fixed charges 6.94 9.60 9.14 7.68
======== ======== ======== =======
Deficiency ........................ $ 1,086 $ 4,133 $ 11,048
======== ======== =========
</TABLE>
II-14
EXHIBIT 21.1
Subsidiaries of Foamex L.P.:
----------------------------
1. FCC:
----
a) Legal Name: Foamex Capital Corporation
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Foamex L.P.
2. Foamex Canada, Inc.:
--------------------
a) Legal Name: Foamex Canada, Inc.
b) Jurisdiction of Organization: Ontario, Canada
c) Ownership: Wholly owned by Foamex L.P.
3. Latin America:
--------------
a) Legal Name: Foamex Latin America, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Foamex L.P.
4. Foamex Mexico:
--------------
a) Legal Name: Foamex Mexico, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Latin America
5. Foamex Mexico II:
-----------------
a) Legal Name: Foamex Mexico II, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Latin America
6. Grupo Foamex:
-------------
a) Legal Name: Grupo Foamex de Mexico, S.A. de C.V.
b) Jurisdiction of Incorporation: Mexico
c) Ownership: Owned 99.9% by Foamex Mexico; one share owned by Latin
America
7. TEFSA:
------
a) Legal Name: Transformacion de Espumas y Filetros, de C.V.
b) Jurisdiction of Incorporation: Mexico
c) Ownership: Owned 99.9% by Foamex Mexico; one share owned by Grupo
Foamex
<PAGE>
8. Foamex de Mexico:
-----------------
a) Legal Name: Foamex de Mexico, S.A. de C.V.
b) Jurisdiction of Incorporation: Mexico
c) Ownership: Owned 99.9% by Grupo Foamex Mexico; one share owned by
Foamex Mexico II
9. Colchones:
----------
a) Legal Name: Colchones y de Todo en Espuma, S.A. de C.V.
b) Jurisdiction of Incorporation: Mexico
c) Ownership: Owned 99.9% by Foamex de Mexico; one share owned by Pablo
Mijares Ortega
10. Foamex Asia:
------------
a) Legal Name: Foamex Asia, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Foamex L.P.
11. General Felt:
-------------
a) Legal Name: General Felt Industries, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Foamex L.P.
12. Foamex Fibers:
--------------
a) Legal Name: Foamex Fibers, Inc.
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by General Felt
13. Foamex Delaware:
----------------
a) Legal Name: Foamex Delaware Inc. (formerly Foamex Brazil, Inc.)
b) State of Incorporation: Delaware
c) Ownership: Wholly owned by Foamex L.P.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-30291) of our report dated February 26, 1997, on our audits of
the consolidated financial statements of Foamex L.P. and subsidiaries. We also
consent to the reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
September 10, 1997
II-15
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-30291) of our report dated February 26, 1997, on our audits of
the consolidated financial statements of General Felt Industries, Inc. and
subsidiaries. We also consent to the reference to our firm under the caption
"Experts".
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
September 10, 1997
II-16
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-30291) of our report dated February 26, 1997, on our audits of
the financial statements of Foamex Capital Corporation. We also consent to the
reference to our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
September 10, 1997
II-17
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-30291) of our report dated June 20, 1997, on our audits of the
financial statements of Foamex Fibers, Inc. We also consent to the reference to
our firm under the caption "Experts".
Coopers & Lybrand L.L.P.
Charlotte, North Carolina
September 10, 1997
II-18
Draft 09/10/97
LETTER OF TRANSMITTAL
for
Offer for all Outstanding 9-7/8% Senior Subordinated Notes Due 2007
in Exchange for up to $150,000,000 principal amount of
9-7/8% Senior Subordinated Notes Due 2007
of
FOAMEX L.P.
and
FOAMEX CAPITAL CORPORATION
Pursuant to the Prospectus
Dated ____________, 1997
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON
_____________, 1997, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
- -------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand Or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, Ground Level 101 Barclay Street, 7E
Corporate Trust Services Window To Confirm by Telephone New York, New York 10286
New York, New York 10286 or for Information Call: Attention: Denise Robinson
Attention: Denise Robinson (212) 815-2791 Reorganization Section
Reorganization Section
</TABLE>
Delivery of this Letter of Transmittal (the "Letter of Transmittal") to an
address, or transmission via facsimile to a number, other than as set forth
above, will not constitute a valid tender of 9-7/8% Senior Subordinated Notes
due 2007 (the "Old Notes").
The Instructions contained herein should be read carefully before this
Letter of Transmittal is completed and signed.
<PAGE>
This Letter of Transmittal is to be used by registered holders of Old Notes
("Holders") if: (i) certificates representing Old Notes are to be physically
delivered to the Exchange Agent by such Holders; (ii) tender of Old Notes is to
be made by book-entry transfer to the Exchange Agent's account at The Depositary
Trust Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Prospectus, dated ________, 1997 (as the same may be
amended from time to time, the "Prospectus") under the caption "The Exchange
Offer -- Book-Entry Transfer" by any financial institution that is a participant
in DTC and whose name appears on a security position listing as the owner of Old
Notes or (iii) delivery of Old Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures," and, in each case, instructions are
not being transmitted through the DTC Automated Tender Program ("ATOP").
Delivery of documents to the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures does not constitute delivery to
the Exchange Agent.
In order to properly complete this Letter of Transmittal, a Holder must (i)
complete the box entitled "Description of Old Notes", (ii) check one of the
three boxes relating to the delivery of Old Notes and complete the box entitled
"Method of Delivery", (iii) sign this Letter of Transmittal by completing the
box entitled "Please Sign Here", (iv) if appropriate, check and complete the
boxes relating to the "Special Payment Instructions" and "Special Delivery
Instructions", and (v) complete the Substitute Form W-9. Each Holder should
carefully read the detailed Instructions below prior to the completing this
Letter of Transmittal. See "The Exchange Offer -- Procedures For Tendering" in
the Prospectus.
Holders of Old Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message. DTC participants may also
accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through
ATOP.
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Holder's Old Notes and all other required
documents to reach the Exchange Agent prior to the Expiration Date, or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of such Old Notes in accordance with the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2 below.
A Holder having Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to accept
the Exchange Offer with respect to the Old Notes so registered.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF OLD NOTES BE
ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING
OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION.
All capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Prospectus.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent, whose address and telephone number appear on
the front cover of this Letter of Transmittal. See Instruction 11 below.
<PAGE>
- --------------------------------------------------------------------------------
METHOD OF DELIVERY
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF CERTIFICATES FOR TENDERED OLD NOTES ARE BEING DELIVERED
HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:________________________________
Account Number: ______ Transaction Code Number: _______
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE
AGENT PURSUANT TO INSTRUCTION 2 BELOW AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s): __________________________________________
Window Ticket No. (if any):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________
Name of Eligible Institution that Guaranteed Delivery: _________________
If Delivered by Book-Entry Transfer (yes or no): _______________________
Account Number:__________ Transaction Code Number: ________
- --------------------------------------------------------------------------------
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, list the certificate numbers and
principal amounts on a separately signed schedule and affix the schedule to this
Letter of Transmittal.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- -------------------------------------------------------------------------------------------------------------------------------
Aggregate
Name(s) and Address(es) of Holder(s) Certificate Principal Amount Principal Amount
(Please fill in, if blank) Numbers* Represented** Tendered
<S> <C> <C> <C>
- ------------------------------------------------------------------------ ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
----------------------- ------------------------ -----------------------------
Total Principal
Amount of Old Notes
- ------------------------------------------------------------------------ ------------------------ -----------------------------
* Need not be completed by Holders tendering by book-entry transfer (see below).
** Unless otherwise indicated in the column labeled "Principal Amount Tendered" and subject to the terms and
conditions of the Prospectus, a Holder will be deemed to have tendered the entire aggregate principal amount
represented by the Old Notes indicated in the column labeled "Aggregate Principal Amount Represented." See
Instruction 3.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Ladies and Gentlemen:
By execution hereof, the undersigned acknowledges receipt of the
Prospectus, dated _________, 1997 (as the same may be amended from time to time,
the "Prospectus" and, together with the Letter of Transmittal, the "Exchange
Offer"), of Foamex L.P., a Delaware limited partnership (the "Company"), and
Foamex Capital Corporation, a Delaware corporation ("FCC" and, together with the
Company, the "Issuers"), and this Letter of Transmittal and instructions hereto,
which together constitute Issuers' offer to exchange $1,000 principal amount of
the 9-7/8% Senior Subordinated Old Notes due 2007 (the "New Notes") of the
Issuers, upon the terms and subject to the conditions set forth in the Exchange
Offer, for each $1,000 principal amount of their outstanding 9-7/8% Senior
Subordinated Old Notes due 2007 (the "Old Notes").
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuers the principal amount of Old Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Issuers all right, title and interest in
and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that the Exchange Agent also acts as the
agent of the Issuers) with respect to such Old Notes with full power of
substitution (such power-of-attorney being deemed to be an irrevocable power
coupled with an interest) to (i) present such Old Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Old Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon the
order of, the Issuers, (ii) present such Old Notes for transfer of ownership on
the books of the Company or the trustee under the Indenture (the "Trustee"), and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of and conditions
of the Exchange Offer as described in the Prospectus.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes tendered hereby
and to acquire New Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Issuers will acquire good
and unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim or
right. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuers to
be necessary or desirable to complete the exchange, assignment and transfer of
the Old Notes tendered hereby or transfer ownership of such Old Notes on the
account books maintained by the book-entry transfer facility.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived by the
Issuers, in whole or in part, in the sole discretion of the Issuers), as more
particularly set forth in the Prospectus, the Issuers may not be required to
exchange any of the Old Notes tendered hereby and, in such event, the Old Notes
not exchanged will be returned to the undersigned at the address shown above.
THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED OLD
NOTES DIRECTLY FROM THE ISSUERS FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT OR TO ANY PERSON THAT IS AN "AFFILIATE" OF THE ISSUERS WITHIN THE
MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS AND
AGREES THAT THE ISSUERS RESERVE THE RIGHT NOT TO ACCEPT TENDERED OLD NOTES FROM
ANY TENDERING HOLDER IF THE ISSUERS DETERMINE, IN THEIR SOLE AND ABSOLUTE
DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE
SECURITIES LAWS.
The undersigned, if the undersigned is a beneficial holder, represents, or,
if the undersigned is a broker, dealer, commercial bank, trust company or other
nominee, represents that it has received representations from the beneficial
owners of the Old Notes (the "Beneficial Owner") stating that (i) the New Notes
to be acquired in connection with the Exchange Offer by the Holder and each
Beneficial Owner of the Old Notes are being acquired by the Holder and each such
Beneficial Owner in the ordinary course of business of the Holder and each such
Beneficial Owner, (ii) the Holder and each such Beneficial Owner are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the New
Notes, (iii) the Holder and each Beneficial Owner acknowledge and agree that any
<PAGE>
person participating in the Exchange Offer for the purpose of distributing the
New Notes must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction of the
New Notes acquired by such person and cannot rely on the position of the staff
of the Commission set forth in no-action letters that are discussed in the
Prospectus under the caption "The Exchange Offer -- Purpose and Effect of the
Exchange Offer," (iv) that if the Holder is a broker-dealer that acquired Old
Notes as a result of market-making or other trading activities, it will deliver
a prospectus in connection with any resale of New Notes acquired in the Exchange
Offer, (v) the Holder and each such Beneficial Owner understand that a secondary
resale transaction described in clause (iii) above should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 of Regulation S-K of the Securities Act and
(vi) neither the Holder nor any such Beneficial Owner is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Issuers or is a
broker-dealer who purchased Old Notes directly from the Issuers for resale
pursuant to Rule 144A under the Securities Act.
In addition, if the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT
OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"),
BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES
THAT, UPON RECEIPT OF NOTICE FROM THE ISSUERS OF THE OCCURRENCE OF ANY EVENT OR
THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY
REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE
PROSPECTUS TO OMIT TO A STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OR
CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH
PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT OT THE
PROSPECTUS UNTIL THE ISSUERS HAVE AMENDED OR SUPPLEMENTED THE PROSPECTUS TO
CORRECT SUCH MISSTATEMENT OR OMISSION AND HAVE FURNISHED COPIES OF THE AMENDED
OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE ISSUERS
HAVE GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY
BE.
The undersigned understands that tenders of the Old Notes pursuant to any
one of the procedures described under "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Issuers in accordance with the
terms and subject to the conditions of the Exchange Offer. All authority herein
conferred or agreed to be conferred by this Letter of Transmittal and every
obligation of the undersigned hereunder shall be binding upon the heirs, legal
representatives, successors and assigns, executors, administrators and trustees
in bankruptcy of the undersigned and shall survive the death or incapacity of
the undersigned. Tendered Old Notes may be withdrawn at any time prior to
5:00 p.m. on the Expiration Date in accordance with the terms of the Exchange
Offer.
The undersigned understands that by tendering Old Notes pursuant to one of
the procedures described under "The Exchange Offer -- Procedures for Tendering"
in the Prospectus and the instructions hereto, the tendering holder will be
deemed to have waived the right to receive any payment in respect of interest on
the Old Notes accrued up to the date of issuance of the New Notes.
The undersigned also understands and acknowledges that the Issuers reserve
the right in their sole discretion to purchase or make offers for any Old Notes
that remain outstanding subsequent to the Expiration Date in the open market, in
privately negotiated transactions, through subsequent exchange offers or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
<PAGE>
The undersigned understands that the delivery and surrender of the Old
Notes is not effective, and the risk of loss of the Old Notes does not pass to
the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, with any required signature guarantees, together with all accompanying
evidences of authority and any other required documents in form satisfactory to
the Issuers. All questions as to form of all documents and the validity
(including time of receipt) and acceptance of tenders and withdrawals of Old
Notes will be determined by the Issuers, in their sole discretion, which
determination shall be final and binding.
Unless otherwise indicated herein under "Special Payment Instructions,"
the undersigned hereby requests that any Old Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Old Notes delivered by book-entry transfer,
by credit to the account at the Book-Entry Transfer Facility), and certificates
for New Notes be issued to the order of the undersigned. Similarly, unless
otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Old Notes representing principal amounts
not tendered or not accepted for exchange and certificates for New Notes be
delivered to the undersigned at the address(es) shown above. In the event that
the "Special Payment Instructions" box or the "Special Delivery Instructions"
box is, or both are, completed, the undersigned hereby requests that any Old
Notes representing principal amounts not tendered or not accepted for exchange
be issued in the name(s) of, certificates for such Old Notes be delivered to,
and certificates for New Notes be issued in the name(s) of, and be delivered to,
the person(s) at the address(es) so indicated, as applicable. The undersigned
recognizes that the Issuers have no obligation pursuant to the "Special Payment
Instructions" box or "Special Delivery Instructions" box to transfer any Old
Notes from the name of the registered Holder(s) thereof if the Issuers do not
accept for exchange any of the principal amount of such Old Notes so tendered.
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(To Be Completed By All Holders of Old Notes
Regardless of Whether Old Notes Are Being Physically Delivered Herewith)
This Letter of Transmittal must be signed by the Holder(s) of Old Notes
exactly as their name(s) appear(s) on certificate(s) for Old Notes or, if
delivered by a participant in the Book-Entry Transfer Facility, exactly as such
participant's name appears on a security position listing as the owner of Old
Notes, or by person(s) authorized to become Holder(s) by endorsements and
documents transmitted with this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below under "Capacity" and submit evidence
satisfactory to the Issuers of such person's authority to so act. See
Instruction 4 below.
If the signature appearing below is not of the record holder(s) of the Old
Notes, then the record holder(s) must sign a valid bond power.
X_______________________________________________________________________________
X_______________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signatory
Date: ____________________________________________________________________, 1997
Name(s): _______________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.: ___________________________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN
[ ] CHECK HERE IF YOU ARE A BROKER DEALER WHO ACQUIRED THE OLD NOTES FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ____________________________________________________________________
Address:__________________________________________________________________
MEDALLION SIGNATURE GUARANTEE (See Instruction 4 below)
Certain Signatures Must Be Guaranteed by an Eligible Institution
________________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
________________________________________________________________________________
(Address (including zip code) and Telephone Number
(including area code) of Firm)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Printed Name)
________________________________________________________________________________
(Title)
Dated: ___________________________________________________________________, 1997
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------- ---------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4, 5 and 7) (See Instructions 4 and 5)
To be completed ONLY if To be completed ONLY if
certificates for Old Notes in a certificates for Old Notes in a
principal amount not tendered or principal amount not accepted for
not accepted for exchange are to be exchange or certificates for New
issued in the name of, or Notes are to be sent to someone
certificates for New Notes are to other than the person or persons
be issued to the order of, someone whose signature(s) appear(s) within
other than the person or persons this Letter of Transmittal or to an
whose signature(s) appear(s) within address different from that shown
this Letter of Transmittal. in the box entitled "Description of
Old Notes" within the Letter of
Issue: [ ] Old Notes Transmittal.
[ ] New Notes
(check as applicable Issue: [ ] Old Notes
[ ] New Notes
Name: (check as applicable
------------------------------
(Please Print) Name:
------------------------------
Address: (Please Print)
---------------------------
Address:
---------------------------
- -----------------------------------
(Zip Code)
-----------------------------------
- ----------------------------------- (Zip Code)
(Tax Identification or
Social Security Number)
(See Substitute Form W-9 herein)
Credit Old Notes not exchanged
and delivered by book entry
transfer to the Book Entry Transfer
Facility account set below:
- -----------------------------------
(Book Entry Transfer Facility
Account Number)
Credit New Notes to the Book
Entry Transfer Facility account set
below:
- -----------------------------------
(Book Entry Transfer Facility
Account Number)
- -------------------------------------- ---------------------------------------
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates for Old Notes or
Book-Entry Confirmations; Withdrawal of Tenders.
To tender Old Notes in the Exchange Offer, physical delivery of
certificates for Old Notes or a confirmation of any book-entry transfer into the
Exchange Agent's account with a Book-Entry Transfer Facility of Old Notes
tendered electronically, as well as a properly completed and duly executed copy
or manually signed facsimile of this Letter of Transmittal, or in the case of a
book-entry transfer, an Agent's Message, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date. Tenders of Old Notes in
the Exchange Offer may be made prior to the Expiration Date in the manner
described in the preceding sentence and otherwise in compliance with this Letter
of Transmittal. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL,
CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT, INCLUDING DELIVERY THROUGH DTC AND ANY ACCEPTANCE OF AN AGENT'S MESSAGE
TRANSMITTED THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE HOLDER TENDERING
OLD NOTES. IF SUCH DELIVERY IS MADE BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND THAT
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO ALTERNATIVE,
CONDITIONAL OR CONTINGENT TENDERS OF OLD NOTES WILL BE ACCEPTED. Except as
otherwise provided below, the delivery will be made when actually received by
the Exchange Agent. This Letter of Transmittal, certificates for the Old Notes,
and any other required documents should be sent only to the Exchange Agent, not
to the Company, the Trustee, or to DTC.
Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to 5:00 p.m. New York time on the Expiration Date. In order to be
valid, notice of withdrawal of tendered Old Notes must comply with the
requirements set forth in the Prospectus under the caption "The Exchange Offer
- -- Withdrawal of Tenders."
2. Guaranteed Delivery Procedures.
If Holders desire to tender Old Notes pursuant to the Exchange Offer and
(i) certificates representing such Old Notes are not lost but are not
immediately available, (ii) time will not permit this Letter of Transmittal,
certificates representing such Holder's Old Notes and all other required
documents to reach the Exchange Agent prior to the Expiration Date, or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date, such Holders may effect a tender of Old Notes in accordance with the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures."
Pursuant to the guaranteed delivery procedures:
(i) such tender must be made by or through an Eligible
Institution;
(ii) prior to the Expiration Date, the Exchange Agent must have
received from such Eligible Institution, at one of the addresses set forth on
the cover of this Letter of Transmittal, a properly completed and validly
executed Notice of Guaranteed Delivery (by manually signed facsimile
transmission, mail or hand delivery) in substantially the form provided with the
Prospectus, setting forth the name(s) and address(es) of the registered
Holder(s) and the principal amount of Old Notes being tendered and stating that
the tender is being made thereby and guaranteeing that, within three New York
Stock Exchange ("NYSE") trading days from the date of the Notice of Guaranteed
Delivery, the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, or, in the case of a book-entry transfer,
an Agent's Message, together
-9-
<PAGE>
with certificates representing the Old Notes (or confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at a Book-Entry
Transfer Facility), and any other documents required by this Letter of
Transmittal and the instructions thereto, will be deposited by such Eligible
Institution with the Exchange Agent; and
(iii) this Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and validly executed with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
together with certificates for all Old Notes in proper form for transfer (or a
Book-Entry Confirmation with respect to all tendered Old Notes), and any other
required documents must be received by the Exchange Agent within three NYSE
trading days after the date of such Notice of Guaranteed Delivery.
3. Partial Tenders.
If less than the entire principal amount of any Old Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the last column of the box entitled "Description of
Old Notes" herein. The entire principal amount represented by the certificates
for all Old Notes delivered to the Exchange Agent will be deemed to have been
tendered, unless otherwise indicated. The entire principal amount of all Old
Notes not tendered or not accepted for exchange will be sent (or, if tendered by
book-entry transfer, returned by credit to the account at the Book-Entry
Transfer Facility designated herein) to the Holder unless otherwise provided in
the "Special Payment Instructions" or "Special Delivery Instructions" boxes of
this Letter of Transmittal.
4. Signatures on this Letter of Transmittal, Bond Powers and Endorsements;
Guarantee of Signatures.
If this Letter of Transmittal is signed by the Holder(s) of the Old Notes
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in one of
the Book-Entry Transfer Facilities whose name is shown as the owner of the Old
Notes tendered hereby, the signature must correspond with the name shown on the
security position listing as the owner of the Old Notes.
If any of the Old Notes tendered hereby are registered in the name of two
or more Holders, all such Holders must sign this Letter of Transmittal. If any
tendered Old Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal and any necessary accompanying documents as there are
different names in which certificates are held.
If this Letter of Transmittal or any certificates for Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Issuers of their authority so to act must be
submitted with this Letter of Transmittal.
IF THIS LETTER OF TRANSMITTAL IS EXECUTED BY A PERSON OR ENTITY WHO IS NOT
THE REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID BOND POWER,
WITH THE SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED MEDALLION SIGNATURE PROGRAM (A "MEDALLION SIGNATURE GUARANTOR").
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered Holder(s) of the Old Notes tendered herewith (or by a
participant in one of the Book-Entry Transfer Facilities whose name appears on a
security position listing as the owner of Old Notes) and certificates for New
Notes or for any Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued, directly to such Holder(s) or, if tendered by a
participant in one of the Book-Entry Transfer Facilities, any Old Notes for
-10-
<PAGE>
principal amounts not tendered or not accepted for exchange are to be credited
to such participant's account at such Book-Entry Transfer Facility and neither
the "Special Payment Instructions" box nor the "Special Delivery Instructions"
box of this Letter of Transmittal has been completed or (ii) such Old Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES ON LETTERS OF TRANSMITTAL ACCOMPANYING OLD NOTES MUST BE GUARANTEED
BY A MEDALLION SIGNATURE GUARANTOR. In all such other cases (including if this
Letter of Transmittal is not signed by the Holder), the Holder must either
properly endorse the certificates for Old Notes tendered or transmit a separate
properly completed bond power with this Letter of Transmittal (in either case,
executed exactly as the name(s) of the registered Holder(s) appear(s) on such
Old Notes, and, with respect to a participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Old Notes,
exactly as the name(s) of the participant(s) appear(s) on such security position
listing), with the signature on the endorsement or bond power guaranteed by a
Medallion Signature Guarantor, unless such certificates or bond powers are
executed by an Eligible Institution.
Endorsements on certificates for Old Notes, signatures on bond powers
provided in accordance with this Instruction 4 by registered Holders not
executing this Letter of Transmittal must be guaranteed by a Medallion Signature
Guarantor.
5. Special Payment and Special Delivery Instructions.
Tendering Holders should indicate in the applicable box or boxes the name
and address to which Old Notes for principal amounts not tendered or not
accepted for exchange or certificates for New Notes, if applicable, are to be
sent or issued, if different from the name and address of the Holder signing
this Letter of Transmittal. In the case of payment to a different name, the
taxpayer identification or social security number of the person named must also
be indicated. If no instructions are given, Old Notes not tendered or not
accepted for exchange will be returned, and certificates for New Notes will be
sent, to the Holder of the Old Notes tendered.
6. Taxpayer Identification Number.
Each tendering Holder is required to provide the Exchange Agent with the
Holder's social security or Federal employer identification number, on
Substitute Form W-9, which is provided under "Important Tax Information" below,
or alternatively, to establish another basis for exemption from backup
withholding. A Holder must cross out item (2) in the Certification box in Part
III on Substitute Form W-9 if such Holder is subject to backup withholding.
Failure to provide the information on the form may subject such Holder to 31%
Federal backup withholding tax on any payment made to the Holder with respect to
the Exchange Offer. The box in Part I of the form should be checked if the
tendering or consenting Holder has not been issued a Taxpayer Identification
Number ("TIN") and has either applied for a TIN or intends to apply for a TIN in
the near future. If the box in Part I is checked the Holder should also sign the
attached Certification of Awaiting Taxpayer Identification Number. If the
Exchange Agent is not provided with a TIN within 60 days thereafter, the
Exchange Agent will withhold 31% on all such payments of the New Notes until a
TIN is provided to the Exchange Agent.
7. Transfer Taxes.
The Issuers will pay all transfer taxes applicable to the exchange and
transfer of Old Notes pursuant to the Exchange Offer, except if (i) deliveries
of certificates for Old Notes for principal amounts not tendered or not accepted
for exchange are registered or issued in the name of any person other than the
Holder of Old Notes tendered thereby, (ii) tendered certificates are registered
in the name of any person other than the person signing this Letter of
Transmittal or (iii) a transfer tax is imposed for any reason other than the
transfer and sale of Old Notes to the Company or its order pursuant to the
Exchange Offer. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
deducted from any payment made to such tendering Holder.
-11-
<PAGE>
8. Irregularities.
All questions as to the form of all documents and the validity (including
time of receipt) and acceptance of all tenders and withdrawals of Old Notes will
be determined by the Issuers, in their sole discretion, which determination
shall be final and binding. Alternative, conditional or contingent tenders of
Old Notes will not be considered valid. The Issuers reserve the absolute right
to reject any and all tenders of Old Notes that are not in proper form or the
acceptance of which, in the Issuers' opinion, would be unlawful. The Issuers
also reserve the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes. The Issuers' interpretations of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding. Any defect or irregularity in connection
with tenders of Old Notes must be cured within such time as the Issuers
determine, unless waived by the Issuers. Tenders of Old shall not be deemed to
have been made until all defects or irregularities have been waived by the
Issuers or cured. A defective tender (which defect is not waived by the Issuers
or cured by the Holder) will not constitute a valid tender of Old Notes and will
not entitle the Holder to New Notes. Neither of the Issuers, the Trustee, the
Exchange Agent, nor any other person will be under any duty to give notice of
any defect or irregularity in any tender or withdrawal of any Old Notes, or
incur any liability to Holders for failure to give any such notice.
9. Waiver of Conditions.
The Issuers reserve the right, in their sole discretion, to amend or waive
any of the conditions to the Exchange Offer.
10. Mutilated, Lost, Stolen or Destroyed Certificates for Old Notes.
Any Holder whose certificates for Old Notes have been mutilated, lost,
stolen or destroyed should write to or telephone the Trustee at the address or
telephone number set forth on the cover of this Letter of Transmittal for the
Exchange Agent.
11. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering Old Notes and requests
for assistance or additional copies of the Prospectus, this Letter of
Transmittal, the Notice of Guaranteed Delivery and other documents may be
directed to the Exchange Agent, whose address and telephone number appear above.
-12-
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder who tenders Old Notes prior to
receipt of the New Notes is required to provide the Exchange Agent with such
Holder's correct TIN on the Substitute Form W-9 below or otherwise establish a
basis for exemption from backup withholding. If such Holder is an individual,
the TIN is his or her social security number. If the Exchange Agent is not
provided with the correct TIN, a $50 penalty may be imposed by the Internal
Revenue Service ("IRS") and payments, including any New Notes, made to such
Holder with respect to Old Notes exchanged pursuant to the Exchange Offer may be
subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should indicate their exempt status on the
Substitute Form W-9. A foreign person may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed IRS Form W-8, signed under
penalties of perjury, attesting to that Holder's exempt status. A Form W-8 can
be obtained from the Exchange Agent. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions. Holders are urged to consult their own tax advisors to
determine whether they are exempt.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the Holder or other payee. Backup withholding is not
an additional Federal income tax. Rather, the Federal income tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the IRS.
Purpose of Substitute Form W-9
To prevent backup withholding on payments, including any New Notes, made
with respect to Old Notes exchanged pursuant to the Exchange Offer, the Holder
is required to provide the Exchange Agent with (i) the Holder's correct TIN by
completing the form below, certifying that the TIN provided on the Substitute
Form W-9 is correct (or that such Holder is awaiting a TIN) and that (A) such
Holder is exempt from backup withholding, (B) the Holder has not been notified
by the IRS that the Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (C) the IRS has notified the
Holder that the Holder is no longer subject to backup withholding and (ii) if
applicable, an adequate basis for exemption.
What Number to Give the Exchange Agent
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered Holder. If
the Old Notes are held in more than one name or are held not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
-13-
<PAGE>
SUBSTITUTE FORM W-9
Request for Taxpayer Identification Number and Certification
PAYOR'S NAME: FOAMEX L.P.
- --------------------------------------------------------------------------------
PAYEE INFORMATION
(Please print or type)
Individual or business name (if joint account, list first and circle the name of
person or entity whose number you furnish in Part 1 below):
- --------------------------------------------------------------------------------
Check appropriate box: [_] Individual/Sole proprietor [_] Corporation
[_] Partnership [_] Other _____________
- --------------------------------------------------------------------------------
Address (number, street, and apt. or suite no.):________________________________
- --------------------------------------------------------------------------------
City, state, and ZIP code:______________________________________________________
- --------------------------------------------------------------------------------
PART I Taxpayer Identification Number ("TIN") | PART II Payees Exempt from
Enter your TIN below. For individuals, this is | Backup Withholding
your social secial security number. For other |
entities, it is your employer identification |
number. Refer to the chart on page 1 of the | Check box (See page 2 of
Guidelines for Certification of Taxpayer | the Guidelines for further
Identification Number on Substitute Form W-9 | clarification. Even if
(the "Guidelines") for further clarification. | you are exempt from backup
If you do not have a TIN, see instructions on | withholding, you should
how to obtain a TIN on page 2 of the | still complete and sign the
Guidelines, check the appropriate box below | certification below):
indicating that you have applied for a TIN and, |
in addition to the Part III Certification, sign | [_] EXEMPT
the attached Certification of Awaiting Taxpayer |
Identification Number. |
|
Social security number: |
|
[_] [_] [_] - [_] [_] - [_] [_] [_] [_] |
|
[_] Applied For |
|
Employer identification number: |
|
[_] [_] - [_] [_] [_] [_] [_] [_] [_] |
|
- --------------------------------------------------------------------------------
PART III Certification
Certification Instructions: You must cross out item 2 below if you have been
notified by the Internal Revenue Service (the "IRS") that you are currently
subject to backup withholding because of underreporting interest or dividends on
your tax return (See page 2 of the Guidelines for further clarification).
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, (b) I have not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
Signature_________________________________ Date____________________________
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT
IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS:
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED
THE BOX "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9
--------------------------------------------------------------
| CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER |
| |
| I certify, under penalties of perjury, that a TIN has not |
| been issued to me, and either (a) I have mailed or delivered |
| an application to receive a TIN to the appropriate IRS |
| Service Center of Social Security Administration Office, or |
| (b) I intend to mail or deliver an application in the near |
| future. I understand that I must provide a TIN to the payor |
| within 60 days of submitting this Substitute Form W-9 and |
| that if I do not provide a TIN to the payor within 60 days, |
| the payor is required to withhold 31% of all reportable |
| payments thereafter to me until I furnish the payor with a |
| TIN. |
| |
| |
| Signature______________________ |
| |
| |
| |
| Date_______________ |
| |
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Draft 7/24/97
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
9-7/8% Senior Subordinated Notes due 2007
in Exchange for New
9-7/8% Senior Subordinated Notes due 2007
of
FOAMEX L.P.
and
FOAMEX CAPITAL CORPORATION
As set forth in the Prospectus dated _______, 1997 (as the same may be
amended from time to time, the "Prospectus") of Foamex L.P. (the "Company") and
Foamex Capital Corporation ("FCC" and, together with the Company, the "Issuers")
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures," and in
the accompanying Letter of Transmittal (the "Letter of Transmittal") and
Instruction 2 thereto, this form or one substantially equivalent, must be used
to tender any of the Issuers' outstanding 9-7/8% Senior Subordinated Notes due
2007 (the "Old Notes") pursuant to the Exchange Offer, if (i) certificates
representing the Old Notes to be tendered for exchange are not lost but are not
immediately available, (ii) time will not permit a Holder's Letter of
Transmittal, certificates representing the Old Notes to be tendered and all
other required documents to reach The Bank of New York (the "Exchange Agent")
prior to the Expiration Date with respect to the Exchange Offer, or (iii) the
procedures for book-entry transfer cannot be completed prior to the Expiration
Date. This form may be delivered by an Eligible Institution by mail or hand
delivery or transmitted, via manually signed facsimile, to the Exchange Agent as
set forth below.
Terms not otherwise defined herein shall have their respective
meanings as set forth in the Prospectus.
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THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON
_____________, 1997, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
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The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand Or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, Ground Level 101 Barclay Street, 7E
Corporate Trust Services Window To Confirm by Telephone New York, New York 10286
New York, New York 10286 or for Information Call: Attention: Denise Robinson
Attention: Denise Robinson Reorganization Section
Reorganization Section (212) 815-2791
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other
than as set forth above or transmission of instructions via facsimile
transmission to a number other than as set forth above will not constitute
a valid delivery.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tender(s) to the Issuers, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount
of Old Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the undersigned
has full power and authority to tender the Old Notes. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Issuers to be necessary or desirable for the
perfection of the undersigned's tender.
Tenders may be withdrawn in accordance with the procedures set
forth in the Prospectus. The undersigned authorizes the Exchange Agent to
deliver this Notice of Guaranteed Delivery to the Issuers and the Trustee as
evidence of the undersigned's tender of Old Notes.
All authority herein conferred or agreed to be conferred by this
Notice of Guaranteed Delivery shall survive the death or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of the undersigned.
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<PAGE>
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PLEASE SIGN AND COMPLETE
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Signatures of Registered Holder(s) or Date:
Authorized Signatory: -----------------------------------
Address:
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Name(s) of Registered Holder(s): Area Code and Telephone No.:
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Principal Amount of Notes Tendered: If Notes will be delivered by
book-entry transfer,
complete the following:
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Certificate No.(s) of
Notes (if available):
Depository Account No.
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This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as
their names appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below
under "Capacity" and submit evidence satisfactory to the Issuers of such
person's authority to so act.
Please print name(s) and address(es)
Name(s):
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Capacity:
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Address(es):
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DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT, TOGETHER WITH A PROPERLY COMPLETED AND VALIDLY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER RELATED DOCUMENTS.
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<PAGE>
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GUARANTEE
(Not to be used for signature guarantee)
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The undersigned, a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States, hereby
guarantees that, within three New York Stock Exchange trading days from the date
of this Notice of Guaranteed Delivery, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof), together with
certificates representing the Old Notes tendered hereby in proper form for
transfer (or confirmation of the book-entry transfer of such Old Notes into the
Depositary's account at a Book-Entry Transfer Facility, pursuant to the
procedure for book-entry transfer set forth in the Prospectus under the caption
"The Exchange Offer -- Book-Entry Transfer"), and any other required documents
will be deposited by the undersigned with the Exchange Agent at its address set
forth above.
Name of Firm:
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Address: Authorized Signature
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Area Code and Name:
Telephone No.: -----------------------------------
------------------------ Title:
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Date:
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Draft 09/10/97
FOAMEX L.P.
and
FOAMEX CAPITAL CORPORATION
Offer for all Outstanding 97/8% Senior Subordinated Notes Due 2007
in Exchange for up to $150,000,000 principal amount of
97/8% Senior Subordinated Notes Due 2007
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THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON
_____________, 1997, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
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To Brokers, Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated , 1997 (as the same
may be amended or supplemented form time to time, the "Prospectus") and a form
of Letter of Transmittal (the "Letter of Transmittal") relating to the offer
(the "Exchange Offer") by Foamex L.P. (the "Company") and Foamex Capital
Corporation ("FCC," and, together with the Company, the "Issuers') to exchange
up to $150,000,000 in aggregate principal amount of its Senior Subordinated
Notes due 2007 (the "New Notes") for $150,000,000 in aggregate principal amount
of its Senior Subordinated Notes due 2007 (the "Old Notes").
We are asking you to contact your clients for whom you hold Old Notes
registered in your name or in the name of your nominee. In addition, we ask you
to contact your clients who, to your knowledge, hold Old Notes registered in
their own name. The Issuers will not pay any fees or commissions to any broker,
dealer or other person in connection with the solicitation of tenders pursuant
to the Exchange Offer. You will, however, be reimbursed by the Issuers for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Issuers will pay all transfer taxes, if
any, applicable to the tender any of the enclosed materials to your clients. The
Issuers will pay all transfer taxes, if any, applicable to the tender of Old
Notes to it or its order, except as otherwise provided in the Prospectus and the
Letter of Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the tender of
Old Notes and for the information of your clients;
3. A form of letter that may be sent to your clients for whose accounts
you hold Old Notes registered in your name or the name of your
nominee; with space provided for obtaining the clients' instructions
with regard to the Exchange Offer;
<PAGE>
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at
midnight, New York City Time; on , 1997, unless extends (the
"Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be
withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
In all cases, exchanges of Old Notes for New Notes accepted for exchange
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of (a) certificates representing such Old Notes or a confirmation
of a book-entry transfer of such Old Notes, as the case may be, (b) the Letter
of Transmittal (or a facsimile thereof) promptly completed and duly executed
with any required signature guarantees, and (c) any other documents required by
the Letter of Transmittal.
Holders who wish to tender their Old Notes and (a) whose Old Notes are not
immediately available, (b) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date or (c) who cannot complete the procedure for book-entry transfer
on a timely basis, may tender their Old Notes by following the guaranteed
delivery procedures described in the Prospectus under "The Exchange Offer - -
Guaranteed Delivery Procedures."
To tender Old Notes, certificates for Old Notes, a duly executed and
properly completed Letter of Transmittal or a facsimile thereof, together with
any other required documents, must be received by the Exchange Agent as provided
the Prospectus and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
Exchange Agent, The Bank of New York, by calling (212) 815-2791.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO
THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
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Draft 09/10/97
FOAMEX L.P.
and
FOAMEX CAPITAL CORPORATION
Offer for all Outstanding 9-7/8% Senior Subordinated Notes Due 2007
in Exchange for up to $150,000,000 principal amount of
9-7/8% Senior Subordinated Notes Due 2007
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THE EXCHANGE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON
_____________, 1997, UNLESS EXTENDED OR TERMINATED (THE "EXPIRATION DATE").
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To Our Clients:
Enclosed for your consideration is a Prospectus dated , 1997 (as the same
may be amended or supplemented from time to time, the "Prospectus") and a form
of Letter of Transmittal (the "Letter of Transmittal") relating to the offer
(the "Exchange Offer") by Foamex L.P. (the "Company") and Foamex Capital
Corporation ("FCC," and, together with the Company, the "Issuers") to exchange
up to $150,000,000 in aggregate principal amount of its Senior Subordinated
Notes due 2007 (the "Old Notes") for $150,000,000 in aggregate principal amount
of its Senior Subordinated Notes due 2007 (the "New Notes") upon the terms and
conditions set forth in the Prospectus and the Letter of Transmittal.
The material is being forwarded to you as the beneficial owner of Old Notes
held by us for your account or benefit but not registered in your name. A tender
of the Old Notes pursuant to the Exchange Offer may be made only by us as the
registered holder of the Old Notes, and pursuant to your instructions.
Therefore, the Issuers urge beneficial owners of Old Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee to
contact such holder promptly if they wish to tender Old Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to tender
any or all Old Notes held by us for your account or benefit, pursuant to the
terms and conditions set forth in the Prospectus and Letter of Transmittal. We
urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to tender your Old Notes pursuant to the Exchange Offer.
Your instructions to us should be forwarded as promptly as practicable in
order to permit us to tender Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City Time, on , unless extended (the "Expiration Date"). Old
Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the
procedures described in the Prospectus, at any time prior to the Expiration
Date.
<PAGE>
If you wish to have us tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the instruction form that appears below. The accompanying Letter
of Transmittal is furnished to you for informational purposes only and may not
be used by you to tender Old Notes held by us and registered in our name for
your account or benefit.
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