<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 11, 1996
FOAMEX L.P.
FOAMEX CAPITAL CORPORATION
FOAMEX-JPS AUTOMOTIVE L.P.
FOAMEX-JPS CAPITAL CORPORATION
FOAMEX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11432 05-0475617
1-11436 22-3182164
33-82028 13-3770906
33-82028-01 13-3770901
0-22624 05-0473908
(Commission File Number) (I.R.S. Employer Identification No.)
1000 Columbia Avenue,
Linwood, PA 19061
(Address of principal executive offices) (Zip Code)
(610) 859-3000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. Other Events.
On June 11, 1996, PFI Subsidiary, Inc. ("Newco"), PFI Acquisition
Corp. ("Parent"), Jody B. Vitale, Perfect Fit Industries, Inc., a wholly
owned subsidiary of General Felt Industries, Inc. ("Perfect Fit"), General
Felt Industries, Inc., a wholly owned subsidiary of Foamex L.P. and Foamex
L.P. entered into an Agreement and Plan of Merger pursuant to which Parent
will acquire all of the outstanding shares of capital stock of Perfect Fit
through the merger of Newco with and into Perfect Fit.
The aggregate consideration for the acquisition is $50 million,
subject to closing and post-closing adjustments.
Perfect Fit, which had 1995 revenues of approximately $98.5 million,
is a leading domestic manufacturer and marketer of home comfort and
furnishings products such as mattress pads, bed pillows, draperies and
decorative bedding. Products are sold under such nationally advertised brands
as Bedsack(TM), Decorama(TM) and Flexwall(TM). Perfect Fit is headquartered in
Monroe, North Carolina, and has eight manufacturing and distribution
facilities in North Carolina, Florida and Indiana, as well as a sales office
and showroom in New York City. Its customers include national mass
merchandisers, department stores, catalog companies and specialty retailers.
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits:
2. Agreement and Plan of Merger, dated as of June 11,
1996, by and among PFI Subsidiary, Inc., PFI Acquisition
Corp., Jody B. Vitale, Perfect Fit Industries, Inc.,
General Felt Industries, Inc. and Foamex L.P.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOAMEX L.P.
By: FMXI, Inc.
General Partner
DATE: June 13, 1996 By: /s/ Kenneth R. Fuette
NAME: Kenneth R. Fuette
TITLE: Senior Vice President
of Finance
FOAMEX CAPITAL CORPORATION
DATE: June 13, 1996 By: /s/ Kenneth R. Fuette
NAME: Kenneth R. Fuette
TITLE: Treasurer, Chief Financial
Officer and Chief Accounting
Officer
FOAMEX-JPS AUTOMOTIVE L.P.
By: FJGP Inc.
General Partner
DATE: June 13, 1996 By: /s/ Kenneth R. Fuette
NAME: Kenneth R. Fuette
TITLE: Senior Vice President of
Finance
FOAMEX-JPS CAPITAL CORPORATION
DATE: June 13, 1996 By: /s/ Kenneth R. Fuette
NAME: Kenneth R. Fuette
TITLE: Senior Vice President of
Finance
FOAMEX INTERNATIONAL INC.
DATE: June 13, 1996 By: /s/ Kenneth R. Fuette
NAME: Kenneth R. Fuette
TITLE: Senior Vice President
of Finance, Chief Financial
Officer and Chief Accounting
Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
- ----------- --------
2 Agreement and Plan of Merger, dated as of June 11, 1996,
by and among PFI Subsidiary, Inc., PFI Acquisition Corp.,
Jody B. Vitale, Perfect Fit Industries, Inc., General Felt
Industries, Inc. and Foamex L.P.
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND
AMONG
PFI SUBSIDIARY, INC.,
PFI ACQUISITION CORP.,
JODY B. VITALE,
PERFECT FIT INDUSTRIES, INC.,
GENERAL FELT INDUSTRIES, INC.,
AND
FOAMEX L.P.
Dated as of June 11, 1996
<PAGE>i
TABLE OF CONTENTS
Page
ARTICLE I. TERMS AND EFFECT OF MERGER........................................2
Section 1.1. The Merger; Name of Surviving Corporation................... 2
Section 1.2. Certificate of Incorporation of Surviving Corporation.........2
Section 1.3. By-laws of Surviving Corporation..............................2
Section 1.4. Directors and Officers of Surviving Corporation...............2
Section 1.5. Effect of Merger on Capital Stock of Constituent
Corporations..................................................2
Section 1.6. Adoption of this Agreement by the Sole Stockholders
of Newco and the Company......................................3
Section 1.7. Effect of the Merger..........................................3
Section 1.8. Closing; Filing of Certificate of Merger;
Effective Time................................................3
ARTICLE II. CLOSING PAYMENT; MERGER CONSIDERATION............................3
Section 2.1. Merger Consideration..........................................3
Section 2.2. Post-Closing Adjustment.......................................4
Section 2.3. Deposit.......................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF FOAMEX, GENERAL FELT
AND THE COMPANY.................................................6
Section 3.1. Organization, Good Standing, Power and Authority and
Qualification of Foamex, General Felt and the Company.........6
Section 3.2. Capitalization of the Company.................................7
Section 3.3. Issuance of Capital Stock of the Company; Calls
upon Shares...................................................7
Section 3.4. Effective Agreement of Foamex, General Felt and the
Company.......................................................7
Section 3.5. Subsidiaries and Affiliates...................................8
Section 3.6. Certificate of Incorporation and By-laws......................8
Section 3.7. Financial Statements..........................................8
Section 3.8. Taxes.........................................................9
Section 3.9. Compliance with Law..........................................10
Section 3.10. Environmental Matters.......................................10
Section 3.11. Labor Contracts.............................................12
Section 3.12. Condition of Properties.....................................12
Section 3.13. Undisclosed Liabilities; Accounts Payable, Etc..............12
Section 3.14. Absence of Changes..........................................13
Section 3.15. Title to Real Property......................................14
Section 3.16. Leases of Real Property.....................................15
Section 3.17. Easements; Condemnation.....................................15
Section 3.18. Title to Personal Property..................................15
Section 3.19. Leases of Personal Property.................................16
Section 3.20. Accounts Receivable.........................................17
Section 3.21. Inventory; Recalls..........................................17
Section 3.22. Contracts, Agreements and Commitments.......................17
<PAGE>ii
Section 3.23. Certain Documents and Reports...............................18
Section 3.24. Patents, Trademarks, Copyrights, Etc........................18
Section 3.25. Insurance...................................................19
Section 3.26. Litigation..................................................19
Section 3.27. Employee Benefit Plans......................................20
Section 3.28. Employee Compensation.......................................21
Section 3.29. Principal Revenue Sources...................................21
Section 3.30. Third Party Obligations.....................................21
Section 3.31. Affiliate and Associate Transactions........................21
Section 3.32. Absence of Certain Business Practices.......................22
Section 3.33. Brokers and Finders.........................................22
Section 3.34. Certain Tell City Representations...........................22
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO..............23
Section 4.1. Organization, Good Standing and Corporate Power
and Authority of Parent and Newco............................23
Section 4.2. Effective Agreement of Parent and Newco......................23
Section 4.3. Litigation...................................................23
Section 4.4. Brokers and Finders..........................................23
Section 4.5. Parent Funds.................................................23
Section 4.6. Ownership of Parent and Newco................................24
ARTICLE V. COVENANTS REGARDING THE COMPANY'S BUSINESS AND
TRANSACTIONS PRIOR TO THE EFFECTIVE TIME.........................24
Section 5.1. Conduct of Business in Ordinary Course.......................24
Section 5.2. No Change in Certificate of Incorporation or
By-laws......................................................25
Section 5.3. No Change in Capital Stock...................................25
Section 5.4. No Change in Accounting Methods..............................25
Section 5.5. Prohibition on Loans and Certain Other Transactions..........25
Section 5.6. No Defaults..................................................25
Section 5.7. No Increases in Compensation.................................26
Section 5.8. No Change in Pension Plan Status.............................26
Section 5.9. Preservation of Business.....................................26
Section 5.10. Maintenance of Properties...................................26
Section 5.11. Maintenance of Insurance....................................26
Section 5.12. Filing of Reports and Permit Renewals and Transfers.........27
Section 5.13. Actions Affecting Representations, Warranties
and Covenants...............................................27
Section 5.14. Books and Records...........................................27
Section 5.15. Financial Statements........................................27
Section 5.16. No Shop.....................................................27
Section 5.17. Certain Real Property Matters...............................28
ARTICLE VI. CERTAIN COVENANTS OF THE PARTIES................................29
Section 6.1. Notice of Certain Events.....................................29
Section 6.2. Access to Properties and Records.............................29
Section 6.3. Consents and Approvals.......................................30
Section 6.4. Further Assurances...........................................30
<PAGE>iii
Section 6.5. Efforts......................................................30
Section 6.6. Confidentiality Covenant.....................................30
Section 6.7. Non-Competition and Non-Solicitation Covenants...............31
Section 6.8. Cash Dividend................................................32
Section 6.9. Certain Senior Executive Employee Matters....................32
Section 6.10. Collection of Certain Accounts Receivable...................32
Section 6.11. Tax Matters.................................................33
Section 6.12. Employee Matters............................................33
Section 6.13. Release of Obligations Under Letter of Credit
Agreement...................................................34
Section 6.14. Self-Insured Welfare Liabilities............................34
Section 6.15. Certain Insurance Matters...................................34
Section 6.16. Satisfaction of Certain Liabilities.........................34
Section 6.17. Certain Matters Relating to Commitment Letters
and the Lock-In Date........................................35
ARTICLE VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND NEWCO....35
Section 7.1. Proceedings and Documentation................................35
Section 7.2. Accuracy of Representations and Warranties;
Compliance with Covenants and Conditions.....................36
Section 7.3. Legal Opinion of Counsel to the Company......................36
Section 7.4. Obtaining of Consents........................................36
Section 7.5. Absence of Pending Proceedings...............................36
Section 7.6. No Material Adverse Change...................................37
Section 7.7. Supply Agreement.............................................37
Section 7.8. FIRPTA Affidavit.............................................37
Section 7.9. Delivery of Shares...........................................37
Section 7.10. Absence of Certain Environmental Matters....................37
ARTICLE VIII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF GENERAL
FELT AND THE COMPANY..........................................37
Section 8.1. Proceedings and Documentation................................37
Section 8.2. Accuracy of Representations and Warranties;
Compliance with Covenants and Conditions.....................38
Section 8.3. Legal Opinion of Counsel to Newco and Parent.................38
Section 8.4. Obtaining of Consents........................................38
Section 8.5. Absence of Pending Proceedings...............................38
Section 8.6. Supply Agreement.............................................38
Section 8.7. Merger Consideration.........................................38
ARTICLE IX. TERMINATION OF THIS AGREEMENT...................................38
Section 9.1. Termination..................................................39
Section 9.2. Liability of the Parties.....................................40
Section 9.3. Termination Fee..............................................41
Section 9.4. The Effect of Certain Terminations on the Deposit............41
ARTICLE X. INDEMNIFICATION..................................................42
<PAGE>iv
Section 10.1. Indemnification by Foamex and General Felt..................42
Section 10.2. Indemnification by Parent and Newco.........................44
Section 10.3. Indemnification Procedures..................................44
Section 10.4. Survival of Representations, Warranties, Covenants
and Agreements..............................................45
Section 10.5. Certain Additional Provisions Relating to
Indemnification.............................................46
Section 10.6. Indemnification for Taxes...................................47
Section 10.7. Environmental Compliance Costs..............................49
ARTICLE XI. VITALE GUARANTY.................................................50
Section 11.1. Vitale Guaranty.............................................50
Section 11.2. Guaranty of Payment and Performance.........................51
Section 11.3. Defenses....................................................51
Section 11.4. Certain Representations.....................................51
Section 11.5. Termination of Guaranty.....................................52
ARTICLE XII. MISCELLANEOUS..................................................52
Section 12.1. Notices.....................................................52
Section 12.2. Assignability and Parties in Interest.......................53
Section 12.3. Governing Law...............................................54
Section 12.4. Consent to New York Jurisdiction............................54
Section 12.5. Counterparts................................................54
Section 12.6. Publicity...................................................54
Section 12.7. Complete Agreement..........................................54
Section 12.8. Expenses....................................................54
Section 12.9. Modifications, Amendments and Waivers.......................54
Section 12.10. Interpretation.............................................55
Section 12.11. Specific Performance Agreement.............................55
Section 12.12. Knowledge..................................................55
<PAGE>v
SCHEDULES
Schedule 2.2(b) - Post-Closing Adjustment
Schedule 3.1 - Organization, Good Standing, Power and Authority and
Qualifications of Foamex, General
Felt and the Company
Schedule 3.3 - Capital Stock; Calls upon Shares
Schedule 3.4 - Conflicts or Violations of Foamex, General Felt and
the Company
Schedule 3.6 - Certificate of Incorporation and By-Laws
Schedule 3.7(a) - Financial Statements
Schedule 3.7(b) - Adjusted April Balance Sheet
Schedule 3.8 - Tax Matters
Schedule 3.9 - Compliance with Law
Schedule 3.10 - Environmental Matters
Schedule 3.11 - Labor Contracts
Schedule 3.12 - Condition of Property
Schedule 3.13 - Undisclosed Liabilities
Schedule 3.14 - Absence of Changes
Schedule 3.15 - Real Property; Liens
Schedule 3.16 - Leased Real Property
Schedule 3.18 - Personal Property; Liens
Schedule 3.19 - Leases of Personal Property
Schedule 3.20 - Accounts Receivable
Schedule 3.21 - Inventory; Recalls
Schedule 3.22 - Contracts
Schedule 3.23 - Certain Documents and Reports
Schedule 3.24 - Intellectual Property
Schedule 3.25 - Insurance
Schedule 3.26 - Litigation
Schedule 3.27 - Employee Benefit Plans
Schedule 3.28 - Employee Compensation
Schedule 3.29 - Principal Revenue Sources
Schedule 3.30 - Third Party Obligations
Schedule 3.31 - Affiliate and Associate Transactions
Schedule 5.4 - Changes in Accounting Methods
Schedule 5.5 - Loans and Certain Other Transactions
Schedule 5.7 - Increases in Salary and Bonus
Schedule 6.7 - Non-Competition and Non-Solicitation
Schedule 7.4 - Parent's and Newco's Closing Condition Consents
Schedule 8.4 - Foamex's, General Felt's and the Company's Closing
Condition Consents
Schedule 10.1(h)- Certain Non-Indemnified Liabilities
Schedule 12.12 - Knowledge
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Opinion of Willkie Farr & Gallagher
Exhibit C - Supply Agreement
Exhibit D - Opinion of Parker Chapin Flattau & Klimpl, LLP
Exhibit E - Title Affidavits
<PAGE>1
AGREEMENT AND PLAN OF MERGER
of
PFI SUBSIDIARY, INC.
into
PERFECT FIT INDUSTRIES, INC.
AGREEMENT AND PLAN OF MERGER dated as of June 11, 1996
("Agreement") by and among PFI SUBSIDIARY, INC., a Delaware corporation having
a mailing address c/o Parent (as defined below) at Parent's principal office
location set forth below ("Newco"), and PERFECT FIT INDUSTRIES, INC., a
Delaware corporation having its principal office at 201 Cuthbertson Street,
Monroe, North Carolina 28110 (the "Company"), as the "constituent
corporations" to the merger contemplated by this Agreement (the "Merger"), PFI
ACQUISITION CORP., a North Carolina corporation having its principal office at
6337 Morrison Boulevard, Charlotte, North Carolina 28211 ("Parent"), JODY B.
VITALE, an individual having a mailing address c/o Parent at Parent's
principal office location set forth above, as guarantor pursuant to Article XI
hereof ("Vitale"), GENERAL FELT INDUSTRIES, INC., a Delaware corporation
having its principal office at 1000 Columbia Avenue, Linwood, Pennsylvania
19061 ("General Felt"), and FOAMEX L.P., a Delaware limited partnership having
its principal office at 1000 Columbia Avenue, Linwood, Pennsylvania 19061
("Foamex"), each of Parent, Vitale, General Felt and Foamex as a party hereto
but not as a constituent corporation.
W I T N E S S E T H :
WHEREAS, the parties wish to provide for the acquisition of
the Company by Parent through (a) the merger of Newco into the Company, (b)
the conversion of all of the Company's presently outstanding shares of capital
stock into the Merger Consideration (as defined in Section 2.1), and (c) the
conversion of all of Newco's presently outstanding shares of capital stock
into shares of the Company, which shares shall thereupon constitute all of the
outstanding capital stock of the Surviving Corporation (as defined in Section
1.1); and
WHEREAS, the laws of the State of Delaware permit the
merger of Newco with and into the Company; and
WHEREAS, the respective Boards of Directors of the Company
(all of the outstanding capital stock of which is owned by General Felt),
General Felt, Newco (all of the outstanding capital stock of which is owned by
Parent), and Parent deem it desirable and in the best interests of their
respective corporations and stockholders to merge Newco with and into the
Company, and have approved this Agreement for that purpose; and
WHEREAS, this Agreement has been approved by Parent, which
is the sole stockholder of Newco, and by General Felt, which is the sole
stockholder of the Company; and
WHEREAS, Foamex, as the owner of all of the outstanding
capital stock of General Felt (and, therefore, as the indirect owner of all of
the outstanding capital stock of the Company), has
<PAGE>2
agreed to join with General Felt in its representations, warranties, covenants
and agreements to be made hereunder.
NOW, THEREFORE, in consideration of the covenants,
agreements, representations and warranties contained in this Agreement, and in
order to prescribe the terms and conditions of the Merger and the procedures
to effectuate the Merger, the parties hereto agree as follows:
ARTICLE I.
TERMS AND EFFECT OF MERGER
Section 1.1. The Merger; Name of Surviving Corporation. The
Company and Newco are the constituent corporations as contemplated by the
Delaware General Corporation Law. At the Effective Time (as defined in Section
1.8) and pursuant to the Delaware General Corporation Law, (a) Newco shall be
merged with and into the Company and the separate existence of Newco shall
cease, and (b) the Company shall be the "Surviving Corporation" and shall
continue its corporate existence under the laws of the State of Delaware under
the name "Perfect Fit Industries, Inc."
Section 1.2. Certificate of Incorporation of Surviving
Corporation. The Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of the Company in effect at the
Effective Time, which shall remain unchanged and unaffected by the Merger
until further amended as provided by law.
Section 1.3. By-laws of Surviving Corporation. The By-laws of
the Surviving Corporation shall be the By-laws of Newco in effect at the
Effective Time, which shall remain unchanged and unaffected by the Merger until
amended as provided by law.
Section 1.4. Directors and Officers of Surviving Corporation.
The directors of Newco immediately prior to the Effective Time shall be the
directors of the Surviving Corporation and the officers of Newco immediately
prior to the Effective Time shall be the officers of the Surviving Corporation,
in each case until their respective successors are duly elected and qualified.
Section 1.5. Effect of Merger on Capital Stock of Constituent
Corporations. As of the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of capital stock of the
constituent corporations:
(a) All of the shares of the Company's Class A Voting Stock
("Class A Common Stock"), par value $.01 per share (the "Shares"), issued and
outstanding immediately prior to the Effective Time shall, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and represent solely the right to receive the Merger
Consideration.
(b) Each share of common stock, par value $.01 per share, of
Newco issued and outstanding immediately prior to the Effective Time shall, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and exchangeable
<PAGE>3
for one share of Class A Common Stock of the Company, which shares shall
thereupon represent all of the outstanding capital stock of the Surviving
Corporation.
Section 1.6. Adoption of this Agreement by the Sole
Stockholders of Newco and the Company. This Agreement has been adopted by
Parent, which is the sole stockholder of Newco, and by General Felt, which is
the sole stockholder of the Company, each pursuant to written consents of its
Board of Directors and, in the case of Parent, by its stockholders, as provided
by the Delaware General Corporation Law.
Section 1.7. Effect of the Merger. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law. At the
Effective Time, the constituent corporations shall become a single corporation
and the Company shall continue to exist as the Surviving Corporation and shall
thereupon and thereafter, pursuant to the Delaware General Corporation Law, have
all the rights, privileges, immunities, powers and franchises, and be subject to
all the duties, liabilities, obligations and penalties, of each of the
constituent corporations, and all property, real, personal and mixed, and all
debts due on whatever account and all other choses in action, and all and every
other interest of, or belonging to or due to each of the constituent
corporations shall be vested in the Surviving Corporation without further act or
deed, and the Surviving Corporation shall be subject to all of the liabilities,
obligations and penalties of the respective constituent corporations, not
pursuant to contract but by operation of law, all in the manner and to the full
extent provided by the Delaware General Corporation Law.
Section 1.8. Closing; Filing of Certificate of Merger;
Effective Time.
(a) Upon the terms and provisions and subject to the
conditions set forth in this Agreement, the constituent corporations shall cause
a Certificate of Merger to be duly prepared in the form attached hereto as
Exhibit A (the "Certificate of Merger") and properly executed and delivered for
filing and thereafter duly filed with the Secretary of State of the State of
Delaware, as provided in the Delaware General Corporation Law, as soon as
practicable on or after the Closing Date (as defined below), pursuant to which
Certificate of Merger Newco shall be merged with and into the Company. The
Merger shall become effective upon the later of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware or at such later
time thereafter as is provided in such Certificate of Merger (the "Effective
Time").
(b) The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at 10:00 a.m. on a date to be mutually
agreed upon by Foamex, General Felt, the Company, Parent and Newco, which date
shall be set no later than the fifth business day after satisfaction of the
closing conditions set forth in Articles VII and VIII hereof, or the waiver
thereof as provided herein, unless another date or place is agreed to in writing
by Foamex, General Felt, the Company, Parent and Newco. The date on which the
Closing occurs is referred to herein as the "Closing Date."
ARTICLE II.
CLOSING PAYMENT; MERGER CONSIDERATION
Section 2.1. Merger Consideration.
<PAGE>4
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of Shares, the Shares shall be converted
into the right to receive an amount in cash equal to FIFTY MILLION DOLLARS
($50,000,000), subject to adjustment prior to the Closing as provided in (b)
below (the "Merger Consideration"), and subject to further adjustment following
the Closing as provided in Section 2.2 hereof.
(b) Not fewer than five (5) business days prior to the Closing
Date, General Felt shall deliver to Parent a balance sheet of the Company (the
"Pre-Closing Balance Sheet") as of the close of the last completed fiscal month
prior to the Closing Date, provided that if the last permissible date of
delivery is on or before the tenth calendar day of a calendar month, then the
balance sheet shall be as of the close of the penultimate completed fiscal month
(the "Estimation Date"), including a statement setting forth its reasonable,
good faith estimate of the Net Assets (as defined in Section 2.2) as of the
Estimation Date determined based upon the Pre-Closing Balance Sheet (the
"Estimated Net Assets"), which statement shall be accompanied by a certificate
of the Chief Financial Officer of the Company, without personal liability, to
the effect that the Pre-Closing Balance Sheet and the statement of the Net
Assets have been prepared in good faith, have been prepared and calculated in
accordance with Section 2.2(b), and reflect General Felt's and the Company's
reasonable, good faith estimate of the Net Assets as of the Estimation Date. If
the amount of the Estimated Net Assets exceeds $46,670,000 (the "Target
Amount"), the amount of the Merger Consideration payable at Closing shall be
increased on a dollar-for-dollar basis by an amount equal to such excess. If the
Target Amount exceeds the Estimated Net Assets, the amount of the Merger
Consideration payable at Closing shall be decreased on a dollar-for-dollar basis
by an amount equal to the excess.
(c) On the Closing Date, Parent or Newco shall deliver an
amount equal to the Merger Consideration by wire transfer of immediately
available funds as follows: (i) an amount specified by General Felt in writing
not less than one business day prior to the Closing Date to the holders of
certain of the Released Obligations (as defined in Section 6.16), and (ii) the
balance of the Merger Consideration to the holder of the Shares. Following the
Effective Time, the amount of the Merger Consideration shall be subject to
further adjustment as provided in Section 2.2 hereof. Until surrendered in
exchange for the Merger Consideration, each certificate for the Shares shall
represent for all purposes solely the right to receive the Merger Consideration
in respect of the Shares evidenced thereby. From and after the Effective Time,
the holder of certificates immediately prior to the Merger shall have no rights
in respect of such Shares evidenced thereby other than the right to receive the
Merger Consideration or otherwise as provided herein or by law.
Section 2.2. Post-Closing Adjustment.
(a) Following the Effective Time, the amount of the Merger
Consideration shall be subject to adjustment as provided in this Section 2.2.
(b) Within sixty (60) days following the Closing Date, General
Felt will, at its expense, prepare and deliver to Parent an unaudited balance
sheet of the Company as of the close of business on the Closing Date (the
"Closing Date Balance Sheet"). The Closing Date Balance Sheet will be prepared
and presented in accordance with generally accepted accounting principles on a
basis consistent with those used in the December 31, 1995 audited balance sheet
of the Company included in the Financial Statements (as defined in Section 3.7
hereof), will exclude all notes that would be included if such balance sheet
were audited, and will be accompanied by a statement setting forth in reasonable
detail and certifying the calculation of the Net Assets (as defined below) of
the Company as of the close of business on the Closing Date, including all
adjustments to the Closing Date Balance
<PAGE>5
Sheet effected to arrive at the calculation of Net Assets. In connection with
the preparation of the Closing Date Balance Sheet, General Felt shall cause
the Company to conduct a physical inventory of the Company's inventory, as of
the close of business on the Friday immediately preceding the Closing Date,
and Parent shall have the right to have its representatives observe such
physical inventory. Parent shall, and shall cause the Surviving Corporation
to, provide General Felt with reasonable access to all books, records, work
papers and other documentation requested by General Felt to enable General
Felt to prepare the Closing Date Balance Sheet. In addition, following General
Felt's delivery to Parent of the Closing Date Balance Sheet and the
accompanying statement, General Felt shall provide Parent with reasonable
access to all books, records, work papers and other documentation requested by
Parent sufficient to enable Parent to verify the accuracy of the items set
forth on the Closing Date Balance Sheet and the calculation of Net Assets,
including the components of, as well as reserves and allowances applicable to,
receivables, inventories, other current and other assets, accrued
restructuring costs and other liabilities and the components of all
adjustments to the Closing Date Balance Sheet effected to arrive at the
calculation of Net Assets. For purposes of this Agreement, "Net Assets" shall
mean the total assets less the total liabilities of the Company as set forth
on the Closing Date Balance Sheet, subject to the adjustments set forth on the
schedule to this Section. If the amount of the Net Assets reflected on the
Closing Date Balance Sheet exceeds the amount of the Estimated Net Assets, the
amount of the Merger Consideration will be increased on a dollar-for-dollar
basis by an amount equal to such excess. If the amount of the Estimated Net
Assets exceeds the Net Assets reflected on the Closing Date Balance Sheet, the
amount of the Merger Consideration shall be decreased on a dollar-for-dollar
basis by an amount equal to the excess. The amount of either such adjustment
to the amount of the Merger Consideration referred to in the preceding two
sentences shall herein be referred to as the "Adjustment Amount."
(c) Within thirty (30) days following delivery to Parent of
the Closing Date Balance Sheet, Parent shall have the option to deliver to
General Felt notice of its objection to the Closing Date Balance Sheet and/or
the calculation of Net Assets, setting forth in reasonable detail Parent's
objections to the Closing Date Balance Sheet and/or the calculation of Net
Assets set forth therein and its proposal with respect to the Net Assets as of
the close of business on the Closing Date (the "Dispute Notice"). If Parent
shall not have delivered a Dispute Notice during such thirty (30) day period,
the calculation of Net Assets included with the Closing Date Balance Sheet will
be used in computing the Adjustment Amount. If Parent has given a Dispute Notice
within such 30-day period, then during the ten-day period following the date of
any Dispute Notice, Parent and General Felt shall attempt to resolve their
dispute by mutual agreement. If at the end of such ten-day period, Parent and
General Felt shall have failed to reach a complete agreement with respect to the
Closing Date Balance Sheet, including the determination of Net Assets and the
Adjustment Amount, either party may require that the matter shall be submitted
to a mutually acceptable member of the Charlotte, North Carolina office of Price
Waterhouse LLP, certified public accountants (the "Accountants"), for
resolution; provided that in the event that the parties are unable to agree upon
the selection of a mutually acceptable member of the Accountants within twenty
(20) days, the managing partner (or, if none exists, the person of equivalent
position) of such office of the Accountants shall select such member. If issues
in dispute are submitted to the Accountants for resolution, (i) each party will
furnish to the Accountants such work papers and other documents and information
related to the disputed issues as the Accountants may request and are available
to that party or its affiliates (or its independent public accountants), and
will be afforded the opportunity to present to the Accountants any material
relating to the determination of the amount of Net Assets and to discuss the
determination with the Accountants, (ii) the determination by the Accountants,
as set forth in a notice delivered to both parties by the Accountants, shall be
binding and conclusive on the parties, and (iii) the parties shall bear the fees
and expenses of the Accountants in proportion to the difference between the Net
Assets as submitted to the Accountants and the Net Assets as finally determined
by the Accountants, calculated
<PAGE>6
as follows: (A) General Felt shall bear the portion of the
expenses equal to a fraction, the numerator of which is the excess of the Net
Assets as submitted by General Felt to the Accountants over the Net Assets as
finally determined by the Accountants, and the denominator of which is the
excess of the Net Assets as submitted by General Felt to the Accountants over
the Net Assets submitted by Parent to the Accountants, and (B) Parent shall bear
the remaining portion of the fees and expenses. For purposes of the Accountants'
calculation of the Net Assets as of the close of business on the Closing Date as
to items that are not in dispute, the amounts to be included will be the
appropriate amounts from the Closing Date Balance Sheet. In resolving any
disputed item, such items shall be determined by the Accountants in accordance
with generally accepted accounting principles on a basis consistent with those
used in the December 31, 1995 audited balance sheet of the Company included in
the Financial Statements, unless expressly provided in this Agreement and the
Accountants may not assign a value of such item greater than the greatest value
for such item claimed by either party or less than the lowest value for such
item claimed by either party; provided, however, the Accountants may exceed such
limitation if such adjustment results from the resolution of a separately
disputed item.
(d) No later than the earlier of (i) if no Dispute Notice is
delivered, the expiration of thirty (30) days from the delivery of the Closing
Date Balance Sheet, or (ii) ten (10) days following the final determination by
the Accountants of the Adjustment Amount, (x) if the amount of Net Assets as
finally determined is greater than the amount of the Estimated Net Assets,
Parent or the Surviving Corporation will pay the difference to General Felt in
immediately available funds, and (y) if the amount of Net Assets is less than
the amount of the Estimated Net Assets, General Felt will pay the difference to
Parent in immediately available funds.
(e) Payment of the Adjustment Amount by Parent or the
Surviving Corporation to General Felt or by General Felt to Parent or the
Surviving Corporation, as the case may be, pursuant to this Section 2.2 shall
not be subject to the Loss Threshold Amount (as defined in Section 10.1).
Section 2.3. Deposit. On the date of this Agreement, Parent or
Newco shall deliver to Citibank, N.A. (the "Escrow Agent"), by wire transfer of
immediately available funds a deposit (the "Deposit") in an amount equal to
$500,000. The Deposit, together with all interest accrued thereon, shall be
released by the Escrow Agent either (a) to General Felt on the Closing Date
(such Deposit and interest shall be applied in partial satisfaction of the
obligation of Parent or Newco to pay the Merger Consideration pursuant to
Section 2.2(c)) or (b) as otherwise provided in this Agreement, and shall be
held subject to this Agreement and the Escrow Agreement, dated as of the date
hereof, by and among Parent, General Felt and the Escrow Agent
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF FOAMEX,
GENERAL FELT AND THE COMPANY
Foamex, General Felt and the Company hereby, jointly and
severally, represent and warrant to Newco and Parent as follows:
Section 3.1. Organization, Good Standing, Power and Authority
and Qualification of Foamex, General Felt and the Company. The Company and
General Felt are each corporations, and Foamex is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each has the
<PAGE>7
corporate or partnership power and authority to enter into
this Agreement and to perform the obligations required of it under this
Agreement. The Company has full corporate power and authority to conduct its
business and to own, lease and operate the assets, properties and business owned
or leased and operated by it. The Company is duly qualified to transact business
and is in good standing as a foreign corporation authorized to transact business
in each of the jurisdictions set forth on the schedule to this Section, which
are the only jurisdictions in which the Company is required to be so qualified,
except for those jurisdictions in which the failure of the Company to be so
qualified and in good standing does not, and could not reasonably be expected
to, result in a material adverse effect upon the assets, liabilities, results of
operations, business, operations or financial condition of the Company (a
"Material Adverse Effect") or materially impair the Company's ability to
consummate the Merger and the transactions (the "Related Transactions")
contemplated by the Supply Agreement (as defined in Section 7.7). Except as set
forth on the schedule to this Section, neither the present ownership by the
Company of its properties, nor the present use by the Company of its properties,
nor the present conduct by the Company of its business violates, or with or
without the giving of notice or the passage of time, or both, will violate,
conflict with or result in a default, right to accelerate or loss of rights
under, any terms or provisions of its Certificate of Incorporation or By-laws as
currently in effect, or any lien, encumbrance, mortgage or deed of trust, to
which the Company is a party or by which the Company or any of its property,
assets or business may be bound.
Section 3.2. Capitalization of the Company. The entire
authorized capital stock of the Company consists of 500,000 shares of Class A
Common Stock, and 500,000 shares of Class B Nonvoting Common Stock, par value
$.01 per share ("Class B Common Stock"), of which 237,364 shares of Class A
Common Stock are issued and outstanding and all of which are owned beneficially
and of record by General Felt, no shares of Class B Common Stock are issued or
outstanding, and no shares of Class A Common Stock or Class B Common Stock are
held in treasury.
Section 3.3. Issuance of Capital Stock of the Company;
Calls upon Shares.
(a) All of the shares of capital stock of the Company issued
and outstanding as of the date hereof are now, and at the Effective Time will
be, duly authorized, validly issued, fully paid and non-assessable and none will
have been issued or sold since November 18, 1993 in violation of any applicable
securities laws (federal or state).
(b) General Felt has, and will at the Effective Time have,
valid and marketable title to all of the Shares, free and clear of any liens,
claims, charges or encumbrances, except as set forth on the schedule to this
Section with respect to existing liens, claims, charges or encumbrances to be
released at or prior to the Closing.
(c) Except as specifically set forth on the schedule to this
Section, there are no options, calls, subscriptions, warrants, rights,
agreements or commitments of any character obligating the Company, contingently
or otherwise, to issue, redeem or re-acquire shares of its capital stock or to
register shares of its capital stock under the Securities Act of 1933, as
amended (the "Securities Act") or any other applicable securities law (federal
or state), and neither General Felt nor any other person has any pre-emptive
rights.
Section 3.4. Effective Agreement of Foamex, General
Felt and the Company. The execution and delivery by each of Foamex, General
Felt and the Company of this Agreement and the
<PAGE>8
consummation by each of the Merger and the Related Transactions have been duly
authorized by all necessary partnership or corporate action, as the case may
be, and this Agreement, and any other agreements or instruments executed and
delivered by each pursuant to this Agreement, when executed and delivered by
it, will constitute its legal, valid and binding obligations enforceable
against it in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium,
or similar laws from time to time in effect which affect creditors' rights
generally, and by legal and equitable limitations on the enforceability of
specific remedies. Except as specifically set forth on the schedule to this
Section, neither the execution and delivery of this Agreement nor the
consummation of the Merger or any of the Related Transactions, nor compliance
by any of Foamex, General Felt or the Company with any of the provisions
hereof, will (a) violate any provision of the Certificate of Incorporation or
By-laws of the Company or General Felt or the partnership agreement of Foamex,
as the case may be, (b) with or without the giving of notice and/or the
passage of time, violate, conflict with, result in the breach or termination
of, constitute a default under, or result in the creation of any lien,
encumbrance or charge upon the Shares or any of the assets or property of the
Company pursuant to, any contract, Permit (as defined in Section 3.9),
agreement, lease of real or personal property, License (as defined in Section
3.24) or commitment to which Foamex, General Felt or the Company is a party,
or by which Foamex, General Felt or the Company or any of their respective
assets or property may be bound, or (c) violate any judgment, decree, order,
statute, rule or governmental regulation applicable to Foamex, General Felt or
the Company or any of their respective assets, property or business.
Section 3.5. Subsidiaries and Affiliates. The Company (other
than through its employee benefit plans or as acquired subsequent to the date of
this Agreement (and notice of which is given to Parent and Newco) in settlement
of outstanding accounts receivable) does not own any capital stock, bonds or
other securities of, and does not have any partnership, equity or proprietary
interest in, any corporation, partnership, firm, association or business
organization, entity or enterprise.
Section 3.6. Certificate of Incorporation and By-laws.
Included in the schedule to this Section are a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the date hereof,
certified as of a recent date by the appropriate governmental official of its
jurisdiction of incorporation, and a true and complete copy of the By-laws of
the Company, as in effect on the date hereof.
Section 3.7. Financial Statements.
(a) Included in the schedule to this Section are: (i) audited
balance sheets of the Company as at December 31, 1995 (the "Balance Sheet Date")
and January 1, 1995, and the related audited statements of operations, cash
flows and stockholder's equity for the periods ended on each of such dates,
including the respective notes thereto, which are accompanied by the opinion of
Coopers & Lybrand L.L.P., independent certified public accountants, and (ii)
unaudited balance sheet of the Company as at April 28, 1996, and the related
unaudited statements of operations, cash flows and stockholder's equity for the
period ended on such date (the financial statements described in clauses (i) and
(ii) hereinafter collectively referred to as the "Financial Statements"). Such
Financial Statements, together with the notes thereto, if any, reflect the books
and records of the Company, have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered by such statements except as noted therein or as set forth on
the schedule to this Section, and fairly present, in the case of the balance
sheets, the financial condition of
<PAGE>9
the Company as of the respective dates indicated, and in the case of the
statements of operations, cash flows and stockholder's equity, the results of
operations and the changes in stockholder's equity of the Company for the
respective periods indicated.
(b) Included in the schedule to this Section is the balance
sheet of the Company as of April 28, 1996 (the "Adjusted April Balance Sheet"),
which sets forth General Felt's and the Company's reasonable, good faith
estimate of the calculation of the Net Assets as of such date.
Section 3.8. Taxes.
(a) Except as set forth on the schedule to this Section, the
Company: (i) has duly and timely filed (or joined in the duly and timely filing
of) with the appropriate authorities all Tax Returns (as defined below) required
to be filed by or on behalf of the Company on or before the date hereof, (ii)
has duly and timely paid or caused to be timely paid all Taxes (as defined
below) due and payable in respect of all periods up to and including the date
hereof, and (iii) has properly accrued on the Financial Statements all Taxes not
yet payable in respect of all periods up to and including the respective dates
thereof. Except as set forth on the schedule to this Section, all Tax Returns
filed by or on behalf of or which include the Company are true, complete and
correct in all material respects. The schedule to this Section sets forth a list
of each jurisdiction in which the Company has filed a Tax Return, the type of
Tax and type of Tax Return filed. The Company has made available to Parent and
Newco a copy of each Tax Return filed by the Company (or which includes the
Company) within the last three (3) years. Except as set forth on the schedule to
this Section, the Company has duly and timely withheld or collected, paid over
and reported all Taxes required to be withheld or collected by the Company on or
before the date hereof. Except as set forth on the schedule to this Section: (A)
the Company will incur no liability or expense for Taxes for the period between
the Balance Sheet Date and the Effective Time other than with respect to
operations in the ordinary course of business; (B) no taxing authority has
claimed, proposed or asserted any adjustment that could result in the creation
of or an increase in any deficiency in any Tax for which the Company is or may
be liable or which relates to the income, assets or operations of the Company;
(C) to the knowledge of Foamex, General Felt and the Company, there is no
pending or threatened audit, investigation, proceeding or claim respecting any
Tax for which the Company is or may be liable or which relates to the income,
assets or operations of the Company; (D) no statute of limitations relating to
the assessment or collection of any Tax for which the Company is or may become
liable or subject has been waived or extended; (E) the Company is not a party to
any agreement, contract or arrangement that would result, individually or in the
aggregate, in the payment of any amount that would not be deductible by reason
of Section 162(m), Section 280G or Section 404 of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder (the "Code"); (F)
all material agreements, contracts or arrangements with affiliates to which the
Company is a party relating to the acquisition of property or services by the
Company were entered into on terms no less favorable to the Company than those
between parties dealing on an arm's length basis; (G) except pursuant to
Sections 6.11 and 10.6 hereof, the Company is not a party to any Tax sharing or
Tax allocation agreement and any such agreement shall terminate as of the
Effective Time; (H) there are no liens for Taxes upon the assets of the Company
except for liens for Taxes not yet due and payable; and (I) all federal income
Tax Returns of the Company have been finally examined by the appropriate taxing
authorities for all taxable periods up through December 31, 1989 and any
deficiencies or assessments asserted or proposed with respect to such periods
have either been fully paid, finally settled or adequately provided for. The
Company is not a "consenting corporation" within the meaning of Section 341(f)
of the Code. No Tax is required to be withheld pursuant to Section 1445 of the
Code as a result of the transactions contemplated by this Agreement. The Company
has not made, or been required to make, an election under Section 338 of the
Code (or any comparable state, local or foreign Tax provision). None of the
assets of the
<PAGE>10
Company is required to be treated as being owned by any other person pursuant
to the "safe harbor" leasing provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as in effect prior to the repeal of said provision (or
any comparable state, local or foreign Tax provision).
(b) Notwithstanding anything to the contrary contained in
Section 3.8(a), each representation and warranty made by Foamex, General Felt
and the Company in Section 3.8(a) shall be deemed made to their knowledge to the
extent such representation and warranty relates to the period prior to November
18, 1993.
(c) For purposes of this Agreement,"Tax" means any tax, fee,
levy, duty, assessment or other governmental charge imposed by any governmental
authority (including without limitation any income, franchise, gross receipts,
real property, personal property, registration, sales, use, excise, services,
value added, ad valorem, withholding, social security, estimated, accumulated
earnings, transfer, license, privilege, payroll, profits, capital stock,
employment, unemployment, severance, stamp, minimum, environmental, occupancy,
customs or occupation tax), including without limitation any liability therefor
as a result of Treasury Regulation ss.1.1502-6 (or any comparable state, local
or foreign Tax provision), as a transferee (including under Section 6901 of the
Code or any comparable state, local or foreign Tax provision) or as a result of
any Tax sharing or similar agreement, and any interest, additions to tax and
penalties in connection therewith. "Tax Return" means any return, declaration,
report, estimate, information return or statement and any amendment thereto,
together with any supporting information or schedules, which is filed or
required to be filed under applicable law in connection with the determination,
assessment, collection, payment or administration of any Tax, whether on a
consolidated, combined, unitary or separate basis or otherwise.
Section 3.9. Compliance with Law.
(a) Except as set forth on the schedule to this Section, the
Company is in all material respects, in compliance with all applicable material
laws, rules, regulations or requirements of any governmental authority, federal,
state or local, relating to its business and its real and personal property.
(b) The Company holds and is in material compliance with all
permits, certificates, licenses, approvals, registrations and authorizations
required under all laws, rules and regulations ("Permits"), and all of such
Permits are in full force and effect. All such Permits which are material to the
business of the Company as presently conducted and the expiration dates thereof
are listed on the schedule to this Section.
Section 3.10. Environmental Matters. As of the date
hereof:
(a) except as set forth on the schedule to this Section, to
the knowledge of Foamex, General Felt and the Company, the Company has complied
with all, and is not in violation of any, applicable Environmental Laws (as
defined below);
(b) the Company has not received any request for information,
notice of claim, notice of violation, complaint, demand or notification that it
is or may be potentially responsible with respect to any investigation or
clean-up of any threatened or actual Release (as hereinafter defined) of any
Hazardous Substance;
<PAGE>11
(c) except as set forth on the schedule to this Section, to
the knowledge of Foamex, General Felt and the Company, the Company has not
managed or handled any substance regulated under any Environmental Law (a
"Hazardous Substance") on any property now or previously owned, operated or
leased by the Company, nor has anyone else managed any Hazardous Substances on
any property now or previously owned, operated or leased by the Company, except
in compliance with all applicable laws;
(d) except as set forth on the schedule to this Section, to
the knowledge of Foamex, General Felt and the Company, there are no underground
storage tanks, active or abandoned, at any property now or previously owned,
operated or leased by the Company and for which the Company may have legal
responsibility under any Environmental Laws;
(e) to the knowledge of Foamex, General Felt and the Company,
no Hazardous Substance managed by the Company has come to be located at any site
which is listed or proposed for listing pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), on the Comprehensive Environmental Response Compensation and
Liability Information System ("CERCLIS") or on any similar state list of sites
requiring remediation of environmental contamination, or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against the Company or Parent for investigation, clean-up costs,
remedial work, damages to natural resources or for personal injury claims,
including, but not limited to, claims under CERCLA;
(f) to the knowledge of Foamex, General Felt and the Company,
no Hazardous Substance has been released, spilled, leaked, discharged, disposed
of, pumped, poured, emitted, emptied, injected, leached, dumped or allowed to
escape ("Release") at, on, about or under any property now or formerly owned,
operated or leased by the Company in amounts which must be reported to the
National Response Center pursuant to Section 103(a) of CERCLA, 42 U.S.C. ss.
9603(a);
(g) there are no environmental liens on any properties owned
or leased by the Company and, to the knowledge of Foamex, General Felt and the
Company, no actions by any federal, state or local governmental or regulatory
agency or authority have been taken or are in process or pending which could
subject any of such properties to such liens;
(h) except as set forth on the schedule to this Section and
heretofore provided to Parent and Newco, since November 18, 1993, there have
been no environmental inspections, investigations, studies, audits, tests,
reviews or other analyses conducted by or on behalf of the Company or any
affiliate of the Company in relation to any property or business now or
previously owned, operated, or leased by the Company; and
(i) except as set forth on the schedule to this Section,
neither Foamex, General Felt nor the Company knows of any facts or circumstances
related to environmental matters concerning the existing or previously owned
properties or businesses of the Company that could reasonably be expected to
lead to any future environmental claims, liabilities or responsibilities against
the Company or Parent.
For purposes of this Agreement, "Environmental Laws" means all federal, state
and local laws and regulations (as in effect, administered and interpreted on
the date hereof) relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to
<PAGE>12
emissions, discharges, releases or threatened releases of regulated substances,
or otherwise relating to manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of regulated substances, including, but
not limited to chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum, petroleum products, asbestos and polychlorinated biphenyls (PCB's).
Section 3.11. Labor Contracts.
(a) Except as specifically set forth on the schedule to this
Section, there are no collective bargaining agreements or other written
agreements or arrangements of any kind with any union or other employee
organization or association with respect to any of the employees of the Company.
Neither Foamex, General Felt nor the Company has knowledge of any condition
which could reasonably be expected to cause the Company to suffer any strike,
union representation contest, labor trouble or work stoppage and, since November
18, 1993, the Company has not suffered any strike, union representation contest
or work stoppage.
(b) Since November 18, 1993, the Company has not engaged in
any conduct which constitutes an unfair labor practice pursuant to Section 8(a)
of the National Labor Relations Act or otherwise failed to comply in all
material respects with all laws, statutes, regulations and ordinances governing
employment, employment practices and the terms and conditions of employment.
Except as set forth on the schedule to this Section, there are (i) no actions at
law or suits in equity against the Company or to which the Company is a party
pending before any court or any other tribunal, agency or authority arising
under any laws governing the employer-employee relationship, (ii) no matters,
including but not limited to investigations, hearings or appeals, involving the
Company pending before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any similar federal or state agency, and (iii) no
matters involving the Company currently before any arbitrator or mediator in
respect of the employer-employee relationship. To the knowledge of Foamex,
General Felt and the Company, since November 18, 1993, there have been no
material attempts, whether or not successful, to organize any union or employee
organization or association in respect of any of the employees of the Company.
Section 3.12. Condition of Properties. Other than the Closed
Plants (as defined below) and except as set forth on the schedule to this
Section, (a) all plants, buildings, offices, shops and other structures, and (b)
all machinery, equipment and fixtures with an individual original cost of
$150,000 or more owned, leased or used by the Company, are in good operating
condition and are suitable and sufficient for all operations currently conducted
by them, ordinary wear and tear excepted. For purposes of this Agreement,
"Closed Plants" shall mean the Company's plants located at Rock Hill, South
Carolina and Sparks, Nevada and the machinery, equipment and fixtures included
therein.
Section 3.13. Undisclosed Liabilities; Accounts Payable,
Etc.
(a) Except as set forth on the schedule to this Section, the
Company does not have any indebtedness, obligations or liabilities of any
nature, whether accrued, absolute, contingent or other, whether due or to become
due, including, without limitation, liabilities or obligations on account of
Taxes, other governmental charges, duties, penalties, interest or fines, other
than (i) those reflected on the balance sheet of the Company at the Balance
Sheet Date or in the notes thereto, (ii) incurred by the Company since the
Balance Sheet Date in the ordinary course of business and consistent with past
practice, (iii) relating to the performance of obligations under contracts to
which the Company is party or to which its assets are subject, in accordance
with the terms and conditions
<PAGE>13
thereof, which contracts are not in default and the liabilities associated
therewith are not required under generally accepted accounting principles
consistently applied to be accrued or disclosed on the Financial Statements,
(iv) reflected on the Pre-Closing Balance Sheet or in the calculation of
Estimated Net Assets, (v) liabilities arising out of or in connection with
Environmental Laws, (vi) any liability arising out of or in connection with
any claim by the ultimate retail purchaser of any of the Company's products
resulting from an alleged defect in the design or manufacture of any product,
or any alleged failure to warn with respect to any product, (vii) Released
Obligations (as defined in Section 6.16), (viii) Taxes, and (ix) Self-Insured
Welfare Liabilities (as defined in Section 6.14).
(b) The accounts payable of the Company reflected on the
balance sheet of the Company at the Balance Sheet Date or arising subsequent
thereto are the result of bona fide transactions in the ordinary course of
business and were paid or are not yet due and payable.
Section 3.14. Absence of Changes. Except as set forth on the
schedule to this Section or as otherwise expressly permitted under this
Agreement or consented to in writing by Parent or Newco, since the Balance Sheet
Date, the Company has conducted its business only in the ordinary course and
consistent with past practices and there has not been any:
(a) change in the condition (financial or otherwise),
properties, assets, liabilities, results of operations, business or operations
of the Company, other than (i) changes in the ordinary course of business which
in the aggregate have not had and could not reasonably be expected to have a
Material Adverse Effect, or (ii) changes resulting from (A) general economic
conditions, (B) seasonality of the Company's business, or (C) conditions
affecting the home textile furnishings industry generally;
(b) loss, damage or destruction to any of the properties of
the Company due to fire or other casualty, whether or not insured, that has had
and could reasonably be expected to have a Material Adverse Effect;
(c) increase in the rate of direct compensation payable or to
become payable by the Company to any (i) officer or employee, or (ii) agent or
consultant which has a written agreement with the Company that is not terminable
at will, other than routine increases made in the ordinary course of business,
or any bonus, percentage compensation, service award or other like benefit,
granted, made or agreed to for any such officer, employee, agent or consultant,
or any welfare, pension, retirement or similar payment or arrangement made or
agreed to;
(d) mortgage, pledge or subjection to lien, charge or any
other encumbrance of any of the assets, tangible or intangible, of the Company,
other than Permitted Encumbrances (as defined in Section 3.18);
(e) sale, lease, abandonment, assignment, transfer or other
disposition of any of the tangible assets (other than inventory) or interests in
real property of the Company or cancellation of any debt or claim of the Company
(other than receivables in the ordinary course of business), or any sale,
assignment, transfer, license or other disposition of any patent, trademark,
trade name, service mark, copyright or other similar asset of the Company,
except in each case in the ordinary course of business, consistent with past
practices and which, in the aggregate, are not material;
(f) incurrence of any extraordinary loss or waiver of
any right of substantial value by the Company whether or not in the ordinary
course of business;
<PAGE>14
(g) capital expenditures by the Company in the
aggregate of more than $50,000; or
(h) agreement by the Company to do any of the
foregoing.
Section 3.15. Title to Real Property.
(a) The schedule to this Section sets forth a complete
description, based on the existing owner's title insurance policies, by metes
and bounds or lot, block and section of each parcel of real property owned by
the Company, together with a brief, summary description of the buildings,
structures and improvements thereon. The Company has good, marketable and
insurable title in fee simple to all real property set forth on the schedule to
this Section (including, but not limited to, that reflected on the balance sheet
of the Company at the Balance Sheet Date) and to the buildings, structures and
improvements thereon, in each case free and clear of all security interests,
liens, adverse claims, encumbrances, mortgages, pledges, charges, assessments,
easements, covenants, restrictions, reservations, defects in title, encroachment
and other burdens, except (i) as specifically set forth on the schedule to this
Section, and (ii) except for any Permitted Encumbrances (as defined in Section
3.18). For purposes of this Section, insurable title is deemed to be such title
as Lawyers Title Insurance Corporation or any other national reputable title
company will approve and insure at standard rates, subject only to the matters
set forth on the schedule to this Section and Permitted Encumbrances.
(b) Each parcel of real property listed on the schedule to
this Section, including, without limitation, all buildings and improvements
thereon, and the present use, operation and condition thereof do not violate in
any material respect or in any respect that would render title unmarketable any
deed or other covenant, restriction, right of way or easement of record. The
Company has not received written notice of any such default or breach by the
Company or any of the real properties listed on the schedule to this Section
under any such covenants, restrictions, rights of way or easements affecting
such real property.
(c) None of Foamex, General Felt and/or the Company or any of
their respective affiliates own any real property adjacent to the real
properties described on the schedule to this Section.
(d) Neither the Company, nor Foamex, nor General Felt have any
knowledge of any adverse possession claim or threatened adverse possession claim
with respect to any of the real property listed on the schedule to this Section.
There is no building, structure or other improvement existing at any of such
real properties which does presently, or could in the future if unremedied, give
rise to an adverse possession claim.
(e) Each of the real properties listed on the schedule
to this Section does not violate any set back restriction.
(f) Pursuant to the lease and amendment thereto described in
item 9 on the schedule to Section 3.16 (the "Tell City Lease"), the Company has
the right of ingress and egress from the real property described on the schedule
to Section 3.16 as Parcel I of the Tell City Property (as defined in the
schedule to Section 3.16) to New Indiana State Highway #37 and, if such Parcel I
is conveyed to the Company prior to the Effective Time, upon the conveyance of
such Parcel I to the Company, the Company will have such rights as of the date
of the conveyance.
<PAGE>15
(g) Each owned property (except for the Tell City Property) is
assessed as one or more separate tax lots and no part of each such property is
part of a tax lot which includes other property not owned by the Company.
Section 3.16. Leases of Real Property.
(a) The schedule to this Section sets forth a list of all
leases and subleases of real property and all other occupancy or similar license
agreements with respect to real property to which the Company is a party,
together with all amendments and supplements thereto and modifications and
guaranties thereof (collectively, the "Leases"). Except as specified on the
schedule to this Section, the Company has heretofore made available to Newco and
Parent true and complete copies of all of the Leases. All of the Leases are
legally valid and binding and in full force and effect, and there are no
material defaults thereunder nor any events which with the passage of time or
the giving of notice or both would constitute a material default thereunder by
the Company or, to the knowledge of Foamex, General Felt and the Company, by any
other party thereto which would interfere with the use by the Company of such
premises. The Company has not mortgaged, pledged or otherwise encumbered its
interest in any premises covered by the Leases nor has it assigned its interest
under any Lease or sublet all or any portion of any real property which it
leases, nor has it granted any person or entity any rights to any of the
premises covered by any Lease or in and to any Lease, except as set forth on the
schedule to this Section.
(b) Part B of the schedule to this Section sets forth a
complete description of the Tell City Property based on the Tell City Lease, by
metes and bounds, together with a brief description of the building structures
and improvements thereon.
(c) If, as of the Effective Time, the Company owns fee title
to Parcel I of the Tell City Property, then Part B of the schedule to this
Section shall be deemed added to the schedule to Section 3.15, all of Section
3.15 shall be deemed to be applicable to the Tell City Property, Section 3.16(b)
shall be deemed included in Section 3.15 of this Agreement and the Tell City
Lease shall be deemed deleted from the schedule to this Section. If, as of the
Effective Time, the Company does not own fee title to the Tell City Property,
then the Company, nevertheless, shall be deemed to have made the representations
and warranties set forth in Sections 3.15(c), (d), (e) and (f) with respect to
the Tell City Property and the representation and warranty set forth in the
first sentence of Section 3.15(b), to its knowledge, as it relates to the Tell
City Property.
Section 3.17. Easements; Condemnation. The Company has all
easements and rights of ingress and egress and all utilities and services
necessary for the operations currently conducted by the Company. Neither the
whole nor any portion of any real property owned or leased by the Company or
providing a right of access to the Company has been condemned, requisitioned or
otherwise taken by any public authority, and no such condemnation, requisition
or taking is, to the knowledge of the Company, threatened or contemplated.
Section 3.18. Title to Personal Property. The schedule to this
Section sets forth a list of all furniture, machinery, equipment, vehicles,
aircraft and other personal property owned by the Company having, individually,
a book value of at least $25,000 as of June 5, 1996. Except as set forth on the
schedule to this Section, the Company has good and marketable title to all
furniture, machinery, equipment, vehicles, aircraft and other personal property
which it purports to own, including but not limited to that
<PAGE>16
reflected on the balance sheet of the Company at the Balance Sheet Date
(except as disposed of since the Balance Sheet Date in the ordinary course of
business without involving any misrepresentation or breach of warranty or
covenant by the Company under this Agreement), in each case free and clear of
all security interests, liens, adverse claims, encumbrances, mortgages,
pledges, equities, charges, defects in title, restrictions or other burdens,
other than Permitted Encumbrances. For purposes of this Agreement, "Permitted
Encumbrances" shall mean the following encumbrances:
(a) liens for Taxes, assessments or other government charges,
levies or claims not yet due and payable or which are being contested by the
Company in good faith and for which the Company has taken appropriate reserves
in accordance with generally accepted accounting principles consistently
applied;
(b) liens of carriers, warehousemen, mechanics, laborers and
materialmen (or similar liens) incurred in the ordinary course of business for
amounts not yet due and payable or which are being contested by the Company in
good faith and for which the Company has taken appropriate reserves in
accordance with generally accepted accounting principles consistently applied;
(c) liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance, statutory
obligations or social security legislation, or for any purpose at the time
required by law as a condition precedent to the transaction of business or the
exercise of any of the privileges or licenses of the Company, so long as the
underlying obligations are not then required to be paid;
(d) with respect to real estate, minor imperfections of title,
if any, none of which is substantial in amount, materially detracts from the
value or materially impairs the use, or in any respect detracts from the
marketability or insurability (at standard rates by a title company of
nationally recognized standing) of the property subject thereto, or materially
impairs the operations of the Company, and building and zoning laws and other
land use restrictions that do not materially impair and are not materially
violated by the present or anticipated use of the property subject thereto;
(e) with respect to personal property, any lien with respect
to such asset which does not adversely affect the value or marketability of such
asset or materially interfere with the present use and the continuation of such
present use of such asset;
(f) liens against leased equipment securing rental
payments under capital lease arrangements for such equipment; and
(g) currently existing liens that are disclosed on the
schedule to this Section, but those liens or pledges shall not be increased or
extended to other Indebtedness unless otherwise permitted by the terms and
provisions of this Agreement.
Section 3.19. Leases of Personal Property. The schedule to
this Section sets forth a list of all furniture, machinery, equipment, vehicles,
aircraft and other tangible personal property covered by each lease of personal
property providing for payments of at least $25,000 per annum or $50,000 over
its term, to which the Company is a party, together with all amendments and
supplements thereto and modifications thereof. Except as specified on the
schedule to this Section, the Company has heretofore made available to Newco and
Parent true and complete copies of all such leases and the amendments,
supplements and modifications thereto. All such leases, amendments, supplements
and modifications are legally valid and binding and in full force and effect,
and there are no defaults thereunder by the
<PAGE>17
Company or, to the knowledge of Foamex, General Felt or the Company, by any
other party thereto which would materially interfere with the Company's use of
such personal property. Except as set forth on the schedule to this Section or
the schedule to Section 3.18 hereof, no leasehold or other interest of the
Company in tangible personal property is subject or subordinate to any
security interest, lien, adverse claim, encumbrance, mortgage, pledge, equity,
defect in title, restriction or other burden other than Permitted
Encumbrances.
Section 3.20. Accounts Receivable. The accounts receivable
shown on the balance sheet of the Company at the Balance Sheet Date or acquired
by the Company after such date, arise from bona fide transactions in the
ordinary course of business, and are carried (or to be carried) on the books of
the Company in accordance with generally accepted accounting principles
consistently applied. The schedule to this Section sets forth a list of each
outstanding Bankruptcy Receivable (as defined in Section 6.10) as of the date of
this Agreement, including for each Bankruptcy Receivable the name of the
customer, the gross amount of such outstanding receivable due the Company, and
the amount at which such Bankruptcy Receivable is carried by the Company on its
books. On the balance sheet of the Company as at December 31, 1995, there is an
aggregate reserve for doubtful accounts of $560,000, none of which is
attributable to such Bankruptcy Receivables and all of which is attributable to
other receivables of the Company.
Section 3.21. Inventory; Recalls. All additions to
inventories since the Balance Sheet Date and all inventory classified as such
on the balance sheet of the Company at the Balance Sheet Date are valued in
accordance with generally accepted accounting principles consistently applied.
All slow-moving, unmarketable, returned, rejected, damaged or obsolete
inventory has been written-down or written-off, in accordance with generally
accepted accounting principles consistently applied. Except as set forth on
the schedule to this Section, the Company is not contemplating the recall of
any products sold by it nor have any products sold by it since November 18,
1993 been subject to any recalls; to the knowledge of Foamex, General Felt and
the Company, there are no material defects in any such products.
Section 3.22. Contracts, Agreements and Commitments. The
schedule to this Section lists specifically each of the following additional
contracts, agreements, commitments and other documents to which the Company is a
party or by which the Company or any of its respective properties or assets is
in any way affected or bound (the copies thereof heretofore made available by
the Company to Newco and Parent being true and complete and including all
material amendments, supplements and modifications thereof):
(a) as of the date hereof, each contract, agreement or
commitment for the purchase of pre-assembled parts, raw materials, supplies,
services or utilities which involve aggregate payments or receipts by the
Company of $25,000 or more;
(b) each employment, non-competition or secrecy
agreement;
(c) each loan or credit agreement, security agreement,
guaranty, indenture, mortgage, pledge, conditional sale or title retention
agreement, equipment obligation, lease purchase agreement or instrument
evidencing indebtedness;
(d) each partnership, joint venture, joint operating or
similar agreement;
<PAGE>18
(e) each contract, agreement or commitment (other than those
types covered by subsections (a) through (d), inclusive, of this Section and any
lease or sublease set forth on the schedule to Sections 3.16 or 3.19) which (i)
involves aggregate payments or receipts by the Company of $25,000 or more, or
(ii) otherwise materially affects the condition (financial or other),
properties, assets, business or prospects of the Company; and
(f) as of the date hereof, each contract in excess of $25,000
for the sale of goods on which the Company has made a bid or, to the knowledge
of Foamex, General Felt and the Company, any of its distributors has made a bid,
which has neither been accepted nor rejected.
All of such contracts, agreements and commitments are legally
valid and binding and in full force and effect, and there are no material
defaults thereunder, or events which upon notice or the passage of time or both
would constitute a material default thereunder, by the Company or, to the
knowledge of Foamex, General Felt and the Company, by any other party thereto.
Section 3.23. Certain Documents and Reports. The schedule to
this Section lists specifically each of the following described documents (the
copies thereof heretofore made available by the Company to Newco and Parent
being true and complete and including all material amendments, supplements and
modifications thereof):
(a) each contract, agreement, arrangement or commitment to
which the Company or General Felt is a party or may be bound, in respect of the
issuance, transfer, ownership or voting of capital stock, bonds or other
securities of the Company;
(b) each contract, agreement, arrangement or commitment to
which the Company may be a party or may be bound, pursuant to which the Company
has acquired or disposed of any substantial portion of its business or assets or
the Company was itself acquired since November 18, 1993;
(c) each notice of any violation or potential violation of law
received from and after January 1, 1995 by the Company from (and each response
of the Company) any federal, state or local governmental body or administrative
agency;
(d) each audit report or other formal report submitted to the
Company by independent accountants in connection with any annual or interim
audit of the books of the Company or by the Internal Revenue Service for any
fiscal period commencing after January 1, 1995 in connection with the audit of
any federal income tax return of the Company.
Section 3.24. Patents, Trademarks, Copyrights, Etc.
(a) Set forth on the schedule to this Section is a true and
complete list of all trademarks, trade names, service marks, copyrights,
imprints, logos, trade dress, patents, whether or not registered (and all
registrations, applications, renewals and licenses therefor) that are material
to and used in the business of the Company (collectively, the "Intellectual
Property"), specifying all registration and application numbers, the subject
matter of the application or registration, the owner of each item of
Intellectual Property, the jurisdiction by or in which such item of Intellectual
Property has been issued or registered or in which an application therefor has
been filed, and the respective expiration dates thereof in each jurisdiction
where a registration has been filed.
<PAGE>19
(b) Except for licenses for generally commercially available
software, each item of Intellectual Property licensed by or to the Company is
licensed to the extent provided in the applicable license agreements (the
"Licenses") as set forth on the schedule to this Section. A true and correct
copy of each of the Licenses has been made available to Parent and Newco and no
changes have been made thereto. Each License is valid, binding and enforceable
in accordance with its terms, there are no existing material defaults by the
Company thereunder, and, to the knowledge of Foamex, General Felt and the
Company, no event has occurred, which (with notice, lapse of time or both) would
constitute a material default thereunder by any party thereto.
(c) Except as set forth on the schedule to this Section, the
Company has not received any notification of infringement by it or by anyone
claiming any right to use an item of Intellectual Property assigned, licensed or
registered to it by an agreement with the Company or any claims with regard to
any item of Intellectual Property used by it. To the knowledge of Foamex,
General Felt and the Company, no item of Intellectual Property used by the
Company infringes any trademark, service mark, trade name or patent (or similar
right) of others in any jurisdiction in which such item of Intellectual Property
is used and the Company has all right and authority to use the item of
Intellectual Property in its business.
(d) Except as set forth on the schedule to this Section, all
technical information, procedures, processes, trade secrets, formulae, methods,
practices, techniques, information, bills of parts, diagrams, drawings,
specifications, blueprints, lists of materials, production manuals and data
relating to the design, manufacture, production, inspection, labor and general
costs, and testing of products (collectively, the "Know-How") developed, sold or
used by the Company is owned by it or may be utilized by the Company without the
consent or license of any third party, is free and clear of all liens and the
Company does not pay royalties to any third party in respect of the use by it of
the Know-How. The Company has not received any notification of infringement by
it or other adverse claim with regard to any Know-How used by it. To the
knowledge of Foamex, General Felt and the Company, no Know-How used by the
Company infringes upon or otherwise violates any rights of others.
Section 3.25. Insurance. The schedule to this Section sets
forth each material insurance policy (specifying the insurer, the type of
insurance and the policy number) maintained by or on behalf of the Company on
its properties, assets, products, business or personnel. True and complete
copies of the most recent inspection reports, if any, received since January 1,
1995 from insurance underwriters as to the condition of the properties and
assets owned, leased, occupied or operated by the Company or the conduct of its
business have been made available to Parent and Newco. The Company is not in
default with respect to any material provision contained in any insurance policy
and has not failed to give any notice or present any material claim under any
insurance policy in due and timely fashion. True and complete copies of all
liability insurance policies of the Company in effect have heretofore been made
available by the Company to Newco and Parent.
Section 3.26. Litigation. The schedule to this Section
includes a true and complete list of all pending claims, actions, suits,
investigations, audits and other proceedings of every kind ("Proceedings") to
which the Company is a party or which involve or relate to the Company or any of
its properties, officers, employees or directors in connection with the business
and affairs of the Company, and, to the knowledge of Foamex, General Felt and
the Company, there is no written threat of any other Proceeding. Except as set
forth on the schedule to this Section, none of such claims arose during a period
in which the Company was not adequately insured and all of such claims are
covered by insurance, subject to applicable deductibles,
<PAGE>20
retentions and applicable policy limitations. Copies of all opinions of the
Company's counsel given in response to inquiries by its independent certified
public accountants in connection with any audit of the Company conducted since
November 18, 1993 have heretofore been made available by the Company to Newco
and Parent.
Section 3.27. Employee Benefit Plans.
(a) The schedule to this Section lists any bonus, incentive
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, welfare, workmen's
compensation or other insurance, severance, separation or other employee benefit
plan, practice, policy or arrangement of any kind, including, but not limited
to, any "employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (other
than a "multiemployer plan" within the meaning of Sections 3(37) and 4001(a)(3)
of ERISA; a "Multiemployer Plan") established by the Company or to which the
Company contributes or has contributed and with respect to which the Company has
or may reasonably be expected to have any liability.
(b) Except as set forth on the schedule to this Section, each
employee benefit plan listed on the schedule and any related trust agreements,
annuity contracts, insurance contracts or other instruments are currently, and
have been in the past, in compliance in all material respects both as to form
and operation with the requirements of ERISA and the Code.
(c) No "pension plan" (within the meaning of Section 3(2) of
ERISA) maintained by the Company has at any time incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived. Each such pension plan which is intended to be
qualified under Section 401(a) of the Code has been determined to be qualified
by the Internal Revenue Service.
(d) Neither Foamex, General Felt nor the Company has knowledge
of any communication (whether written or oral) generally to employees or
specifically to any employee regarding (i) any future increase of benefit levels
(or creation of new benefits) with respect to any employee benefit plan listed
on the schedule to this Section beyond those reflected in such plans, or (ii)
the adoption or creation of any new benefit plan.
(e) Except as set forth on the schedule to this Section, all
reports and applications relating thereto required by any government agency have
been timely filed and all contributions required to be made on or before the
Effective Time to each employee benefit plan under the terms of such plan,
ERISA, the Code or other applicable law will have been timely made.
(f) The Company has not engaged in, and neither Foamex,
General Felt nor the Company has actual knowledge of any fiduciary of any such
employee benefit plan that has engaged in, any transaction in violation of
Section 406 of ERISA or any "prohibited transaction" (within the meaning of
Section 4975 of the Code) for which no exemption exists under ERISA or the Code.
(g) Except as set forth on the schedule to this Section, the
Company does not maintain or contribute to any employee benefit plan which
provides, and has no liability or obligation to provide, life insurance, medical
or other employee welfare benefits to any employee (or such
<PAGE>21
employee's beneficiary) upon such employee's retirement or termination of
employment, except as may be required by federal, state or local laws, rules
or regulations.
(h) The Company is not now or has ever been a
contributing employer with respect to any Multiemployer Plan.
(i) There is no circumstance, event or condition which could
reasonably result in the Company incurring any liability in respect of an
employee benefit plan maintained by any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" (within the meaning of
Section 414(b) of the Code) with the Company or under "common control" (within
the meaning of Section 414(c) of the Code) with the Company.
Section 3.28. Employee Compensation. The schedule to this
Section includes a list of the names, salaries (wage rates for non-salaried
employees) and functions performed by all the directors and officers of the
Company, and by all other employees of the Company whose total compensation from
the Company for the fiscal year ended December 31, 1995 exceeded $75,000.
Section 3.29. Principal Revenue Sources. Except as set forth
on the schedule to this Section, during the twelve (12) months ended on the
Balance Sheet Date, 5% or more of the revenues of the Company were not
attributable to any single corporation, person or other entity or to any group
of affiliated corporations, persons or other entities. Since the Balance Sheet
Date, there has not been any change in the relationship or course of dealing
between the Company and any of its (a) customers from whom the Company received
5% or more of its revenues during the twelve (12) months ended on the Balance
Sheet Date, or (b) suppliers, which has or had or could reasonably be expected
to result in a Material Adverse Effect.
Section 3.30. Third Party Obligations. Except as set forth on
the schedule to this Section, the Company has no obligation or liability, either
actual or accrued, accruing or contingent, as guarantor, surety, co-signor,
endorser, co-maker, indemnitor or otherwise, in respect of the obligation of any
person, corporation, partnership, joint venture, association, organization or
other entity, except as endorser or maker of checks or letters of credit,
respectively, endorsed or made in the ordinary course of business.
Section 3.31. Affiliate and Associate Transactions. Except as
set forth on the schedule to this Section or the Employee Loans Receivable, the
Company has no loan or advance in excess of $1,000 outstanding to any
stockholder, officer, director or employee and, to the knowledge of the Company,
no officer or director of the Company or any "affiliate" or "associate" (as
those terms are defined in Rule 405 of the Rules and Regulations under the
Securities Act) of the Company or any such person has, either directly or
indirectly:
(a) an equity interest of 5% or more in any corporation,
partnership, joint venture, association, organization or other person or entity
which purchases from or sells or furnishes to the Company any goods or otherwise
does business with the Company; or
(b) a beneficial interest in any contract, commitment or
agreement to which the Company is a party or under which the Company is
obligated or bound or to which the property of the Company may be subject, other
than contracts, commitments or agreements between the Company and
<PAGE>22
such persons in their capacities as employees, officers or directors of the
Company; provided, however, that such representation and warranty shall not
apply to the ownership, as a passive investment, by any such officer,
"affiliate" or "associate" of less than 5% of a class of securities listed for
trading on a national securities exchange or publicly traded in the
over-the-counter market.
Section 3.32. Absence of Certain Business Practices. Neither
the Company, nor any of its officers, employees or agents, nor any other person
acting on behalf of any of them, has, directly or indirectly, since January 1,
1995 given or agreed to give any gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office or other person who is
or may be in a position to help or hinder the business of the Company (or assist
it in connection with any actual or proposed transaction) which (a) would or
could reasonably be expected to subject the Company to any damage or penalty in
any civil, criminal or governmental litigation or proceeding, (b) if not given
in the past, would or could reasonably be expected to have had a Material
Adverse Effect as reflected in any of the Financial Statements, or (c) if not
continued in the future, would or could reasonably be expected to have a
Material Adverse Effect.
Section 3.33. Brokers and Finders. Neither
Foamex, General Felt, the Company nor any of their respective officers,
directors or employees has employed any broker, agent or finder (other than
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Lazard Freres
& Co. LLC ("Lazard"), the fees and expenses of which shall be borne by General
Felt), as a result of which the Company shall have any liability for any
brokerage fees, agents' commissions or finders' fees, in connection with the
transactions contemplated hereby.
Section 3.34. Certain Tell City Representations.
(a) The Company completed the construction of the Facility (as
such term is defined in the Tell City Lease) and began production therein on or
prior to July 14, 1995, and Lessor (as such term is defined in the Tell City
Lease) has not given notice of termination of the Tell City Lease pursuant to
Section 4(b) thereof.
(b) The Company has not violated the provisions of Section 10
of the Tell City Lease in such a manner as would entitle Lessor to terminate the
Tell City Lease pursuant to Section 12 thereof and Lessor has not given notice
of termination of the Tell City Lease pursuant to Section 12 thereof.
(c) The Company has provided to Lessor the
certification required pursuant to Section 4(a) of the Tell City Lease.
(d) As of the date of this Agreement, the Company (i) has no
knowledge of any claim by Lessor that it will not comply with its obligations
under Section 4(a) of the Tell City Lease, and (ii) has no knowledge of any
circumstances that could reasonably be expected to result in the Lessor not
complying with its obligations under Section 4(a) of the Tell City Lease.
<PAGE>23
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco hereby, jointly and severally, represent and
warrant to Foamex, General Felt and the Company as follows:
Section 4.1. Organization, Good Standing and Corporate Power
and Authority of Parent and Newco. Parent and Newco (a) are corporations duly
organized, validly existing and in good standing under the laws of the States of
North Carolina and Delaware, respectively, (b) have the corporate power and
authority to enter into this Agreement and to perform the obligations required
of them under this Agreement, and (c) have the power and authority to carry on
their respective businesses as now conducted. Immediately prior to the Effective
Time, Newco will have outstanding less than 500,000 shares of Common Stock.
Section 4.2. Effective Agreement of Parent and Newco. The
execution and delivery by Parent and Newco of this Agreement and the
consummation by Parent and Newco of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of Parent and Newco, and
this Agreement and any other agreements or instruments executed and delivered by
Parent and Newco pursuant to this Agreement, when executed and delivered by such
persons, will constitute legal, valid and binding obligations of Parent and
Newco enforceable against Parent or Newco, as the case may be, in accordance
with their respective terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws from time to time
in effect which affect creditors' rights generally, and by legal and equitable
limitations on the enforceability of specific remedies. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Parent or Newco with any of the
provisions hereof, will (a) violate any provision of the Certificate of
Incorporation or By-laws of Parent or Newco, (b) with or without the giving of
notice and/or the passage of time, violate, conflict with, result in the breach
or termination of, constitute a default under, or result in the creation of any
lien, encumbrance or charge upon any of the assets or property of Parent or
Newco pursuant to, any contract, agreement, lease or commitment to which Parent
or Newco is a party or by which Parent or Newco or any of their respective
assets or property may be bound, or (c) violate any judgment, decree, order,
statute, rule or governmental regulation applicable to Parent or Newco or any of
their respective assets, property or business.
Section 4.3. Litigation. There are no claims or Proceedings
pending or, to the knowledge of Parent or Newco, threatened against or affecting
Parent or Newco, or Parent's or Newco's business which could prevent or
interfere with the consummation of the transactions contemplated hereby.
Section 4.4. Brokers and Finders. Neither Parent nor Newco,
nor any of their respective officers, directors or employees has employed any
broker, agent or finder or incurred any liability for brokerage fees, agents'
commissions or finders' fees, in connection with the transactions contemplated
hereby.
Section 4.5. Parent Funds. On or prior to the date of
this Agreement, Parent has delivered to General Felt commitment letters for
<PAGE>24
the borrowing and/or raising of mezzanine debt and equity financing in form
and substance reasonably satisfactory to Foamex, General Felt and the Company.
Section 4.6. Ownership of Parent and Newco. Capitalized terms
used in this Section 4.6, and not otherwise defined, shall have the meaning
ascribed to them under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
(a) Parent owns beneficially, and of record, all of the
issued and outstanding capital stock of Newco.
(b) At the Effective Time, (i) no Person (other than Parent)
will hold an aggregate total amount of the Voting Securities and Assets of
Parent in excess of $15,000,000, and (ii) no Person (other than Parent) will
hold 50% or more of an aggregate amount of the Voting Securities and Assets of
Parent.
(c) At the Effective Time, (i) Parent will not be Controlled
by any other Person, and (ii) Parent's and Newco's Annual Net Sales and Total
Assets will be less than $10,000,000.
(d) At all times since its incorporation and prior to the date
of capitalization of Parent (the "Parent Capitalization Date"), (i) Vitale has
been the sole record and beneficial owner of all of the issued and outstanding
capital stock of Parent and (ii) no other Person has had any right to elect or
designate any director of Parent. Insofar as the transactions contemplated to
occur on the Parent Capitalization Date constitute the formation of a joint
venture or other corporation under 16 C.F.R. ss. 801.40, no Acquiring Person
would (as a result of such acquisition) hold an aggregate total amount of the
Voting Securities and Assets of Parent in excess of $15,000,000 or hold Voting
Securities of Parent which confer Control of Parent. Insofar as 16 C.F.R. ss.
801.40 would not apply to the transactions contemplated to occur on the Parent
Capitalization Date, no Acquiring Person, other than Vitale, would (as a result
of such acquisition) hold an aggregate total amount of the Voting Securities and
Assets of Parent in excess of $15,000,000 or hold Voting Securities of Parent
which confer Control of Parent.
ARTICLE V.
COVENANTS REGARDING THE COMPANY'S BUSINESS AND
TRANSACTIONS PRIOR TO THE EFFECTIVE TIME
Foamex, General Felt and the Company covenant and agree with
Parent and Newco that, except (i) as otherwise consented to in writing by Parent
and Newco, or (ii) as provided specifically in this Agreement (including,
without limitation, the Schedules), from the date hereof until the Effective
Time:
Section 5.1. Conduct of Business in Ordinary Course. Subject
to Section 5.17, the Company will conduct its business only in the ordinary
course and substantially in the same manner as it has heretofore operated such
business, except for such conduct which is not material, and will not, in any
material respect change the character of its business or enter into any contract
to take any such action.
<PAGE>25
Section 5.2. No Change in Certificate of Incorporation
or By-laws. No change will be made in the Certificate of Incorporation or
By-laws of the Company.
Section 5.3. No Change in Capital Stock. No change will be
made in the authorized, issued or outstanding capital stock of the Company and
no subscriptions, options, rights, warrants, calls, commitments or agreements
relating to the authorized, issued or outstanding capital stock of the Company
will be entered into, issued, granted or created.
Section 5.4. No Change in Accounting Methods. Except as set
forth on the schedule to this Section and changes that do not affect the amount
of the Merger Consideration and would not, and could not reasonably be expected
to be, material to the business of the Company, no change will be made in the
accounting methods and practices followed by the Company or in the depreciation,
amortization or inventory valuation policies, rates or methods heretofore used
or adopted by the Company.
Section 5.5. Prohibition on Loans and Certain Other
Transactions. Except as set forth on the schedule to this Section or is not
material, the Company will not (a) enter into, create or assume any obligation
for Indebtedness or any security agreement, lien, encumbrance, mortgage, deed of
trust, pledge, conditional sale or other title retention agreement, easement,
covenant, restriction or other burden upon any of its properties or assets
whether now owned or hereafter acquired, except for borrowings and repayment of
borrowings under existing intercompany debt facilities, in the ordinary course
of business consistent with past practices, or (b) assume, guarantee, endorse
(other than endorsements of items for collection) or otherwise become liable
with respect to the obligations of any person, corporation, partnership, firm,
association, or business organization, entity or enterprise, or (c) make any
loan or advance to, or assume, guarantee, endorse (other than endorsements of
items for collection), or otherwise become liable with respect to the capital
stock or dividends of, any person, corporation, partnership, firm, association
or business organization, entity or enterprise. For purposes of this Agreement,
"Indebtedness" means any obligation (i) in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii) representing
the balance deferred and unpaid of the purchase price of any property (including
pursuant to capital leases), except any such balance that constitutes an accrued
expense or a trade payable, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of the Company
prepared in accordance with generally accepted accounting principles
consistently applied, (iii) to the extent not otherwise included, obligations
under interest rate exchange, currency exchange, swaps, futures or similar
agreements, and (iv) guaranties (other than endorsements for collection or
deposit in the ordinary course of business), direct or indirect, in any manner
(including, without limitation, reimbursement agreements in respect of letters
of credit), of all or any part of any Indebtedness of any third party. Any
breach or failure to perform this Section 5.5 shall, for all purposes of this
Agreement, be deemed to be a breach of a representation or warranty, and not a
breach of a covenant.
Section 5.6. No Defaults. The Company will not breach any
material term or provision of, any material contract, agreement, lease, license,
commitment, instrument or obligation. Any breach or failure to perform this
Section 5.6 shall, for all purposes of this Agreement, be deemed to be a breach
of a representation or warranty, and not a breach of a covenant.
<PAGE>26
Section 5.7. No Increases in Compensation. No increase will be
made in the salary or bonus payable or to become payable by the Company to any
employee whose current total annual compensation or estimated annual
compensation from the Company is $75,000 or more, or to any stockholder,
director or officer, except pursuant to an employment agreement disclosed on the
schedule to Section 3.22; no general increase will be made in the salary or
bonus payable or to become payable by the Company to any other salaried
employees or to hourly employees ("general increase" for purposes of this
Section being any increase generally applicable to a class or group of employees
and not including overtime, increases granted to individual employees for merit,
length of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class or group thereof);
no employee will be hired by the Company at a total annual compensation payable
by the Company of $75,000 or more; no extraordinary or special extra
compensation or bonus will be paid by the Company, other than overtime to hourly
workers; no employee benefit plan will be adopted or entered into, or be
amended, modified or changed in any material respect, except as set forth on the
schedule to this Section, or to the extent required by applicable law or to the
extent necessary to preserve the tax qualification of any such plan; and the
Company will not enter into any material transaction with any stockholder,
officer, director or employee except payment of directors' fees and compensation
for services rendered as employees, purchases of foam and polyurethane foam
products in a manner consistent with past practices or as set forth on the
schedule to Section 3.31. No action taken with respect to the Employee Loans
Receivable shall constitute a breach of this Section 5.7
Section 5.8. No Change in Pension Plan Status. The Company
will preserve the status of its employee benefit plans as described on the
schedule to Section 3.27 hereof. Any breach or failure to perform this Section
5.8 shall, for all purposes of this Agreement, be deemed to be a breach of a
representation or warranty, and not a breach of a covenant.
Section 5.9. Preservation of Business. The Company will use
its commercially reasonable efforts to preserve the business organization of the
Company, to continue its operations at its present levels, to keep available the
services of the present employees and agents of the Company and to preserve the
goodwill of customers, suppliers and others having business relations with the
Company, in each case in all material respects.
Section 5.10. Maintenance of Properties. The Company will
perform routine maintenance to keep and maintain its buildings, offices,
warehouses and other structures and its machinery, tools, dies, fixtures,
vehicles, spare parts and other properties which are material to its business as
conducted presently or hereafter prior to the Effective Time (whether owned or
leased and whether under its control or the control of others) in good operating
condition and in states of repair consistent with their respective ages and
present usage, ordinary wear and tear excepted, and will take all necessary
action to preserve any intangible assets which are material to its business as
conducted presently or hereafter prior to the Effective Time. Any breach or
failure to perform this Section 5.10 shall, for all purposes of this Agreement,
be deemed to be a breach of a representation or warranty, and not a breach of a
covenant.
Section 5.11. Maintenance of Insurance. General Felt
will continue to maintain in full force and effect on behalf of the Company
all insurance policies now in effect or renewals thereof or substitutions
therefor and will
<PAGE>27
not default with respect to any material provision of, and will give all
notices and file all appropriate claims under, all insurance policies in due
and timely fashion.
Section 5.12. Filing of Reports and Permit Renewals and
Transfers. The Company will duly and timely file all material reports required
to be filed with governmental authorities. The Company will duly and timely make
application for renewals of all Permits which are material to the business of
the Company as presently conducted. Each of the parties hereto will prepare and
file all necessary applications for Permits or waivers in connection with the
Merger for Permits which are material to the business and set forth on the
schedule to Section 3.4.
Section 5.13. Actions Affecting Representations, Warranties
and Covenants. The Company will not take any action which would result in, or
fail to take any commercially reasonable action which would prevent (a) an
inaccuracy in any representation or breach of any warranty of Foamex, General
Felt or the Company under this Agreement if such representation or warranty were
deemed to be restated and made again at the time of doing or suffering such act
or thing or at the Effective Time, or (b) any failure by Foamex, General Felt or
the Company duly to perform or observe any term, provision, covenant, agreement
or condition set forth or provided for in this Agreement. Any breach or failure
to perform this Section 5.13 shall, for all purposes of this Agreement, be
deemed to be a breach of a representation or warranty, and not a breach of a
covenant.
Section 5.14. Books and Records. The Company will maintain its
books and records in accordance with generally accepted accounting principles
applied on a consistent basis by the Company and in the usual, regular and
ordinary manner.
Section 5.15. Financial Statements.
(a) Within fifteen (15) days after the end of each fiscal
month commencing with fiscal May, 1996, the Company will deliver to Newco and
Parent unaudited balance sheets of the Company as at the end of such calendar
month and for the comparative calendar month of the preceding year and the
related statements of income and retained earnings and changes in financial
position for the periods ended on each of such dates.
(b) Within thirty (30) days after the end of each fiscal
quarter ending after the date hereof, the Company will deliver to Newco and
Parent unaudited balance sheets of the Company and of the Company as at the end
of such fiscal quarter and as at the end of the comparative quarter of the
preceding fiscal year, together with the related unaudited statements of income
and retained earnings and changes in financial position for the fiscal quarters
then ended.
Section 5.16. No Shop.
(a) Each of Foamex, General Felt, the Company and their
respective subsidiaries and affiliates shall not, directly or indirectly, take
(nor shall either Foamex, General Felt or the Company authorize or permit any of
its subsidiaries, officers, directors, employees, representatives, investment
bankers, attorneys, accountants or other agents or affiliates, to take) any
action to (i) encourage, solicit or initiate the submission of any Business
Combination Proposal (as defined below); provided, however, that any public
disclosure permitted pursuant to Section 12.6 shall not be deemed a breach of
this provision, (ii) enter into any agreement with respect to any Business
Combination
<PAGE>28
Proposal, or (iii) participate in any way in discussions or negotiations with,
or furnish any information to, any person in connection with, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Business
Combination Proposal. For purposes of this Agreement, "Business Combination
Proposal" shall mean, with respect to the Company, any proposal or offer
regarding a tender or exchange offer, proposal or offer for a merger,
consolidation or other business combination involving the Company or any other
proposal or offer to enter into a Business Combination (as defined in Section
9.3).
(b) No action taken by an officer or employee of the Company
who is not and was not an officer or director of Foamex or General Felt or any
direct or indirect owner of them relating to a Business Combination Proposal in
which the officer or employee (i) would participate as a holder of equity
interests in such Business Combination Proposal, (ii) is acting on behalf of or
is in concert with the party making the Business Combination Proposal, or (iii)
would be a party to an arrangement relating to his continuing employment, shall
constitute a breach of this Section.
Section 5.17. Certain Real Property Matters.
(a) The Company will not amend, terminate or surrender any
real property lease and will not enter into any new real property lease;
provided, however, that the Company shall be permitted to exercise renewal
options with respect to existing real property leases set forth on the schedule
to Section 3.16 (other than the lease for the premises located at 295 Fifth
Avenue, New York, New York) in such cases where, pursuant to the terms of such
lease, the renewal right may be exercised by the Company at that time and at no
time following July 31, 1996.
(b) The Company shall satisfy, release, discharge or otherwise
cure any and all security interests, liens, adverse claims, encumbrances,
mortgages, pledges, equities, charges, assessments, easements, covenants,
restrictions, reservations, defects in title, encroachments and other burdens
which may now or at any time prior to the Effective Time encumber all or part of
the owned real property, other than the Permitted Encumbrances.
(c) At or prior to the Closing the Company will provide, or
cause Foamex or General Felt to provide, to the title company insuring Newco
affidavits in the forms attached hereto as Exhibit E.
(d) If the Company acquires fee title to the Tell City
Property prior to the Effective Time, then, prior to the Effective Time, the
Company will use commercially reasonable efforts (i) not requiring the
expenditure of any material sum, to obtain such reasonably requested documents
evidencing the fee owner's authority to convey the property necessary to obtain
title insurance with respect to the Tell City Property, and (ii) to cause the
Tell City Property to be separated into one or more tax parcels, no part of
which shall include property owned by any person or entity other than the
Company.
(e) Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall be permitted to acquire the fee title to the
Tell City Property and terminate the Tell City Lease in accordance with the
terms thereof and the schedule to Section 3.15 shall be amended accordingly.
(f) Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall be permitted to enter into a contract of sale
with respect to the Company's real
<PAGE>29
property located in Rock Hill, South Carolina described on the schedule to
Section 3.15, provided that Parent and Newco shall have consented thereto in
writing and the schedule to Section 3.15 shall be amended accordingly and such
contract and the consummation of the transactions contemplated thereby shall
not constitute a breach or default of any of the representations, warranties,
covenants and agreements set forth in this Agreement.
(g) Notwithstanding any provision to the contrary contained in
this Agreement, the Company shall be permitted to enter into a contract (i)
retaining a broker to sublease its real property in Sparks, Nevada, and (ii)
subleasing such space, provided that Parent and Newco shall have consented
thereto in writing, and such contract and the consummation of the transactions
contemplated thereby shall not constitute a breach or default of any of the
representations, warranties, covenants and agreements set forth in this
Agreement.
ARTICLE VI.
CERTAIN COVENANTS OF THE PARTIES
Section 6.1. Notice of Certain Events.
(a) Each party shall promptly give written notice to the other
parties upon becoming aware of the occurrence of any event which would cause any
of its representations or warranties to be untrue at the Effective Time or cause
a breach by it of any covenant contained in this Agreement. No such notification
shall be deemed an amendment of the disclosure schedule to any Section of this
Agreement.
(b) The Company shall promptly give written notice to Parent
and Newco of any fire or casualty loss or damage amounting to more than $25,000
and of all fires or casualty losses or damages if they exceed $50,000 in the
aggregate, whether or not insured. Any breach or failure to perform this Section
6.1 shall, for all purposes of this Agreement, be deemed to be a breach of a
representation or warranty, and not a breach of a covenant.
(c) The Company shall promptly give written notice to Parent
and Newco of each contract in excess of $25,000 entered into by the Company for
the sale of goods or for the purchase of pre-assembled parts, raw materials,
supplies, services or utilities.
Section 6.2. Access to Properties and Records. Foamex, General
Felt and the Company shall afford to Parent and Newco and their respective
accountants, counsel and representatives (including potential lenders to Parent
who have executed confidentiality agreements in form and substance reasonably
satisfactory to General Felt) reasonable access during normal business hours
throughout the period prior to the Effective Time (or the earlier termination of
this Agreement pursuant to Article IX) to all of the material properties, books,
contracts, records (including, but not limited to, Tax Returns) and key
employees of the Company and, during such period, shall furnish promptly to
Parent and Newco (a) a copy of each material report, schedule and other document
filed or received by Foamex, General Felt or the Company relating to the Company
pursuant to the requirements of federal or state securities laws, and (b) all
other material financial, technical and other information concerning the
Company's business, properties and personnel as Parent or Newco may reasonably
request. No investigation or receipt of information pursuant to this Section 6.2
shall affect any representation or warranty of Foamex, General Felt or the
Company or the conditions to the obligations of Parent or Newco.
<PAGE>30
Section 6.3. Consents and Approvals. Each of the parties (a)
shall use its commercially reasonable efforts to obtain all necessary consents,
waivers, authorizations and approvals of all governmental and regulatory
authorities, domestic and foreign, and of all other persons, firms or
corporations set forth on the schedule to Section 7.4 hereof, and (b) shall
diligently assist and cooperate with the other in preparing and filing all
documents required to be submitted to any governmental entity in connection with
such transactions and in obtaining any governmental consents, waivers,
authorizations or approvals which may be required to be obtained in connection
with such transactions (which assistance and cooperation shall include, without
limitation, timely furnishing all appropriate information which counsel to the
other party to this Agreement determines is required to be included in such
documents or would be helpful in obtaining any such required consent, waiver,
authorization or approval).
Section 6.4. Further Assurances. Upon the request of Parent or
the Surviving Corporation at any time after the Closing Date, Foamex and General
Felt shall execute and deliver such further instruments of assignment, transfer,
conveyance, endorsement, direction or authorization and other similar documents
and perform such acts as may be reasonably requested in order to effectuate the
purposes of this Agreement. In addition, at any time following the Closing, if
requested by Parent or the Surviving Corporation in connection with a filing by
either or any of their respective affiliates under the federal securities laws,
Foamex and General Felt will, at the expense of Parent and the Surviving
Corporation, use their commercially reasonable efforts to cause Coopers &
Lybrand L.L.P., independent certified public accountants, to execute any consent
required for inclusion in such filing of certified financial statements which
had been certified by such accountants; provided, however, that Foamex and
General Felt shall not be obligated to take any action which would expose them
to liability under any federal or state securities laws, or otherwise.
Section 6.5. Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable consistent
with applicable law to cause the satisfaction of the conditions precedent set
forth in Articles VII and VIII hereof, as the case may be, and to consummate the
Merger and the Related Transactions.
Section 6.6. Confidentiality Covenant. Foamex, General Felt
and, prior to the Effective Time, the Company each hereby covenants and agrees
that, during the period from the date hereof and continuing until the fifth
anniversary of the earlier of the Closing Date or the date of termination of
this Agreement, if any (the "Confidentiality Period"), it will not, and will not
cause or direct any of its officers, directors, employees, representatives,
investment bankers, attorneys, accountants or other agents or affiliates
("Representatives") to, disclose in any way any Confidential Information (as
defined below) with respect to Newco, Parent or, following the Effective Time,
the Surviving Corporation to any other person (except as may be necessary to
enforce its rights hereunder or to its officers, directors, employees or
representatives who need to know such information for purposes of the
transactions contemplated by this Agreement, Taxes (which may also be disclosed
to taxing authorities as may be reasonably necessary in connection with a Tax
examination), accounting, pending litigation, and other matters necessary in
respect of the ownership, prior to the Effective Time, of the Company, provided
they are apprised of the confidential nature of the information). Parent and
Newco each hereby covenants and agrees that, during the Confidentiality Period,
it will not, and will not cause or direct any of its Representatives to,
disclose in any way any Confidential Information with respect to
<PAGE>31
Foamex, General Felt and, until the Effective Time, the Company to any other
person (except to its officers, directors, employees, lenders, prospective
lenders, equity investors, prospective equity investors and representatives
who need to know such information for purposes of the transactions
contemplated by this Agreement (including, without limitation, financing
related thereto), Taxes, accounting, pending litigation and other matters
necessary in respect to Parent's ownership, following the Effective Time, of
the Company, provided they are apprised of the confidential nature of the
information). For the purposes of the foregoing, "Confidential Information"
with respect to any person shall mean any and all information pertaining to
the assets, business, creditors, customers, data, employees, financial
condition or affairs, formulae, Know-How, methods, operations, procedures,
reports, suppliers, systems and technologies of such person; provided,
however, that Confidential Information shall exclude any information that (a)
is or becomes publicly available other than through disclosure by the party
subject to this covenant or any of its Representatives or any of their
respective affiliates, or (b) is required to be disclosed by law. Following
the Effective Time, Foamex and General Felt, on the one hand, and Parent, on
the other hand, shall each exercise reasonable efforts to deliver to the other
all documents and other tangible items containing Confidential Information
with respect to the other, or to destroy such documents and items, as such
party may request.
Section 6.7. Non-Competition and Non-Solicitation
Covenants.
(a) Foamex and General Felt each hereby covenants and agrees
that, during the period commencing at the Effective Time and continuing until
the third anniversary of the Closing Date, (i) neither it nor Foamex
International Inc., a Delaware corporation ("Foamex International"), nor any
affiliate controlled by Foamex International (other than an affiliate which
becomes an affiliate subsequent to the Effective Time and is not under the
control of the persons who controlled Foamex International immediately prior to
the date such affiliate became an affiliate, collectively, the "Restricted
Persons") shall, directly or indirectly, under any circumstance, sell any of the
products listed on the schedule to this Section (the "Restricted Products") to
(A) any retailer (other than a retailer in Mexico) or (B) any distributor listed
on the schedule to this Section, and (ii) none of the Restricted Persons shall,
directly or indirectly, under any circumstance, solicit, encourage or induce any
creditor, customer, supplier, officer, employee or agent of the Surviving
Corporation to sever its relationship with the Surviving Corporation.
(b) Foamex and General Felt each acknowledges that the
covenants contained in Sections 6.6 and 6.7 of this Agreement are an essential
part of the Merger and the transactions contemplated in connection therewith.
Foamex and General Felt each acknowledges that Parent and Newco have informed it
that no person would invest any monies in Parent or the Surviving Corporation,
whether as a shareholder or lender, without the benefit of the foregoing
covenants by Foamex and General Felt. Foamex and General Felt each acknowledges
that the provisions of Sections 6.6 and 6.7 hereof are fair and reasonable.
Accordingly, Foamex and General Felt each hereby agrees to be bound by the
provisions thereof to the maximum extent permitted by law, it being the intent
and spirit of the parties that the foregoing shall be fully enforceable.
However, the parties further agree that, if any of the provisions thereof shall
for any reason be held to be excessively broad as to duration, geographical
scope, property or subject matter, it shall be construed by limiting and
reducing it so as to be enforceable to the extent compatible with the applicable
law as it shall herein pertain.
(c) Foamex and General Felt each hereby acknowledges and
agrees that, in the event that Foamex or General Felt or any of their respective
subsidiaries or other affiliates violates any of the provisions of Sections 6.6
or 6.7 hereof, it would be difficult or impossible to measure the loss by, and
damages to, Parent and the Surviving Corporation. Accordingly, in addition to
any other
<PAGE>32
rights and remedies available to Parent or the Surviving Corporation under
this Agreement or otherwise, Parent and the Surviving Corporation shall each
be entitled to an injunction to be issued (without the necessity of a bond) or
specific enforcement to be required, by any tribunal of competent jurisdiction
restricting Foamex, General Felt and their respective affiliates from
committing or continuing any such violation.
Section 6.8. Cash Dividend. Immediately prior to the
Closing, the Company shall make a special dividend to General Felt of all cash
then on hand (the "Cash Dividend").
Section 6.9. Certain Senior Executive Employee Matters.
(a) At or prior to the Closing, the Company shall dividend and
distribute to General Felt the Employee Loans Receivable listed on the Adjusted
April Balance Sheet (the "Employee Loans Receivable"), and all security and
rights of the Company with respect thereto and the security therefor. From and
after the Closing Date, the Surviving Corporation shall provide information
reasonably requested by General Felt and shall assist General Felt, at General
Felt's expense, in any and all reasonable efforts to collect the Employee Loans
Receivable.
(b) At or prior to the Closing, the Company shall assign to
General Felt and General Felt shall assume all of the Company's liabilities and
obligations to Murphy L. Fontenot, Jr. ("Fontenot"), including, without
limitation, under that certain Employment Agreement, dated as of May 24, 1989,
by and among HFE Acquisition Corporation, Home Furnishings Enterprises, Inc.,
and Fontenot, as amended by that certain Amendment to Employment Agreement,
dated as of November 18, 1993, between the Company and Fontenot, (collectively,
the "Fontenot Liabilities"). There shall be no accrual for the Fontenot
Liabilities on the Closing Date Balance Sheet, and the Fontenot Liabilities
shall not be included in the calculation of Net Assets. The parties hereto agree
that this provision relates solely to the allocation of the Fontenot Liabilities
between the parties, and shall not constitute an admission that any such
liabilities exist.
(c) Prior to the Closing Date, General Felt shall use
its commercially reasonable efforts to obtain a waiver from Mr. L. Dupuy Sears
("Sears") of Section 6.1(b)(ii) of that certain Employment Agreement, dated as
of August 1, 1989, by and between Home Furnishings Enterprises, Inc. and
Sears, as amended by that certain Amendment to Employment Agreement, dated as
of November 18, 1993, between the Company and Sears to the extent such
provision relates to Mr. Sears' participation in the Foamex International Inc.
stock option plan.
Section 6.10. Collection of Certain Accounts Receivable.
(a) Together with its delivery of the Closing Date Balance
Sheet, the Company shall deliver a schedule setting forth each account
receivable to be included in the Closing Date Balance Sheet for which the
Company has taken a specific reserve as a result of the filing by the account
debtor of a petition for relief under the U.S. Bankruptcy Code or any equivalent
state law (the "Bankruptcy Receivables") and the specific reserves with respect
to such Bankruptcy Receivables (the "Bankruptcy Reserves").
(b) Parent shall cause the Surviving Corporation to use
commercially reasonable efforts, not requiring (however, permitting in the
Surviving Corporation's sole discretion) the
<PAGE>33
expenditure of any funds, to collect the Bankruptcy Receivables, and will
cooperate with General Felt, upon General Felt's written request, in any
reasonable effort to collect such Bankruptcy Receivables.
(c) Within thirty (30) days after the end of each calendar
quarter subsequent to the Effective Time and continuing to and including the
quarter ending December 31, 1997 (the "Collection Period"), Parent shall cause
the Surviving Corporation to pay to General Felt 50% of the excess of the
cumulative collections with respect to the Bankruptcy Receivables during the
Collection Period over the amount of the Bankruptcy Receivables set forth on the
Closing Date Balance Sheet less the Bankruptcy Reserves, net of the Surviving
Corporation's costs of collection, except to the extent previously paid. The
remaining amount shall be retained by the Surviving Corporation.
Section 6.11. Tax Matters.
(a) Foamex and General Felt shall duly file or cause to be
duly filed on a timely basis all Tax Returns of, relating to or which include
the Company for all periods ending on or before the Closing Date (each, a
"Pre-Closing Period"). Such Tax Returns shall be filed on a basis consistent
with prior Tax Returns and shall not make, amend or terminate any election by
the Company (or to which the Company is subject) without Newco's and Parent's
prior written consent, which consent shall not be unreasonably withheld. Foamex
and General Felt shall give Newco and Parent a copy of each such Tax Return for
its review with sufficient time for comments prior to filing.
(b) Foamex and General Felt shall be, jointly and severally,
responsible for and shall timely pay all Taxes, including without limitation any
Taxes resulting from an audit or examination adjustment, for which the Company
is or may be liable with respect to any Pre-Closing Period and, with respect to
any period that includes but does not end on the Closing Date, the portion of
such period through and including the Closing Date, except to the extent that
such Taxes are included as a liability on the Closing Date Balance Sheet or in
the calculation of Net Assets ("Pre-Closing Taxes").
(c) Foamex and General Felt shall timely file all required
stock transfer, real or personal property transfer, sales, use and other
transfer Tax Returns and Parent and General Felt shall each bear 50% of, and
General Felt shall remit when due, any such Taxes in connection with the
transactions contemplated by this Agreement.
Section 6.12. Employee Matters. Except with respect to the
Fontenot Liabilities, the Self-Insured Welfare Liabilities and as otherwise
provided in this Agreement, Parent acknowledges and agrees that: (a) the
Surviving Corporation shall be the sponsor of the employee benefit plans,
programs and policies set forth on the schedule to Section 3.27(a) as of the
Effective Time, and (b) Parent shall cause the Surviving Corporation to satisfy
all obligations and liabilities provided under such plans, programs and policies
as in effect as of the Effective Time. Notwithstanding the foregoing, the
Surviving Corporation shall not be obligated to continue any particular employee
benefit plan after the Effective Time, and any Company employee benefit plan may
be amended or terminated after the Effective Time in accordance with its terms
and applicable law. Parent will, or will cause the Surviving Corporation to,
waive all limitations as to pre-existing conditions exclusions and waiting
periods with respect to participation and coverage requirements applicable to
the Company employees under any welfare plans that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for the Company employees immediately prior to the Effective Time.
Notwithstanding anything contained in this Section, the provisions of this
<PAGE>34
Section are not intended to, and shall not in any way be construed to, confer
upon any person other than the parties hereto any rights or remedies
hereunder.
Section 6.13. Release of Obligations Under Letter of Credit
Agreement. No less than three (3) business days prior to the Closing, General
Felt shall deliver a schedule of the Company's open Letters of Credit to Parent,
specifying the remaining term, and undrawn amount of such Letters of Credit. At
Closing, Parent shall cause to be delivered to the issuing bank under such
Letters of Credit, letters of credit with terms and availability equivalent to
the Letters of Credit outstanding on the Closing Date; provided, however, that
in no event shall Parent be obligated to provide such substitute Letters of
Credit in an aggregate amount of availability exceeding $250,000.
Section 6.14. Self-Insured Welfare Liabilities.
(a) From and after the Closing Date, all claims for
reimbursement from employees of the Company as of the Effective Time (the
"Business Employees") for liabilities or obligations under the Company's
self-insured employee medical benefit plans arising on or prior to the Closing
Date (the "Self-Insured Welfare Liabilities") shall be the sole obligation of,
and shall be administered and paid by General Felt.
(b) For purposes of this Section, claims shall be deemed to
have arisen (i) with respect to all death or dismemberment claims, on the actual
date of death or dismemberment; (ii) with respect to short-term disability,
salary continuance claims and long-term disability claims, on the first day when
the Business Employee ceases to be actively employed by the Company as a result
of a condition which ultimately results in a determination that the Business
Employee is entitled to disability benefits under the appropriate disability
plan; (iii) with respect to all hospital, medical, drug or dental claims, on the
date the service or supply was purchased or received by the claimant; and (iv)
with respect to worker's compensation claims (A) which are single accident
specific, on the date of the occurrence, and (B) which are not single accident
specific, on the date the claim is filed with the appropriate agency.
(c) There shall be no accrual for the Self-Insured Welfare
Liabilities on the Closing Date Balance Sheet, and the Self-Insured Welfare
Liabilities shall not be included in the calculation of Net Assets.
Section 6.15. Certain Insurance Matters. At or prior to the
Closing, General Felt shall obtain insurance coverage, at its expense, for the
extended reporting period from the Effective Time through the expiration of the
applicable statute of limitations periods during which claims may be brought
against the Company, under the Company's current fiduciary liability and
directors and officers liability insurance policies with respect to acts and
events occurring prior to the Effective Time.
Section 6.16. Satisfaction of Certain Liabilities. At or prior
to the Closing, Foamex, General Felt and the Company shall satisfy, and the
Company shall be released, in a form reasonable satisfactory to Parent, from (a)
all Indebtedness of the Company (other than matters covered by clause (ii) of
Section 5.5 and other than reimbursement obligations for letters of credit to be
listed on the schedule to be delivered pursuant to Section 6.13), and (b) all
obligations and liabilities of the Company to Foamex, General Felt or any of
their respective affiliates, except for accounts receivable incurred in the
ordinary course
<PAGE>35
of business and obligations and liabilities arising pursuant to the terms of
this Agreement (the obligations and liabilities described in clauses (a) and
(b) above are collectively referred to as the "Released Obligations"). In
addition, other than Permitted Encumbrances, all liens upon and security
interests in the Company's assets and properties (other than real property)
shall be released, discharged, satisfied or otherwise, to the reasonable
satisfaction of Parent, bonded or cured at or prior to the Effective Time.
Section 6.17. Certain Matters Relating to Commitment
Letters and the Lock-In Date.
(a) For purposes of this Agreement, the "Lock-In Date" shall
be the earlier of (i) July 1, 1996, or (ii) the first business day following the
date on which Parent delivers to General Felt one or more commitment letters for
borrowing of revolving and/or term debt in the aggregate amount of at least
$50,000,000, less the amount of mezzanine debt and equity commitment letters (A)
delivered on the date of this Agreement and (B) subsequently delivered up to a
maximum amount of $2,800,000, which will be available for borrowing by Parent or
Newco as of the Closing Date. Such commitment letters shall be in customary form
or as is otherwise reasonably satisfactory to General Felt (the "Commitment
Letters").
(b) Prior to July 1, 1996, Parent shall give General Felt at
least four (4) business days prior written notice of its intention to deliver
the Commitment Letters, such notice shall also specify any state of facts known
to Parent and Vitale as of the date of such notice which constitutes a breach of
a representation or warranty of Foamex, General Felt or the Company.
(c) Parent and General Felt shall direct the Escrow Agent to
return the Deposit together with all accrued interest thereon to Parent or Newco
(as directed in writing by Parent) on the second business day following Parent's
delivery of the Commitment Letters.
ARTICLE VII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND NEWCO
All obligations of Parent and Newco under this Agreement are
subject, at the option of Parent and Newco, to the fulfillment, prior to the
Closing, of each of the following conditions:
Section 7.1. Proceedings and Documentation. Parent and Newco
shall have been furnished with (a) copies of resolutions adopted by the Board of
Directors of the managing general partner of Foamex, by the Board of Directors
of General Felt and by the Board of Directors and stockholders of the Company,
authorizing the execution and delivery by Foamex, General Felt and the Company
of this Agreement and the consummation by Foamex, General Felt and the Company
of the transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the managing general partner of Foamex, General Felt or the
Company, as the case may be, (b) certificates of the Secretary or Assistant
Secretary of the managing general partner of Foamex, General Felt and the
Company with respect to the incumbency of all officers of the managing general
partner of Foamex, General Felt and the Company, as the case may be, executing
instruments and other documents in connection with the transactions contemplated
by this Agreement, and (c) such other instruments and documents as counsel to
Parent and Newco shall have reasonably requested.
<PAGE>36
Section 7.2. Accuracy of Representations and Warranties;
Compliance with Covenants and Conditions. All representations and warranties of
Foamex, General Felt and the Company under this Agreement or otherwise made in
writing pursuant to this Agreement shall have been true and correct in all
material respects as of the date when made, and shall be true and correct in all
material respects at the Effective Time as though restated and made at such
time; provided that (a) for the purposes of determining whether any
representation or warranty is or was true and correct in all material respects
and for all other purposes of this Section 7.2 and Section 9.1(e), each
representation and warranty, other than (i) Sections 3.14(a), 3.14(b), 3.14(e)
and 3.15, (ii) the definition of Permitted Encumbrances in Section 3.18, (iii)
the last sentence of Section 3.21, (iv) the last sentence of Section 3.29, (v)
Section 3.32, and (vi) Sections 5.13(a) and 6.1(a) to the extent they relate to
such representations and warranties, shall be construed as if each qualification
as to materiality and Material Adverse Effect contained therein were eliminated,
and (b) for the purposes of determining whether the representation or warranty
contained in Section 3.13(a) is or was true and correct in all material respects
and for all other purposes of this Section 7.2, any liabilities of the Company
which are discovered or arise subsequent to the date of this Agreement and the
existence of which would, notwithstanding Sections 3.13(a)(iv)-(ix), otherwise
constitute a breach of such representation or warranty, but which are fully
accrued for on the Pre-Closing Balance Sheet and fully included as liabilities
in the calculation of Estimated Net Assets shall not be deemed a breach of such
representation and warranty, unless such liability shall have primarily caused
Parent's lender to be unwilling to finance the Merger, and Parent shall have
delivered to Foamex and General Felt a written notice from Parent's lender
either addressed to General Felt or addressed to Parent and providing that
General Felt may rely upon such letter, to the effect that it would still be
willing to fund the Merger on that date but for the effect of any such
specifically identified liability and any specifically identified Additional
Environmental Matter (as defined in Section 7.10), notwithstanding the indemnity
by Foamex and General Felt under this Agreement. Each of Foamex, General Felt
and the Company shall have performed and complied with each and every covenant
and agreement required by this Agreement to be performed or complied with by it
prior to or at the Effective Time. Foamex, General Felt and the Company shall
have delivered to Newco and Parent a certificate to such effect signed by the
Chief Executive Officers or Chief Financial Officers of each of the managing
general partner of Foamex, General Felt and the Company on behalf of such
entities, without personal liability to the signatory thereof.
Section 7.3. Legal Opinion of Counsel to the Company. The
Company shall have delivered to Newco and Parent an opinion of Willkie Farr &
Gallagher, counsel for Foamex, General Felt and the Company, dated the date of
the Closing, in the form attached hereto as Exhibit B, with only such changes as
are necessary to reflect any act, event or occurrence since the date of this
Agreement, which act, event or occurrence does not itself constitute or result
in the non-satisfaction of any of the conditions set forth in this Article.
Section 7.4. Obtaining of Consents. All consents,
approvals and agreements of other parties or governmental authorities set
forth on the schedule to this Section shall have been obtained.
Section 7.5. Absence of Pending Proceedings. No
litigation or action, by any administrative agency or governmental body, no
litigation or action by any third party and no legal or administrative
proceeding
<PAGE>37
shall be pending which seeks to restrict, limit, prohibit or enjoin the Merger
or any of the Related Transactions.
Section 7.6. No Material Adverse Change. Since the date of
this Agreement, there shall not have occurred a Material Adverse Effect, nor
shall there have occurred any event which would reasonably be expected to result
in a Material Adverse Effect.
Section 7.7. Supply Agreement. Foamex shall have executed and
delivered to the Company and the other parties thereto a Supply Agreement
between Foamex, the Company and the other parties thereto in the form attached
hereto as Exhibit C (the "Supply Agreement").
Section 7.8. FIRPTA Affidavit. General Felt shall have
executed and delivered to Parent and Newco a certificate of nonforeign status,
in the form required by Section 1445 of the Code. General Felt acknowledges and
agrees that such certificate will be retained by Parent and will be made
available to taxing authorities upon request.
Section 7.9. Delivery of Shares. General Felt shall have
delivered to Parent and Newco certificates evidencing all of the Shares or an
affidavit of lost stock certificate with respect to the Shares in form and
substance reasonably satisfactory to Parent and Newco, accompanied by stock
powers duly endorsed in blank.
Section 7.10. Absence of Certain Environmental Matters. Other
than the Existing Environmental Matters (as defined in Section 10.1(c)), no
condition specifically identified in writing to General Felt shall exist with
respect to which the ownership of the Company or its assets or the operation of
its business could reasonably be expected to be in violation of, or could
reasonably be expected to give rise to any loss, damage or liability under, any
Environmental Law (each, an "Additional Environmental Matter" and, collectively,
the "Additional Environmental Matters"), which shall have caused Parent's lender
to be unwilling to finance the Merger and Parent shall have delivered to Foamex
and General Felt a written notice from Parent's lender either addressed to
General Felt or addressed to Parent and providing that General Felt may rely
upon such letter, to the effect that it would still be willing to fund the
Merger on that date but for the effect of any specifically identified liability
described in Section 7.2(b) and any specifically identified Additional
Environmental Matter, notwithstanding the indemnity by Foamex and General Felt
under this Agreement.
ARTICLE VIII.
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF GENERAL FELT AND THE COMPANY
All obligations of Foamex, General Felt and the Company under
this Agreement are subject, at the option of Foamex, General Felt and the
Company, to the fulfillment, prior to the Closing, of each of the following
conditions:
Section 8.1. Proceedings and Documentation. Foamex,
General Felt and the Company shall have been furnished
<PAGE>38
with (a) copies of resolutions adopted by the Board of Directors of Parent and
of the Board of Directors and stockholder of Newco, authorizing the execution
and delivery by Parent and Newco of this Agreement and the consummation by
Parent and Newco of the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of Parent or Newco, as the case may be, (b)
certificates of the Secretary or Assistant Secretary of Parent and of the
Secretary or Assistant Secretary of Newco with respect to the incumbency of
all officers of Parent and Newco, as the case may be, executing instruments
and other documents in connection with the transactions contemplated by this
Agreement, and (c) such other instruments and documents as counsel to Foamex
and General Felt shall have reasonably requested.
Section 8.2. Accuracy of Representations and Warranties;
Compliance with Covenants and Conditions. All representations and warranties of
Newco and Parent under this Agreement shall be true and correct in all material
respects as of the date when made, and shall be true and correct in all material
respects at the Effective Time as though restated and made at such time. Newco
and Parent shall have performed and complied with each and every covenant,
agreement and condition required by this Agreement to be performed or complied
with by it prior to or at the Effective Time. Newco and Parent shall have
delivered to Foamex, General Felt and the Company a certificate to such effect
signed by the Chief Executive Officers or Chief Financial Officers of each of
Newco and Parent.
Section 8.3. Legal Opinion of Counsel to Newco and Parent.
Newco and Parent shall have delivered to Foamex and General Felt an opinion of
Parker Chapin Flattau & Klimpl, LLP, counsel for Newco and Parent, dated the
date of the Closing, in the form attached hereto as Exhibit D, with only such
changes as are necessary to reflect any act, event or occurrence since the date
of this Agreement, which act, event or occurrence does not itself constitute or
result in the non-satisfaction of any of the conditions set forth in this
Article.
Section 8.4. Obtaining of Consents. All consents and
approvals set forth on the schedule to this Section shall have been obtained.
Section 8.5. Absence of Pending Proceedings. No litigation or
action, by any administrative agency or governmental body, no litigation or
action by any third party and no legal or administrative proceeding shall be
pending which seeks to restrict, limit, prohibit or enjoin the Merger or any of
the Related Transactions.
Section 8.6. Supply Agreement. The Company shall have
executed and delivered to Foamex the Supply Agreement.
Section 8.7. Merger Consideration. Parent or Newco shall
have delivered irrevocable wire transfer instructions for the transfer of the
Merger Consideration to General Felt and as otherwise as provided in Section
2.1(c), subject to the Merger taking place.
ARTICLE IX.
TERMINATION OF THIS AGREEMENT
<PAGE>39
Section 9.1. Termination. This Agreement may be
terminated at any time prior to the Effective Time as follows and in no other
manner:
(a) by mutual consent of Parent and General Felt;
(b) after the Lock-In Date, by Parent upon five (5) business
days notice if, at or before the Effective Time, satisfaction of any condition
set forth in Article VII is or becomes impossible (other than through the breach
by Parent or Newco of any of their representations or warranties or the failure
of Parent or Newco to perform any of their obligations pursuant to this
Agreement) and Parent shall not have waived such condition at or before the
Effective Time; provided that, in the case of the covenants of Foamex, General
Felt and the Company pursuant to Sections 5.17(b) and 6.16, Foamex, General Felt
and the Company shall have until July 31, 1996 to cure such non-satisfaction so
long as Foamex, General Felt and the Company are making reasonable efforts to do
so;
(c) after the Lock-In Date, by General Felt upon five (5)
business days notice if, at or before the Effective Time, satisfaction of any
condition set forth in Article VIII is or becomes impossible (other than through
the breach by Foamex, General Felt or the Company of any of their
representations or warranties or the failure of Foamex, General Felt or the
Company to perform any of their obligations pursuant to this Agreement) and
General Felt shall not have waived such condition at or before the Effective
Time;
(d) by Parent or General Felt if the Closing shall not have
occurred on or before July 31, 1996, or such later date as may have been agreed
upon by the parties hereto, provided that the failure to close by such date is
not caused by a breach by the terminating party of any of its representations,
warranties or obligations under this Agreement; provided further, however, that
such date shall be extended until ten (10) business days after any notice given
pursuant to Section 9.1(e) or (f) on or prior to such date;
(e) after the Lock-In Date, by Parent upon five (5) business
days notice if at or before the Effective Time satisfaction of any condition set
forth in Article VII is (or becomes) impossible or will fail to occur as a
result of (i) a breach by Foamex, General Felt or the Company of any
representation or warranty made herein, or (ii) the failure by such parties to
perform any of their covenants and agreements hereunder, provided that such
non-satisfaction has not been cured on or prior to the expiration of such five
(5) business day period; provided further that, in the case of the covenants of
Foamex, General Felt and the Company pursuant to Sections 5.17(b) and 6.16,
Foamex, General Felt and the Company shall have until July 31, 1996 to cure such
non-satisfaction so long as Foamex, General Felt and the Company are making
reasonable efforts to do so;
(f) after the Lock-In Date, by General Felt upon five (5)
business days notice if at or before the Effective Time satisfaction of any
condition set forth in Article VIII is (or becomes) impossible or will fail to
occur as a result of a breach by Parent or Newco of any representation or
warranty made herein, or the failure by such parties to perform any of their
covenants and agreements hereunder, provided that such non-satisfaction has not
been cured on or prior to the expiration of such five (5) business day period;
(g) on or prior to the Lock-In Date, by Parent;
<PAGE>40
(h) in the period prior to the Lock-In Date, by General Felt,
if Parent shall have delivered to General Felt a letter from General Electric
Capital Corporation (the "Proposed Lender") either addressed to General Felt or
addressed to Parent and providing that General Felt may rely upon such letter to
the effect that the Proposed Lender was willing and able to commit to fund the
Merger (subject to definitive loan documentation), but for certain specifically
enumerated facts (the "Proposed Lender Letter"); or
(i) by General Felt on or prior to two (2) business days after
the Response Date (as defined below), if both (i) General Felt shall have
delivered to Parent a written list of Schedule Amendments (as defined below) on
or prior to the earliest of (A) June 24, 1996, or (B) three (3) business days
after receiving the notice from Parent pursuant to Section 6.17(b), and (ii)
Parent and Newco shall not have agreed in writing within two (2) business days
of such delivery (the "Response Date") to amend this Agreement to provide that
such Schedule Amendments shall be considered for all purposes of this Agreement
to have been a part of the Schedules from the date of this Agreement. For
purposes of this Agreement, "Schedule Amendments" means amendments to the
Schedules to this Agreement which either (I) result in Foamex, General Felt and
the Company being in compliance with any representation or warranty with which
they were prior to such Schedule Amendments not in compliance or (II) prevent
Foamex, General Felt and the Company from being in non-compliance with any
representation or warranty as a result of any reasonably expected third party
act, event or occurrence that is likely to occur, and such non-compliance in
either case was not caused by a breach by Foamex, General Felt or the Company of
any covenant contained in Section 6.5.
Section 9.2. Liability of the Parties.
(a) Except as otherwise provided in Section 9.3 hereof, upon
termination of this Agreement pursuant to Section 9.1(e) or Section 9.1(f)
hereof, the party so electing to terminate this Agreement (the "Terminating
Party") shall be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and privileges available to it at law or in equity. For purposes
of this Section, the expenses incurred by Parent shall include the expenses of
Newco, Vitale Holdings, Inc. and Vitale Family Limited Partnership in the event
that the Terminating Party is Parent, and include the Company's and Foamex's
expenses in the event that the Terminating Party is General Felt.
(b) Notwithstanding the foregoing provisions of this Section
9.2, neither Newco and Parent, on the one hand, nor Foamex, General Felt or the
Company, on the other hand, shall have any liability to the other pursuant to
this Section 9.2 in the event that such breach or default arises primarily out
of: (i) any action or failure to act by (A) any international, foreign, federal,
state, county, local or municipal government or administrative agency or
political subdivision thereof, (B) any governmental agency, authority, board,
bureau, commission, department or instrumentality, (C) any court or
administrative tribunal, (D) any non-governmental agency, tribunal or entity
that is vested by a governmental agency with applicable jurisdiction, or (E) any
arbitration tribunal or other non-governmental authority with applicable
jurisdiction; or (ii) any fire, explosion, flood, earthquake or other natural
disaster, war, whether declared or not, labor strike or accident.
(c) If this Agreement is terminated pursuant to Sections
9.1(e) or 9.1(f), all further obligations of the parties under this Agreement
shall terminate, except that the obligations pursuant to Sections 6.6, 9.2, 9.3,
9.4, 11.1, 11.2, 11.3, 12.3, 12.4, 12.6 and 12.8 shall survive such termination.
If this Agreement is terminated pursuant to Sections 9.1(a)-(d) or (g)-(i), all
further obligations of the parties under this Agreement shall terminate, except
that the obligations pursuant to Sections 6.6, 9.2(c), 9.4, 12.3, 12.4, 12.6 and
12.8 shall survive such termination.
<PAGE>41
Section 9.3. Termination Fee. If (a) this Agreement is
terminated by Parent pursuant to Section 9.1(e) (and either Foamex, General Felt
or the Company was previously in breach or default of any of its
representations, warranties or obligations under this Agreement and such breach
or default resulted in a failure of any of the conditions precedent contained in
Article VII to be satisfied), and (b) a Business Combination shall occur within
six (6) months of the date this Agreement is terminated, and (c) at the time of
such termination Parent shall have delivered to Foamex and General Felt a
written reaffirmation from the Proposed Lender to the effect that, but for the
occurrence of the events or conditions giving rise to Parent's right to
terminate this Agreement, the Proposed Lender would still be willing to fund the
Merger on that date, then General Felt shall immediately pay to Parent in same
day funds the sum of $1,000,000 plus all reasonable, documented attorneys',
accountants', consultants' and other out-of-pocket expenses incurred by Parent,
Newco and Vitale Holdings, Inc. in connection with the transactions contemplated
by this Agreement, and Foamex, General Felt and the Company shall thereafter
have no further liability or obligations to Parent or Newco pursuant to this
Agreement other than as provided in Section 9.2(c) hereof (but Section 9.2(a)
shall not survive). For purposes of this Agreement, the term "Business
Combination" means any of the following events: (i) the Company is acquired by
merger or otherwise by any person or group, including, without limitation, any
officer or director or any group which includes such officer or director as a
member (a "Third Party"); (ii) the Company enters into an agreement with a Third
Party which contemplates the acquisition of 30% or more of the total assets of
the Company; (iii) the Company enters into a stock purchase, subscription,
merger, consolidation, share exchange or other agreement with a Third Party
which contemplates the acquisition of 30% or more of the outstanding shares of
the Company's capital stock; (iv) a Third Party acquires 30% or more of the
total assets of the Company; (v) a Third Party acquires 30% or more of the
outstanding shares of the Company's capital stock; or (vi) the Company adopts a
plan of liquidation relating to 30% or more of the total assets of the Company.
Section 9.4. The Effect of Certain Terminations on the
Deposit.
(a) If this Agreement is terminated by Parent pursuant to
Section 9.1(g), then Parent and General Felt shall direct the Escrow Agent to
deliver the Deposit, together with all interest accrued thereon, as follows:
(i) to Parent, if both (A) prior to such
termination Parent shall have delivered to General Felt a Proposed Lender
Letter, and (B) after giving effect to any remedy proposed to be undertaken by
Foamex, General Felt and/or the Company within four (4) business days after
receipt of such Proposed Lender Letter, the specifically enumerated facts in
the Proposed Lender Letter reflect a Material Adverse Effect since the date of
this Agreement; otherwise
(ii) to General Felt.
(b) If this Agreement is terminated by General Felt pursuant
to Section 9.1(h), then Parent and General Felt shall instruct the Escrow
Agent to deliver the Deposit, together with all interest accrued thereon, to
Parent.
(c) If this Agreement is terminated by General Felt pursuant
to Section 9.1(i), then Parent and General Felt shall instruct the Escrow
Agent to deliver the Deposit, together with all interest accrued thereon, to
Parent.
<PAGE>42
ARTICLE X.
INDEMNIFICATION
Section 10.1. Indemnification by Foamex and General Felt.
Except in the case of any claim relating to Taxes for which Foamex and General
Felt shall have no liability or obligation to indemnify under this Agreement
except as specifically provided pursuant to Section 10.6 hereof, Foamex and
General Felt hereby, jointly and severally, agree to indemnify, defend and hold
Parent and the Surviving Corporation harmless on demand from and against, and
will pay to Parent or the Surviving Corporation as provided in the last sentence
of this Section, the full amount of any loss, claim, damage, liability,
obligation or expense (including reasonable attorneys' fees and disbursements)
suffered or incurred by Parent or the Surviving Corporation, either directly or
indirectly, based upon or resulting from:
(a) any breach of or inaccuracy in the representations and
warranties of Foamex, General Felt or the Company contained in this Agreement
other than the representations and warranties contained in Sections 3.8 and 3.10
(or Section 3.9 to the extent such breach also constituted a breach of such
Sections) or any breach, nonfulfillment or default in any of the covenants of
Foamex, General Felt or the Company contained in Sections 5.5, 5.6, 5.8, 5.10,
5.13 or 6.1;
(b) any breach, nonfulfillment or default in the performance
of any of the covenants and agreements of Foamex, General Felt or the Company
contained in this Agreement (other than those contained in Sections 5.5, 5.6,
5.8, 5.10, 5.13 or 6.1);
(c) the ownership of the Company or its assets or operation of
its business prior to the Effective Time in violation of, or in any manner
giving rise at any time to any loss, damage or liability under, any
Environmental Law (including the migration following the Effective Time of
Releases occurring prior to the Effective Time), including, without limitation,
each of the matters set forth on the schedule to Section 3.10 ("Existing
Environmental Matters"); provided, however, that (i) the indemnity payable
(other than for reimbursement of liability to third parties and for incidental
and consequential damages suffered by Parent or the Surviving Corporation) shall
be limited to Reasonably Necessary Costs of Remediation (as defined in Section
10.7), (ii) there shall be no indemnity for one-half of the costs incurred up to
the amount of the ESC Cost Estimates (as defined in Section 10.7), (iii) the
indemnity provided pursuant to this clause (c) shall be subject to Section 10.7;
and provided further, however, that there shall be no indemnity for any loss or
liability to the extent arising out of the conduct of the business of the
Surviving Corporation after the Effective Time;
(d) the Released Obligations;
(e) the Fontenot Liabilities;
(f) Self-Insured Welfare Liabilities;
(g) any liability arising out of or in connection with any
claim made prior to the Effective Time by the ultimate retail purchaser of any
of the Company's products resulting from an alleged defect in the design or
manufacture of any product, or any alleged failure to warn with respect to any
product;
<PAGE>43
(h) any liability to any third party arising primarily out of
any (i) act or (ii) omission to perform any act or obligation in connection with
the conduct of the business of the Company prior to the Effective Time, other
than (A) liabilities relating to the performance of obligations under contracts
to which the Company is party or to which its assets are subject, in accordance
with the terms and conditions thereof, (B) liabilities in the nature and of the
category of liabilities described in clauses (c), (d), (e), (f), (g) or (i) (to
the extent it relates to such clauses) of this Section 10.1 whether or not
indemnity is provided pursuant to such clauses, (C) liabilities, the existence
of which constitutes a breach of a representation or warranty contained in
Article III or Sections 5.5, 5.6, 5.8, 5.10, 5.13 or 6.1, regardless of the
survival period, (D) any liability for Taxes, (E) liabilities which are
expressly permitted hereunder or which are set forth on the schedule to this
Section, and (F) any liability arising out of or in connection with any claim
made after the Effective Time by the ultimate retail purchaser of any of the
Company's products resulting from an alleged defect in the design or manufacture
of any product, or any alleged failure to warn with respect to any product; or
(i) any and all legal and other out-of-pocket expenses
reasonably incurred by Parent or Newco in connection with investigating,
defending, or prosecuting any of the matters referred to in clauses (a) through
(h) above, or any actions or claims in respect thereof, resulting in any loss,
liability or damage and for which Foamex or General Felt is otherwise
responsible pursuant to this Section 10.1;
provided that, for the purposes of determining whether any breach of or
inaccuracy in any representation or warranty made by Foamex, General Felt or the
Company contained in this Agreement or the obligations contained in the first
sentence of Section 5.12(a) hereof has occurred, the amount of any loss, claim,
damage, liability, obligation or expense based upon or resulting from such
breach or inaccuracy, and for all other purposes of this Section 10.1, each such
representation and warranty or Section 5.12 shall be construed as if each
qualification as to materiality and Material Adverse Effect contained therein
were eliminated, other than (A) Sections 3.14(a), 3.14(b) and 3.14(e), (B) the
definition of Permitted Encumbrances in Section 3.18, (C) the last sentence of
Section 3.21, (D) the last sentence of Section 3.29, (E) Section 3.32, and (F)
Sections 5.13(a) and 6.1(a) to the extent they relate to such representations
and warranties. Notwithstanding the foregoing, (1) no claim shall be made under
clauses (a) and (c) of this Section 10.1 for matters (other than Existing
Environmental Matters and Additional Environmental Matters) unless and until the
aggregate amount of such claims exceeds $500,000 (the "Loss Threshold Amount")
and then only to the extent that the amount of such claims (excluding the
portion of the ESC Cost Estimates paid by or on behalf of the Surviving
Corporation for which it is not entitled to indemnity hereunder) exceeds the
Loss Threshold Amount, provided that this limitation does not apply to the
extent that this claim can be brought under another paragraph of this Section
10.1, and (2) in no event (except for actual fraud) shall Foamex, General Felt
and the Company be liable, in the aggregate, under clauses (a) and (c) of this
Section 10.1 for matters other than Existing Environmental Matters and
Additional Environmental Matters for more than $25,000,000; provided, however,
that the dollar limitations set forth in this sentence shall not apply to any
breach of any of the representations or warranties contained in Sections 3.1
(excluding the last sentence of such Section), 3.2, 3.3, 3.4 (the first sentence
only), 3.13(a), 3.27(c), (f), (g), (h) and (i) or 3.33 or any claim which falls
under any of clauses (b) and (d) through (i) (except in the case of clause (i)
to the extent it relates to clause (a) or (c)) above), whether or not it also
falls under (a) or (c) above. In addition, (x) no claim shall be made as a
result of any breach of Section 3.13(a) to the extent that the indebtedness,
obligations and liabilities, if any, that are the subject of such breach are
otherwise covered under clauses (c), (d), (f) or (g) of this Section 10.1, (y)
there shall be no indemnity for breaches of the representations and warranties
contained in Section 3.15 as they relate to the Company's parcels of real
property listed on the schedule to Section 3.15 (as the same may be
<PAGE>44
amended as permitted hereunder) with respect to which Parent or Newco obtains
title insurance (including all title insurance endorsements), to the extent that
such title insurance or title insurance endorsements insure Parent and the
Surviving Corporation against losses arising out of such breaches, and (z) there
shall be no indemnity for any breaches of the representations or warranties
contained in Section 3.34 unless such breaches result in the refusal of the
Lessor to convey the Tell City Property, in which event the indemnity for such
breaches would be provided without regard to the Loss Threshold Amount. For
purposes of this Section 10.1, any liability, loss, damage or expense incurred
by the Surviving Corporation in connection with any of the matters for which
indemnification is provided hereby shall be deemed to have been incurred by
Parent and any indemnified party claiming by or through Parent in the same
amount. Any amounts payable to the Surviving Corporation and Parent from Foamex
or General Felt pursuant to this Section 10.1 shall be paid to the Surviving
Corporation unless payment to Parent is requested by Parent and evidence
reasonably satisfactory to Foamex and General Felt is provided that such payment
has been consented to by the Surviving Corporation's Lenders (as defined in
Section 12.2) and will constitute an indefeasible discharge of its
indemnification obligations hereunder.
Section 10.2. Indemnification by Parent and Newco. Parent and
Newco hereby, jointly and severally, agree to indemnify, defend and hold Foamex
and General Felt harmless on demand from and against, and will pay to Foamex and
General Felt the full amount of any loss, claim, damage, liability, obligation
or expense (including reasonable attorneys' fees and disbursements) suffered or
incurred by Foamex or General Felt, either directly or indirectly, based upon or
resulting from (a) any breach of or inaccuracy in the representations and
warranties of Parent or Newco contained in this Agreement, (b) any breach,
nonfulfillment or default in the performance of any of the covenants and
agreements of Parent or Newco contained in this Agreement, or (c) any and all
legal and other out-of-pocket expenses reasonably incurred by Foamex or General
Felt in connection with investigating, defending, or prosecuting any of the
matters referred to in clauses (a) and (b) above, or any actions or claims in
respect thereof, resulting in any loss, liability or damage and for which Parent
or Newco is otherwise responsible pursuant to this Section 10.2. Notwithstanding
the foregoing, (i) no claim shall be made under clause (a) of this Section 10.2
unless and until the aggregate amount of such claims exceeds the Loss Threshold
Amount and then only to the extent that the amount of such claims exceeds the
Loss Threshold Amount, provided that this limitation does not apply to the
extent that this claim can be brought under another clause of this Section 10.2,
and (ii) in no event (except for actual fraud) shall Parent and Newco be liable,
in the aggregate, for more than $25,000,000; provided, however, that the dollar
limitations set forth in this sentence shall not apply to any breach of any of
the representations or warranties contained in Sections 4.1, 4.2, 4.4 or 4.6 or
any claim which falls under clauses (b) or (c) above (except in the case of
clause (c) to the extent it relates to clause (a) above), whether or not it also
falls under (a) above.
Section 10.3. Indemnification Procedures.
(a) Promptly after notice to an indemnified party of any claim
or the commencement of any Proceeding by a third party involving any loss,
liability, obligation, damage or expense referred to in Section 10.1 or 10.2,
such indemnified party shall, if a claim for indemnification in respect thereof
is to be made against an indemnifying party pursuant to this Article X, give
written notice to the latter of the commencement of such claim or Proceeding,
setting forth in reasonable detail the nature thereof and the basis upon which
such party seeks indemnification hereunder; provided that the failure of any
indemnified party to give such notice shall not relieve the indemnifying party
of its obligations under such Section, except to the extent that the
indemnifying
<PAGE>45
party is actually prejudiced by the failure to give such notice. In case any
such Proceeding is brought against an indemnified party, and provided that
proper notice is duly given, the indemnifying party may assume the defense
thereof insofar as such proceeding involves any loss, liability, obligation,
damage or expense in respect of which indemnification may be sought hereunder,
with counsel reasonably satisfactory to such indemnified party. After notice
from the indemnifying party to such indemnified party of its assumption of the
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof (but the indemnified party shall
have the right, but not the obligation, to participate at its own cost and
expense in such defense by counsel of its own choice) or for any amounts paid
or foregone by the latter as a result of the settlement or compromise thereof
(without the written consent of the indemnifying party), except that, if both
the indemnifying party and the indemnified party are named as parties or
subject to such Proceeding and either such party determines upon the written
advice of counsel that there may be one or more legal defenses available to it
that are different from or additional to those available to the other party or
that a material conflict of interest between such parties exists in respect of
such Proceeding, the indemnified party may retain the defense on its own
behalf, and the indemnifying party shall be required to pay any legal or other
expenses, including without limitation reasonable attorneys' fees and
disbursements, incurred by the indemnified party in such defense; provided,
however, that the indemnifying party shall not be liable for such expenses on
account of more than one separate firm of attorneys (and, if necessary, local
counsel) at any time representing such indemnified party in connection with
any Proceeding or separate Proceedings in the same jurisdiction arising out of
or based upon substantially the same allegations or circumstances. If the
indemnifying party shall assume the defense of any such Proceeding, the
indemnified party shall cooperate fully with the indemnifying party and shall
appear and give testimony, produce documents and other tangible evidence,
allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting
such defense. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement or compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or Proceeding. Provided
that proper notice is duly given, if the indemnifying party shall fail
promptly and diligently to assume the defense thereof, the indemnified party
may respond to, contest and defend against such Proceeding (but the
indemnifying party shall have the right to participate at its own cost and
expense in such defense by counsel of its own choice or to subsequently assume
such defense) and may make in good faith any compromise or settlement with
respect thereto, and recover the entire cost and expense thereof, including
without limitation reasonable attorneys' fees and disbursements, from the
indemnifying party. The indemnification required hereunder shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills or invoices are received or loss, liability,
obligation, damage or expense is actually suffered or incurred.
(b) Any claim on account of any loss, liability, obligation,
damage or expense referred to in Section 10.1 or 10.2 which does not result from
a third party claim shall be asserted by written notice given by the indemnified
party to the indemnifying party. The indemnifying party shall have a period of
thirty (30) days within which to respond thereto. If the indemnifying party does
not respond within such 30-day period, the indemnifying party shall be deemed to
have accepted responsibility to make payment, and shall have no further right to
contest the validity of such claim, but only to the extent that the indemnified
party is prejudiced by such failure to respond.
Section 10.4. Survival of Representations, Warranties,
Covenants and Agreements.
<PAGE>46
(a) Subject to Section 10.4(b) below, the representations,
warranties, covenants and agreements of Foamex, General Felt, the Company,
Parent and Newco contained in this Agreement, or in any document delivered
pursuant to the provisions of, or in connection with, this Agreement shall
survive the making of this Agreement, any examination made by or on behalf of
the parties hereto and the Closing and Merger hereunder.
(b) Notwithstanding the provisions of Section 10.4(a), all
representations and warranties of the parties contained in this Agreement and
the covenants and agreements set forth in Sections 5.5, 5.6, 5.8, 5.10, 5.13 and
6.1 shall expire, terminate and be of no force and effect (and provide no basis
for any claim), and no party shall have any obligation to indemnify under this
Article X with respect to such representations, warranties, covenants and
agreements, unless written notice of any claim resulting from any breach thereof
is received prior to two (2) years after the Closing Date; provided, however,
that (i) with respect to claims resulting from a breach of any representation,
warranty, covenant or agreement of Foamex, General Felt or the Company relating
to Taxes, including under Sections 3.8, 6.11 or 10.6 hereof (a "Tax Claim"),
written notice of any such Tax Claim must be received prior to the date which is
three (3) months following the expiration of the statutory period during which a
taxing authority may bring a claim against the Company and Parent or the Company
shall have the right to extend any such statutory period, (ii) with respect to
claims resulting from a breach of any covenant or agreement or of any
representation or warranty contained in any of Sections 3.1 (excluding the last
sentence of such Section), 3.2, 3.3, 3.4 (the first sentence only), 3.13(a),
3.27(c), (f), (g), (h) and (i), 3.33, 4.1, 4.2, 4.4 or 4.6 of this Agreement, no
such time limitation shall be applicable, (iii) with respect to claims for
indemnification under Section 10.1(c), such claim shall be made prior to five
(5) years after the Closing Date, (iv) if, prior to the Effective Time, General
Felt delivers to Parent an as-built survey in accordance with the Survey
Requirements (as defined below) with respect to any of the Company's parcels of
real property listed on the schedule to Section 3.15 (as the same may be amended
as permitted hereunder) and such survey does not disclose any conditions that
either individually or in the aggregate render the property unmarketable, then
no claims shall be made after the Closing Date for a breach of any
representation or warranty contained in (A) Sections 3.15(d) (second sentence)
and 3.15(e), and (B) Sections 3.15(a) and (b) and Section 3.17 (first sentence
as it relates to ingress and egress) to the extent the matters covered by such
representations and warranties are disclosed on such survey, (v) no claims for a
breach of any covenant or agreement contained in Section 5.17(a) (to the extent
related to amendments), 5.17(c), 5.17(d) and 5.17(e) shall be made after the
Effective Time, and (vi) with respect to any claim of actual fraud, no such time
limitation shall be applicable. For purposes of this Section, the "Survey
Requirements" shall mean a survey performed by a registered land surveyor
licensed in the applicable state and performed in accordance with the "Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys" jointly
established and adopted by the ALTA and ACSM in 1992 and certified by the
surveyor to the Company and to Lawyers Title Insurance Corporation (x) to
conform with such requirements, (y) that such survey correctly shows the
locations of all buildings situated on said premises, and (z) that all
easements, covenants and restrictions referenced in the applicable Commitment
(as defined in the Non-Imputation Affidavit attached as Exhibit E hereto) have
been plotted on the relevant survey or otherwise noted as to their effect on the
subject property and that there are no buildings or encroachments on the subject
property or upon adjacent land abutting said property unless shown thereon.
Section 10.5. Certain Additional Provisions Relating to
Indemnification.
(a) The indemnifying party shall have no obligation to
indemnify or hold harmless the indemnified party pursuant to this Article X for
any losses, damages or expenses to the extent that
<PAGE>47
(i) the indemnified party has actually recovered such losses,
damages or expenses (net of expenses of recovery) from any third party other
than the indemnifying party, (ii) the indemnified party is insured against such
losses, damages or expenses, or (iii) the claim, damage, liability, obligation
or expense with respect to which such indemnity is claimed is reflected in a
liability or contra-asset as of the Closing Date on the Closing Date Balance
Sheet as finally adjusted in connection with the computation of Net Assets. The
indemnified party hereby assigns to the indemnifying party any right the
indemnified party may have against any third party (other than the indemnifying
party) to recover any amounts that the indemnifying party has paid to the
indemnified party pursuant to this Article X.
(b) After the Effective Time, the indemnification provisions
set forth in this Article X will constitute the sole and exclusive recourse and
remedy for monetary damages available to the parties hereto with respect to the
breach of any representation, warranty or covenant (other than the failure to
deliver the Merger Consideration and Section 2.2) contained in this Agreement or
in any certificate delivered pursuant to this Agreement, excluding for the
purposes of this Section 10.5(b) any agreements that are included as Exhibits to
this Agreement.
(c) Any payments by an indemnifying party under this Article X
shall be treated as an adjustment to the Merger Consideration for all purposes,
including, without limitation, foreign, federal, state and local income tax
purposes.
Section 10.6. Indemnification for Taxes.
(a) Foamex and General Felt shall, jointly and severally,
indemnify the Company, Newco, Parent and their respective affiliates, as the
case may be (collectively, the "Taxpayer"), defend and hold the Taxpayer
harmless on demand from and against any Pre-Closing Taxes. In addition, Foamex
and General Felt shall, jointly and severally, reimburse the Taxpayer on demand
for all out-of-pocket expenses incurred in collecting any amounts due hereunder,
including, without limitation, reasonable attorneys' fees and disbursements.
This indemnity shall apply notwithstanding any investigation made by Newco or
Parent in connection with the transactions contemplated by this Agreement and
shall be separate and independent of any other indemnity between the parties
hereto. Notwithstanding the foregoing, this Section 10.6 (other than the notice
provision in the last sentence of Section 10.6(b)) shall not apply to any
Pre-Closing Tax included as a liability on the Closing Date Balance Sheet or in
the calculation of Net Assets.
(b) Parent shall promptly forward to Foamex and General Felt a
copy of all written communications from any governmental authority received by
the Taxpayer relating to any Pre-Closing Taxes. Failure to give such notice
shall not relieve Foamex and General Felt from any liability which it may have
on account of this indemnification or otherwise, except to the extent that
Foamex and General Felt are materially prejudiced thereby. Foamex and General
Felt shall promptly forward to the Parent a copy of all written communications
from any governmental authority received by Foamex or General Felt relating to
any Pre-Closing Taxes for which the Taxpayer is or may be liable.
(c) Foamex and General Felt shall have the right, at their
option, upon timely notice to Parent, to assume control of the defense of any
Tax Claim that relates solely to Taxes of the Company for a Pre-Closing Period
(other than the period that includes but does not end on the Closing Date). If
Foamex and General Felt assume control, they shall defend such Tax Claims in
good faith and may use counsel selected by them, provided such counsel is
reasonably acceptable to Parent. Foamex and General Fit shall keep Parent
appraised as to the status of the Tax Claims and any
<PAGE>48
proceedings with respect thereto, including the positions taken by the
parties. The costs of such defense shall be borne solely by Foamex and General
Felt.
(d) Notwithstanding the right of Foamex and General Felt
pursuant to Section 10.6(c) to assume control of the defense of any Tax Claim
that relates solely to Taxes of the Company for a Pre-Closing Period, if such
Tax Claim or the resolution thereof could reasonably be expected to have an
adverse impact on the Tax liability of the Taxpayer (an "Adverse Tax Impact")
for any period ending after the Closing Date, Foamex and General Felt shall not
agree to any settlement of such Tax Claim without the prior written consent of
the Taxpayer, which consent shall not be unreasonably withheld. For purposes of
determining whether or not there could be an Adverse Tax Impact, a settlement of
a Tax Claim by Foamex and General for less that the amount claimed by the taxing
authority shall not be deemed to have an adverse impact upon the Taxpayer and
shall be considered without regard to the Tax attributes (including, without
limitation, any net operating loss or tax credit) of the Taxpayer other than its
Tax basis. In such case, Foamex and General Felt shall defend such Tax Claims in
good faith and may use counsel selected by them, provided such counsel is
reasonably acceptable to Parent. Foamex and General Felt shall keep Parent
appraised as to the status of the Tax Claims and any proceedings with respect
thereto, including the positions taken by the parties. The Taxpayer shall have
the right, at its expense, to participate in such defense, including without
limitation to attend any meetings and to be represented by counsel selected by
it, provided such counsel is reasonably acceptable to Foamex and General Felt.
Notwithstanding anything herein to the contrary, neither Foamex nor General Felt
shall suggest, negotiate for or agree to any position which could have an
Adverse Tax Impact for any period ending after the Closing Date without the
prior written consent of the Taxpayer, which consent shall not unreasonably be
withheld. Except as otherwise expressly provided in this Section 10.6(d), the
costs of such defense, including any costs incurred by the Taxpayer in
connection therewith, shall be borne by Foamex and General Felt to the extent
they relate to Pre-Closing Taxes and by the Taxpayer to the extent they relate
to a period beginning after the Closing Date.
(e) Foamex and General Felt shall have the right, at their
option, upon timely notice to Parent, to jointly control with the Taxpayer the
defense of any Tax Claim that relates solely to Taxes of the Company for the
Pre-Closing Period that includes but does not end on the Closing Date. In such
case, each of the Taxpayer, on the other hand, and Foamex and General Felt, on
the other, shall work together in good faith to defend such Tax Claims. The
Taxpayer may use counsel selected by it, provided such counsel is reasonably
acceptable to Foamex and General Felt. Foamex and General Felt may use counsel
selected by them, provided such counsel is reasonably acceptable to Parent.
Except as otherwise expressly provided in Section 10.6(d) above, the costs of
such defense shall be borne by Foamex and General Felt, to the extent they
relate to the Pre-Closing Period, and by the Taxpayer to the extent they relate
to the period beginning after the Closing Date.
(f) The right of Foamex and General Felt to control any
defense under this Section 10.6 shall be limited to the items and amounts in
dispute for which Foamex and General Felt would be liable to indemnify the
Taxpayer pursuant to this Article X. The parties shall cooperate with each other
in contesting such Tax Claims, including the provision of records and
information which are reasonably relevant to such Tax Claims and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder.
(g) In the event Foamex and General Felt, following timely
notice from Parent as provided above, fail to assume control (or joint control,
in the case of Section 10.6(e)) of a Tax Claim as provided above, the Taxpayer
may, but shall not be required to, contest such Tax Claim. Foamex and General
Felt shall be liable for indemnification and costs of defense as provided above.
<PAGE>49
(h) Any Taxes for a period which includes but does not end on
the Closing Date shall be allocated between the Pre-Closing Period and the
balance of the period in accordance with this Section 10.6(h). To the extent
permitted under applicable law, the parties shall elect to treat the Tax period
as ending at the close of business on the Closing Date. Where applicable law
does not permit such an election to be made, the taxable income or other Tax
base for the entire period shall be allocated between the Pre-Closing Period and
the balance of the period on the basis of an interim closing of the books at the
close of the Closing Date. Notwithstanding the foregoing, any real estate or
personal property Taxes shall be allocated on the basis of the relative number
of days in the Pre-Closing Period and in the balance of the applicable period.
For purposes of this Section 10.6, any Taxes allocated to the Pre-Closing Period
pursuant to this Section 10.6(h) shall be treated as a Pre-Closing Tax.
Section 10.7. Environmental Compliance Costs. This
Section sets forth the procedures and limitations for indemnification with
respect to Reasonably Necessary Costs of Remediation pursuant to Section
10.1(c).
(a) With respect to each of the Existing Environmental
Matters, the Surviving Corporation shall provide written notice and demand for
reimbursement (a "Demand Notice") to Foamex and General Felt setting forth the
actions taken and costs actually incurred to address the conditions identified,
accompanied by reasonable supporting documentation. Foamex and General Felt
shall indemnify Parent and the Surviving Corporation as provided in Section
10.1(c) for (i) 50% of all such costs incurred by the Surviving Corporation, up
to the maximum estimated costs set forth in the May 8, 1996 letter of
Environmental Strategies Corporation addressed to Ms. Patricia L. Truscelli
regarding the May, 1996 Environmental Strategies Corporation Draft Reports,
Phase I Environmental Assessment Updates of the Company's facilities (the "ESC
Cost Estimates"), with respect to each of those matters, and have no right to
dispute any such costs actually incurred by the Surviving Corporation up to the
amounts of the ESC Cost Estimates, and (ii) subject to the Loss Threshold
Amount, 100% of any additional costs incurred by the Surviving Corporation in
excess of the ESC Cost Estimates with respect to those matters, provided that
such additional costs constitute Reasonably Necessary Costs of Remediation.
Foamex and General Felt shall pay to the Surviving Corporation all of the
amounts payable pursuant to clause (i) above, and the undisputed portion of all
claims made pursuant to clause (ii) above within forty-five (45) days of their
receipt of the Demand Notice from the Surviving Corporation. Parent shall, and
shall cause the Surviving Corporation to, provide Foamex and General Felt with
reasonable access to all books, records, consultants' reports, and other
documentation relating to the Demand Notice requested by Foamex or General Felt
to enable Foamex and General Felt to determine whether the matters which are the
subject of the Demand Notice are subject to indemnification pursuant to Section
10.1(c). Foamex and General Felt shall have the right to object in writing (an
"Objection Notice") to the costs incurred in excess of the ESC Cost Estimates as
not constituting Reasonably Necessary Costs of Remediation within thirty (30)
days of the receipt by Foamex and General Felt of the Demand Notice from the
Surviving Corporation. The Objection Notice shall set forth in reasonable detail
the basis for the objection by Foamex and General Felt, and shall identify the
undisputed portion of the claim. If Foamex and General Felt have delivered an
Objection Notice within such thirty-day period, then during the twenty-day
period following the date of any Objection Notice, the Parent, the Surviving
Corporation, Foamex and General Felt shall attempt to resolve their dispute by
mutual agreement. If at the end of such twenty-day period, the parties shall
have failed to reach a complete agreement with respect to the portion of the
costs in dispute, Parent and the Surviving Corporation may require that the
disputed portion be resolved by arbitration pursuant to Section 10.7(c) hereof.
<PAGE>50
(b) With respect to all Additional Environmental Matters and
any other environmental matters for which Parent and the Surviving Corporation
are entitled to indemnification pursuant to Section 10.1(c), the Surviving
Corporation shall provide a Demand Notice to Foamex and General Felt setting
forth any circumstances or conditions giving rise to a claim and advise Foamex
and General Felt of the actions taken by the Surviving Corporation to address
such circumstance or condition, including costs actually incurred by the
Surviving Corporation to remediate such circumstance or condition identified,
accompanied by reasonable supporting documentation. Foamex and General Felt
shall pay to the Surviving Corporation the undisputed portion of all such claims
within forty (45) days of their receipt of the Demand Notice from the Surviving
Corporation. Parent shall, and shall cause the Surviving Corporation to, provide
Foamex and General Felt with reasonable access to all books, records,
consultants' reports, and other documentation relating to the Demand Notice
requested by Foamex or General Felt to enable Foamex and General Felt to
determine whether the matters which are the subject of the Demand Notice are
subject to indemnification pursuant to Section 10.1(c). Foamex and General Felt
shall have the right to deliver an Objection Notice if the claim includes
demands for expenses which were not Reasonably Necessary Costs of Remediation,
within thirty (30) days of the receipt by Foamex and General Felt of the Demand
Notice from the Surviving Corporation. The Objection Notice shall set forth in
reasonable detail the basis for the objection by Foamex and General Felt, and
shall identify the undisputed portion of the claim. If Foamex and General Felt
have delivered an Objection Notice within such thirty-day period, then during
the twenty-day period following the date of any Objection Notice, the Parent,
the Surviving Corporation, Foamex and General Felt shall attempt to resolve
their dispute by mutual agreement. If at the end of such twenty-day period, the
parties shall have failed to reach a complete agreement with respect to the
portion of the costs in dispute, Parent and the Surviving Corporation may
require that the disputed portion be resolved by arbitration pursuant to Section
10.7(c) hereof.
(c) The disputed portion of any claim asserted by Parent
and/or the Surviving Corporation pursuant to Sections 10.7(a) and 10.7(b) above
shall be settled by arbitration administered by the American Arbitration
Association, located in New York, New York and shall be conducted pursuant to
its Commercial Arbitration Rules and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof, provided,
however, that (i) with respect to disputes as to actual costs of remediation of
environmental matters, the arbitrators shall be required to accept or reject the
disputed claim in whole, but shall not have the authority to grant any partial
award, and (ii) the party who is successful at the conclusion of the arbitration
shall be entitled to reimbursement for all reasonable attorneys' and
consultant's fees incurred in connection with the assertion of the claim and
representation in connection with the arbitration proceeding and for the costs
of arbitration.
(d) For purposes of this Agreement, "Reasonably Necessary
Costs of Remediation" means those reasonably necessary fees, costs and expenses
arising out of the matters set forth in Section 10.1(c) which are (i) incurred
pursuant to the Environmental Laws and which laws continue in effect after the
Closing Date, (ii) reasonably necessary to bring such matters into compliance
with the remediation levels or performance standards imposed under Environmental
Laws as in effect on the Closing Date, and (iii) consistent with good business
practice.
ARTICLE XI.
VITALE GUARANTY
Section 11.1. Vitale Guaranty. Vitale hereby guarantees
to Foamex and General Felt the due and prompt payment and performance of
<PAGE>51
all obligations, covenants and agreements contained in this Agreement to be
performed by Parent or Newco on or prior to the Effective Time (the
"Obligations").
Section 11.2. Guaranty of Payment and Performance. This
guaranty is a guaranty of payment and performance, not merely of collection, and
is independent of any other guaranty or surety of the Obligations. If Parent or
Newco shall fail to perform or pay any Obligation, Vitale shall pay or perform
such Obligation as and when due. The rights, powers and remedies of Foamex and
General Felt hereunder are cumulative and not exclusive of any other right,
power and remedy which Foamex or General Felt otherwise has.
Section 11.3. Defenses. Vitale hereby expressly waives, for
the benefit of Foamex and General Felt: (a) all demands for payment or
performance, notices of nonpayment or nonperformance, and all other notices or
demands of any kind or nature whatsoever with respect to the Obligations other
than as provided in this Agreement; and (b) to the extent permitted by law, any
and all defenses now or hereafter arising or asserted in favor of Vitale, but
which, in the case of clause (i) or (ii) below, are not available to Parent or
Newco by reason of (i) restructuring of the Obligations by new agreement,
waiver, consent, amendment, partial payment, release, settlement, operation of
law or otherwise, (ii) any action taken by Foamex, General Felt or the Company
that is authorized by any provision of this Agreement or any agreement,
instrument or document related hereto, or (iii) any disability or lack of
authority of Parent or Newco with respect to the Obligations. Notwithstanding
anything to the contrary contained in this Agreement, the scope of Vitale's
liability hereunder shall in no event be greater than the scope of the liability
of Parent or Newco under this Agreement. Foamex and General Felt expressly agree
that the defenses available to Vitale shall be no less than the defenses which
are, or would have been, available to Parent or Newco, other than a defense
based upon the ultra vires nature of an act by Parent or Newco in connection
with their execution and delivery of this Agreement.
Section 11.4. Certain Representations. Vitale hereby
represents and warrants to Foamex and General Felt as follows:
(a) this guaranty constitutes the legal, valid, and binding
obligation of Vitale enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, or
similar laws from time to time in effect which affect creditors' rights
generally, and by legal and equitable limitations on the enforceability of
specific remedies;
(b) neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby, nor compliance by
Vitale with any of the provisions hereof, will (i) with or without the giving of
notice and/or the passage of time, violate, conflict with, result in the breach
or termination of, constitute a default under, or result in the creation of any
lien, encumbrance or charge upon any of the assets or property of Vitale
pursuant to, any contract, agreement, lease or commitment to which Vitale is a
party or by which Vitale or any of his assets or property may be bound, or (ii)
violate any judgment, decree, order, statute, rule or governmental regulation
applicable to Vitale or any of his assets, property or business; and
(c) there are no Proceedings pending or, to the knowledge of
Vitale, threatened against or affecting Vitale or Vitale's assets which could
prevent or interfere with the performance by Vitale of the Obligations.
<PAGE>52
Section 11.5. Termination of Guaranty. This guaranty
shall terminate, and be of no further force or effect, at the Effective Time
immediately after payment of the Merger Consideration due at the Closing.
ARTICLE XII.
MISCELLANEOUS
Section 12.1. Notices. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given (a)
when delivered personally to the recipient or when sent to the recipient by
telecopy (receipt confirmed) if during normal business hours of a business day,
otherwise, on the next business day, (b) one (1) business day after the date
when sent to the recipient by reputable overnight courier service (charges
prepaid), or (c) five (5) business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, addressed as follows:
(i) If to Vitale, Newco, Parent or the Surviving
Corporation:
Vitale Holdings Inc.
6337 Morrison Boulevard
Charlotte, North Carolina 28211
Attention: Mr. Jody B. Vitale, President
Facsimile No. (704) 362-8221
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Melvin Weinberg, Esq.
Facsimile No. (212) 704-6288
(ii) If to Foamex, General Felt or the Company:
Foamex L.P.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Attention: Mr. George Karpinski
Facsimile No. (610) 859-3069
with a copy to:
Foamex International Inc.
375 Park Avenue, 11th Floor
New York, New York 10152
Attention: Philip N. Smith, Jr., Esq.
Facsimile No. (212) 593-1363
and with a copy to:
<PAGE>53
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Attention: Laurence D. Weltman, Esq.
Facsimile No. (212) 821-8111
or at such other address or facsimile number and to the attention of such other
person as the addressed party shall designate for itself by written notice in
the foregoing manner. Notwithstanding anything to the contrary herein, such
change shall not be effective until actual receipt.
Section 12.2. Assignability and Parties in Interest.
(a) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assignable by any of the parties hereto without
the prior written consent of the other party, except that the rights of Parent
hereunder may be assigned prior to the Closing, without the consent of the other
parties hereto, to any corporation all of the outstanding capital stock of which
is owned or controlled, directly or indirectly, by Parent; provided that (i) the
assignee shall assume in writing all of Parent's obligations hereunder, (ii)
Parent shall not be released from any of its obligations hereunder by reason of
such assignment, and (iii) such assignment shall not delay the Closing of the
transactions contemplated hereby. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective permitted successors
and assigns. Nothing in this Agreement is intended to confer, expressly or by
implication, upon any other person any rights or remedies under or by reason of
this Agreement.
(b) Notwithstanding the foregoing, Parent and the Surviving
Corporation (including each subsequent assignee of the Surviving Corporation)
shall have the right to assign all (but not less than all) of their rights and
obligations hereunder to any other person who enters into a Business Combination
with the Surviving Corporation (or a subsequent assignee of the Surviving
Corporation); provided that the assignor shall not be released from any of its
obligations hereunder by reason of any such assignment.
(c) Notwithstanding any provision of this Agreement to the
contrary, each of Foamex and General Felt hereby acknowledges and agrees that
all of the covenants, representations, warranties and indemnities of Foamex and
General Felt under this Agreement, and under any document or instrument executed
and delivered in connection with this Agreement or the transactions contemplated
hereby, may be collaterally assigned to any and all lenders to Parent and the
Surviving Corporation or any of their respective affiliates (the "Lenders"), any
and all of whom may enforce their rights and remedies in connection with any
such collateral assignment or realization thereon to the extent provided in the
applicable security agreements and other debt instruments or at law or in
equity. Furthermore, each of Foamex and General Felt hereby acknowledges and
agrees that upon receipt of written notice from the Lenders that an "Event of
Default" has occurred pursuant to the applicable indebtedness, each of Foamex
and General Felt will tender any payments due under this Agreement to the
Lenders in accordance with the instructions set forth in such notice; provided,
however, that in the event that Foamex and General Felt tender payment to Parent
or the Surviving Corporation, such payment shall be a complete discharge of
Foamex's or General Felt's obligation to the Lenders and Foamex and General Felt
shall thereafter have no further liability to the Lenders with respect to such
payment.
<PAGE>54
Section 12.3. Governing Law. This Agreement and all
amendments thereof shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York applicable to contracts
made and to be performed therein.
Section 12.4. Consent to New York Jurisdiction. The parties
hereto hereby consent to the exclusive jurisdiction of the United States
District Court for the Southern District of New York and the Supreme Court of
the State of New York for the County of New York in any action arising out of or
connected in any way with this Agreement. To the extent permitted by applicable
law, the service of process or of any other papers upon them or any of them by
certified or registered mail at their respective addresses set forth in Section
12.1 hereof shall be deemed good, proper and effective service upon them.
Section 12.5. Counterparts. This Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed an original.
Section 12.6. Publicity. The parties hereto agree that the
timing and content of press releases and other announcements with respect to the
Merger or the other transactions contemplated pursuant to this Agreement shall
be subject to mutual agreement; provided that either party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing party will use reasonable efforts to advise the other party
prior to making such disclosure and provide the other party an opportunity to
review the proposed disclosure). The parties acknowledge that Foamex will file a
Current Report on Form 8-K disclosing the execution of this Agreement.
Section 12.7. Complete Agreement. This Agreement, the exhibits
and schedules hereto and the documents delivered pursuant hereto or referred to
herein contain the entire agreement between the parties hereto with respect to
the transactions contemplated herein and therein and supersede all previous
negotiations, commitments and writings.
Section 12.8. Expenses. Except as otherwise expressly provided
in this Agreement, Foamex and General Felt shall bear all of the fees and
expenses of their and the Company's (but not the Surviving Corporation's)
counsel, accountants, investment bankers (including, without limitation, DLJ and
Lazard) and other expenses incurred by such parties in connection with the
preparation, negotiation, execution, delivery and performance of this Agreement
and the transactions contemplated hereby, and Parent shall bear all of the fees
and expenses of its counsel, accountants, investment bankers and other expenses
incurred by it, Vitale, Newco and the Surviving Corporation (incurred following
the Effective Time) in connection with the preparation, negotiation, execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
Section 12.9. Modifications, Amendments and Waivers. The
terms, provisions and conditions of this Agreement may not be changed, modified
or amended in any manner, except by an instrument in writing duly executed by
all of the parties hereto, including Vitale. At any time prior to the Effective
Time, the parties hereto may, by written agreement:
<PAGE>55
(a) extend the time for the performance of any of the
obligations or other acts of the parties hereto;
(b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any schedule or document
delivered pursuant hereto; and
(c) waive compliance with any of the covenants or
agreements contained in this Agreement.
Section 12.10. Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 12.11. Specific Performance Agreement. The parties
hereto agree that irreparable damage would occur if any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereto, this
being in addition to any other remedy to which they are entitled at law or in
equity.
Section 12.12. Knowledge. As used in this Agreement, the term
"knowledge", "to the knowledge of", or similar phrases, with respect to (a)
Foamex, General Felt or the Company means the actual knowledge of such party's
directors and executive officers and also includes the knowledge of each of the
other officers and other persons listed on the schedule to this Section, and (b)
Parent or Newco means the actual acknowledge of Vitale.
[END OF PAGE]
<PAGE>56
IN WITNESS WHEREOF, Parent, Newco, Vitale, Foamex, General
Felt and the Company have caused this Agreement to be duly executed as of the
date first above written.
PFI ACQUISITION CORP.
By: /s/ Jody B. Vitale
Jody B. Vitale, President
PFI SUBSIDIARY, INC.
By: /s/ Jody B. Vitale
Jody B. Vitale, President
/s/ Jody B. Vitale
---------------------------------
JODY B. VITALE
FOAMEX L.P.
By: FMXI, Inc., General Partner
By: /s/ Phillip N. Smith, Jr.
Name: Phillip N. Smith, Jr.
Title: Vice President and
Secretary
GENERAL FELT INDUSTRIES, INC.
By: /s/ Robert H. Nelson
Name: Robert H. Nelson
Title: Vice President
<PAGE>57
PERFECT FIT INDUSTRIES, INC.
By: /s/ Phillip N. Smith, Jr.
Name: Phillip N. Smith, Jr.
Title: Vice President and
President
