EXHIBIT 10.39
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EMPLOYMENT AGREEMENT
This employment agreement (this "Agreement"), entered into on September
10, 2002 and effective as of July 22, 2002 (the "Effective Date"), is entered
into between Foamex International Inc., a Delaware corporation (the "Company"),
and Xxxxxxxx Xxxxxx ("Executive").
WHEREAS, the Company is contemplating the possibility of a public
offering of securities (the "Offering") of a subsidiary, tentatively known as
Symphonex Inc. ("Newco"), which will comprise when fully organized certain of
the Company's existing business groups, including the Technical Products Group
of Foamex L.P. (the "TPG"), Foamex Asia Inc. ("Foamex Asia") and the Micro Fuel
Cell Division of the Company (the "MFCD") (the "TPG, "Foamex Asia" and the
"MFCD" being referred to herein collectively as the "Divisions"); and
WHEREAS, it is contemplated that prior to the Offering the Company will
assign all of its duties and obligations under this Agreement to Newco and that
the Company will have no further obligations to Executive under this Agreement
thereafter, except as otherwise explicitly provided herein; and
WHEREAS, Executive and the Company desire to set forth the terms and
conditions of Executive's employment with the Company and Newco in this
Agreement.
NOW, THEREFORE, the parties hereby agree:
ARTICLE I.
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
EMPLOYMENT. Executive shall be employed as Chairman and Chief Executive Officer
of each of the Divisions and Newco and the Company shall use its best efforts
during the Term to cause Executive to be elected and maintained as a director of
Newco. Executive hereby accepts such employment on the terms and subject to the
conditions hereinafter set forth. Executive agrees to devote substantially all
of her business time and efforts to the performance of her duties hereunder;
PROVIDED, HOWEVER, the foregoing shall not prevent Executive from (i) devoting a
reasonable amount of her time to supervising the operation and directly handling
the potential disposition of her consulting business, KAI Associates, Inc.
("KAI" and in the event KAI is acquired by Newco or any of the Divisions, for
purposes hereof KAI shall then also be a "Division"); (ii) engaging in
charitable and civic activities; or (iii) serving as a director of corporations
and/or charitable organizations, so long as, in the case of such activities
described in clauses (ii)-(iii), such activities do not individually or in the
aggregate interfere in any material respect with the performance by Executive of
her duties hereunder. Executive shall perform her duties primarily at the
Company office in New York City and/or at KAI's offices in New York City, as
Executive may determine; PROVIDED, HOWEVER, that Executive understands and
agrees that the Company may require her to travel away from such office(s) as
may be reasonably required to fulfill her duties hereunder.
1.1. DUTIES AND RESPONSIBILITIES. Executive shall (a) have such
duties and responsibilities as are consistent with her position as Chairman and
Chief Executive Officer of each of the Divisions and Newco, and (b) have such
other duties and responsibilities as are consistent with said titles as may be
assigned to Executive from time to time by the Board of Directors of the Company
(the "Board") or prior to an IPO (as defined in Exhibit B hereto) by the
Chairman of the Board of the Company (subject in each case to the review and
approval of the Board to the extent required). Executive shall report directly
to the Board of Directors of Newco (the "Newco Board") following the IPO and
prior to the IPO, Executive shall report directly to the Chairman of the Board
of the Company.
ARTICLE II.
TERM OF EMPLOYMENT
2.1. TERM. Subject to earlier termination pursuant to Article V,
the term of this Agreement (the "Term") shall commence as of the Effective Date
and shall continue through July 31, 2007.
ARTICLE III.
COMPENSATION BENEFITS, ETC.
3.1. SALARY, BENEFITS, ETC. As compensation and consideration for
the performance by Executive of her obligations under this Agreement, during the
Term Executive shall be entitled to the following (subject, in each case, to the
provisions of Article V hereof):
(a) SALARY. The Company shall pay Executive a base salary
(the "Base Salary"), payable in accordance with the normal payment procedures of
the Company and subject to such withholdings and other normal employee
deductions as may be required by law, at a rate of at least $400,000 per annum.
The Base Salary will be reviewed annually by the Compensation Committee of the
Board and may be increased from the rate then in effect, but not decreased.
(b) BENEFITS. Executive shall (i) be eligible to
participate in employee health, pension and other benefit plans and arrangements
on the same terms as other senior executives of the Company and (ii) receive the
perquisites generally made available to senior executives of the Company. To the
extent not prohibited by applicable law and where the terms of the applicable
plans so permit, all period of service and other eligibility criteria for
participating in such plans will be waived. In addition, at Executive's request
the Company shall make charitable contributions as Executive may direct in
respect of the entities set forth in Exhibit A (as such Exhibit A may be amended
from time to time upon mutual agreement by Executive and the Company), in an
aggregate annual amount not to exceed $100,000. In addition, during the Term the
Company shall reimburse Executive for the costs of a personal financial adviser
in an amount not to exceed $15,000 per annum.
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(c) BONUS. Executive shall be eligible to earn a bonus
award (each an "Annual Bonus") in respect of each fiscal year of the Company in
an amount up to one hundred fifty percent (150%) of Executive's Base Salary at
the end of such fiscal year, which shall be based upon the level of attainment
of Company performance goals for such fiscal year, as measured against a written
set of reasonable performance criteria communicated to Executive for such fiscal
year, with Executive's target bonus for each fiscal year during the Term other
than the 2002 fiscal year equaling seventy-five percent (75%) of Executive's
Base Salary for such fiscal year (the "Target Bonus"); PROVIDED, HOWEVER, that
if this Agreement terminates on July 31, 2007, the Annual Bonus actually earned
by Executive in respect of the 2007 fiscal year of the Company shall be prorated
to reflect the portion of such fiscal year occurring prior to such termination
and shall be payable at such time as such Annual Bonus would have been paid had
such termination not recurred. Notwithstanding the foregoing, (i) Executive's
Annual Bonus in respect of the 2002 fiscal year of the Company shall be not less
than $150,000; and (ii) Executive's Annual Bonus, in respect of each fiscal year
during the term other than the 2002 fiscal year shall be in an amount that is
not less than sixty percent (60%) of Executive's Base Salary for such fiscal
year (the "Guaranteed Bonus"). The Annual Bonus in respect of each fiscal year
during the term shall be paid within 30 days after final determination by the
Company of the amount payable, but in no event later than 100 days after the end
of the fiscal year to which such Annual Bonus relates; PROVIDED, HOWEVER, that
the minimum guaranteed bonus for the 2002 fiscal year and the Guaranteed Bonus
for each subsequent fiscal year shall be paid no later than January 15th of the
following year. In addition, Executive shall be eligible to receive a
discretionary bonus in such amount, if any, as determined by the Compensation
Committee of the Board in its sole discretion.
(d) VACATION. Executive shall be entitled to a paid
vacation of not less than four (4) weeks per year, in accordance with Company
policy (but not necessarily consecutive vacation weeks) for senior executive
officers.
(e) SPECIAL INCENTIVE AWARD. The Company shall and hereby
does, effective as of July 18, 2002 (the "Award Date"), make a special incentive
award (the "Award") to Executive which shall consist of (i) the IPO Award, as
described in and governed by Exhibit B hereto, and (ii) the Long-Term Award, as
described in and governed by Exhibit C hereto, each of which exhibits is
specifically made a part of this Agreement.
3.2. EXPENSES. The Company shall reimburse Executive for reasonable
business-related expenses incurred by her in connection with the performance of
her duties hereunder during the Term, subject, however, to the Company's
policies relating to business-related expenses as in effect from time to time
during the Term.
3.3. SUPPORT. The Company shall provide Executive with the
dedicated full-time services of a secretary and an assistant acceptable to her,
which persons may, at the discretion of Executive, be current employees of KAI,
in which case such persons will receive from the Company the same compensation
and substantially comparable benefits to that which they currently receive from
KAI, of which the material compensation and benefits are as described on Exhibit
D hereto.
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ARTICLE IV.
EXCLUSIVITY, ETC.
4.1. EXCLUSIVITY. During the Term, Executive shall perform her
duties, responsibilities and obligations hereunder to the best of her ability.
Except as set forth in Section 1.1, Executive shall devote her entire working
time, care and attention and best efforts to such duties, responsibilities and
obligations throughout the Term. Executive also agrees that during the Term she
will not engage in any other business activities, pursued for gain, profit or
other pecuniary advantage, that are competitive with the activities of the
Company, except as permitted in Section 1.1 and Section 4.2(a)(ii). Executive
agrees that all of her activities as an employee of the Company shall be in
substantial conformity with all policies, rules and regulations and directions
of the Company not inconsistent with this Agreement.
4.2. NON-COMPETITION. By executing this Agreement, Executive
acknowledges and agrees that the services to be performed by her as an employee
of the Company are services which are unique and extraordinary and that, by
reason of her employment, she will acquire and have access to "Confidential
Information," as defined in Section 4.5. Accordingly, Executive agrees that: (a)
During the Term and the Restrictive Period, as defined below, Executive will
not, absent prior written consent from the Company, directly or indirectly,
engage in a Competitive Business Activity. The term "Competitive Business
Activity" shall mean:
(i) engaging in, or managing or directing persons engaged
in any business engaged in by the TPG, Foamex Asia, the MFCD or Newco, or any of
their subsidiaries, during the Term ("Competing Business"), whether
independently or as an employee, agent, consultant, advisor, independent
contractor, proprietor, partner, officer, director or otherwise;
(ii) acquiring or having an ownership interest in any
entity that derives more than 10% of its gross revenues from any Competing
Business Activity, except for ownership of 1% or less of the shares of any
entity whose securities are freely tradable on an established market; or
(iii) participating in the financing, operation, management
or control of any firm, partnership, corporation, entity or business described
in clause (ii) immediately above;
PROVIDED, HOWEVER, that notwithstanding anything to the contrary, the term
"Competitive Business Activity" shall not include (i) any activities of KAI or
of Executive in her capacity as an officer, director and shareholder of KAI, or
(ii) any activities competitive with any activities of KAI, it being understood
that the activities referred to in clauses (i) and (ii) shall be subject to the
agreement for the KAI Purchase Transaction (as hereinafter defined).
For purposes of this Agreement, the term "Restrictive Period" shall
mean the period beginning upon any termination of Executive's employment with
the Company and ending on the date which is the second anniversary of such
termination.
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4.3. NON-SOLICITATION. During the Term and the Restrictive Period,
Executive will not, either for her benefit or for the benefit of any other
person or entity, directly or indirectly, solicit any contractor (other than KAI
if it is not an affiliate of the Company)) or employee (other than the persons
referred to in Section 3.3) of the Company or its affiliates, to terminate his
or her employment or other relationship with the Company or its affiliates.
During the Term and the Restrictive Period, unless the Company has a direct
ownership interest in KAI, the Company will not, and will not permit any of its
affiliates to, either for its benefit or for the benefit of any other person or
entity, directly or indirectly, solicit any contractor or employee of KAI to
terminate his or her employment or other relationship with KAI.
4.4. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. By executing this
Agreement, Executive acknowledges and agrees that the services to be performed
by her as an employee of the Company are unique services, and that by reason of
her employment she will have access to and acquire proprietary and other
confidential information and trade secrets concerning operations, future plans
and methods of doing business of the Company, its affiliates and their
respective clients. Accordingly, Executive hereby covenants that she will not at
any time during her employment by the Company or any time thereafter, other than
as required by law or legal process, reveal or divulge to any person, firm,
corporation or other business entity or use for her own personal or business
purposes any trade secrets or confidential information or confidential knowledge
relating to the business or businesses of the Company, its affiliates or their
respective clients including, without limiting the generality of the foregoing,
any such information or knowledge pertaining to products, formulae or processes,
and developments or improvements with respect thereto, inventions, discoveries,
trademarks, patents, designs, sketches, manufacturing, packaging, merchandising,
advertising, distribution and sales methods, sales and profits figures,
budgeting materials, customer lists and relationships between the Company and
any of its customers, suppliers (other than KAI for so long as Executive has a
direct ownership interest in KAI), ultimate consumers or affiliates
(collectively, "Confidential Information"). Notwithstanding the foregoing,
Confidential Information shall not include information that (i) is, or becomes
through no breach of Executive's obligations hereunder, generally known to the
public; (ii) becomes known to Executive from sources other than the Company or
its affiliates under circumstances not involving any breach of an agreement to
which any such source is a party; (iii) except as is otherwise agreed in writing
by KAI, is known to KAI from a source other than Executive; or (iv) was known to
Executive prior to the Effective Date. As used in this Agreement, the term
"affiliate" means each corporation or other business entity at any time directly
or indirectly controlling, controlled by, or under common control with the
Company, its successors or assigns. As used in this Agreement, the term "client"
means any person, firm or corporation to whom more than a de minimis amount of
goods, services or intellectual property are actively being supplied by the
Company or an affiliate for compensation at the time Executive learns of such
person's, firm's or corporation's Confidential Information, or to whom the
Company or an affiliate is at such time actively soliciting a business
relationship to engage in such activities.
4.5. CUSTOMER AND SUPPLIER SOLICITATION. During the Term and the
Restrictive Period, Executive shall not on behalf of herself or any other
person, including, but not limited to, KAI (unless KAI becomes an affiliate of
the Company), divert, or attempt to divert any person, business or entity (other
than KAI for so long as Executive has a direct ownership interest in KAI) from
doing business with the Company, nor will Executive attempt to induce any such
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person, business or entity to cease being a customer of or supplier to the
Company. Notwithstanding Section 6.4 of this Agreement, following any assignment
of this Agreement by the Company to Newco, the term "Company" shall mean, solely
for purposes of Sections 4.2, 4.3, 4.4, and 4.5 of this Agreement and the
enforcement of the provisions thereof, both the Company and Newco.
ARTICLE V.
TERMINATION
5.1. TERMINATION BY THE COMPANY. The Company shall have the right
to terminate Executive's employment and this Agreement at any time, with or
without "Cause," subject only to the specific contractual obligations of the
Company to Executive described herein. For purposes of this Agreement, "Cause"
shall mean (i) continued and willful failure by Executive to perform in any
material respect any of her material duties hereunder (other than due to
Executive's Disability) which failure is not cured within thirty (30) days after
written notice which specifically sets forth the nature of such failure is
delivered to Executive by the Company; (ii) an act of gross misconduct by
Executive against the Company, such as embezzlement, fraud, or misappropriation;
or (iii) Executive's conviction by a court of competent jurisdiction of, or
pleading guilty or no contest to, a felony.
5.2. DEATH. In the event Executive dies during the Term, this
Agreement shall automatically terminate, such termination to be effective on the
date of Executive's death.
5.3. DISABILITY. In the event that Executive shall suffer a
Disability (as defined below), the Company shall have the right to terminate
this Agreement, such termination to be effective upon the giving of notice
thereof to Executive in accordance with Section 6.6 hereof. For purposes of this
Agreement, the term "Disability" means a physical or mental condition which
prevents Executive from performing satisfactorily her duties hereunder for a
period of at least 120 consecutive days or 150 days within any 365-day period.
5.4. TERMINATION BY EXECUTIVE FOR GOOD REASON. This Agreement may
be terminated by Executive (a) upon ninety (90) days prior notice to the Company
for any reason other than Good Reason (as defined below) and (b) upon thirty
(30) days prior written notice to the Company at any time within ninety (90)
days after the occurrence of any of the following events, each of which shall
constitute "Good Reason" for termination, unless otherwise agreed to in writing
by Executive: (i) a material diminution occurs in the duties or responsibilities
of Executive, including but not limited to the Executive's being placed in a
reporting relationship to anyone other than the Newco Board (following the IPO)
or the Chairman of the Board (prior to the IPO), and such diminution is not
cured within fifteen (15) days after written notice of the same is received by
the Company; (ii) the Company's failure to pay compensation as required
hereunder and (A) in the case of payments of salary, such failure occurs on more
than two occasions and Executive has provided notice to the Board promptly
following two such earlier occasions or (B) in any case, such failure is not
cured within fifteen (15) days after written notice of the same is received by
the Company; (iii) Executive is removed from the position of Chairman or Chief
Executive Officer of any of the Divisions or Newco or is removed or not
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reelected as a director of Newco; (iv) any other material breach by the Company
of this Agreement (including the Exhibits hereto) if such failure is not cured
within fifteen (15) days after written notice of the same; (v) Executive's
principal place of employment is moved to a location more than twenty-five (25)
miles from its current location; or (vi) a liquidation or dissolution of the
Company occurs; or (vii) the Company or Foamex L.P. (A) does not on or before
October 31, 2002 enter into a binding agreement (which has been consented to by
certain lenders to Foamex L.P.) to purchase KAI at a price of not less than six
million dollars ($6,000,000), (the "KAI Purchase Transaction"), or (B) does not
consummate the KAI Purchase Transaction and pay said purchase price in full on
or prior to January 31, 2003.
5.5. EFFECT OF TERMINATION.
(a) In the event of termination of Executive's employment
for any reason (including termination by either party upon the expiration of the
Term if a new employment agreement is not entered into between the Company and
Executive), the Company shall pay Executive (or her beneficiary in the event of
her death) any Base Salary earned but not paid to Executive prior to the
effective date of such termination, plus any earned, but unpaid Annual Bonus
(including any Guaranteed Bonus) from any prior fiscal year and any unreimbursed
expenses.
(b) In the event of a termination of Executive's
employment by Executive for Good Reason, by the Company for reasons other than
for Cause, death or Disability or upon termination by either party upon the
expiration of the Term if a new employment agreement is not entered into between
the Company and the Executive prior to said expiration("Expiration Event"), the
Company shall pay to Executive, in addition to the amounts set forth in Section
5.5(a) hereof, (i) the amount of the Annual Bonus actually earned by Executive
in respect of the fiscal year in which such termination occurs prorated to
reflect the portion of such fiscal year occurring prior to such termination and
payable at such time as such Annual Bonus would have been paid had such
termination not occurred, but in any event an amount that is not less than the
prorated amount of the Target Bonus; and (ii) a severance payment as follows: if
such termination occurs during the first six months of the Term, such payment
shall equal 0.5 times the sum of the Base Salary and Executive's Target Bonus;
if such termination occurs between the end of the sixth month of the Term and
the first anniversary of the Effective Date, the severance payment shall be
increased on a pro-rata monthly basis up to 2.5 times the sum of the Base Salary
and Executive's Target Bonus; if such termination occurs on or after the first
anniversary of the Effective Date, the severance payment shall equal 2.5 times
the sum of the Base Salary and Executive's Target Bonus; provided, however, (A)
in the event of a termination of Executive's employment by Executive for Good
Reason or by the Company for reasons other than for Cause, death or Disability
within 12 months following a Change in Control, Executive shall receive a
severance payment equal to 2.99 times the sum of the Base Salary and Executive's
Target Bonus, and (B) in the event of a termination upon the Expiration Event,
Executive shall receive a severance payment equal to 2.0 times the sum of the
Base Salary and Executive's Target Bonus.
(c) Executive's rights with respect to the Award
following any termination of Executive's employment shall be governed by Exhibit
B or Exhibit C, as applicable.
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(d) Except as set forth in clause (i) of Section 5.5(b),
all payments due under this Section 5.5 shall be paid promptly after the
termination of Executive's employment, and shall bear interest until paid at the
rate specified in Rule 5004 of New York's Civil Practice Law and Rules, if such
payments are not paid within sixty (60) days after such termination.
5.6. GROSS-UP PAYMENT.
(i) If it is determined (as hereafter provided)
that (A) any payment (other than the Gross-Up Payment provided for in this
Section 5.6) or distribution by the Company to or for the benefit of Executive,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation pursuant to
Exhibit B or Exhibit C to this Agreement, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such excise tax (such
tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the "Excise Tax"), and (B) the aggregate value of
all Payments to Executive is greater than the product of (x) 1.10, multiplied by
(y) the amount of Executive's "includible compensation" for purposes of Section
280G of the Code, multiplied by (z) 2.99, then Executive will be entitled to
receive an additional payment or payments (a "Gross-Up Payment") in an amount
such that, after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(ii) Subject to the provisions of Section 5.6(vi)
hereof, all determinations required to be made under this Section 5.6, including
whether an Excise Tax is payable by Executive and the amount of such Excise Tax
and whether a Gross-Up Payment is required and the amount of such Gross-Up
Payment, will be made by a nationally recognized firm of certified public
accountants (the "Accounting Firm") selected by the Company, which may be the
Company's regular outside auditors. The Company will direct the Accounting Firm
to submit its determination and detailed supporting calculations to both the
Company and Executive within 30 calendar days after the date of the Change in
Control or the date of Executive's termination of employment, if applicable, and
any other such time or times as may be requested by the Company or Executive. If
the Accounting Firm determines that any Excise Tax is payable by Executive, the
Company will pay the required Gross-Up Payment to Executive no later than five
calendar days prior to the due date for the Executive's income tax return on
which the Excise Tax is included. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it will, at the same time as it makes such
determination, furnish Executive with an opinion that she has substantial
authority not to report any Excise Tax on her federal, state, local income or
other tax return. Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment will be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an
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"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 5.6(vi) hereof and Executive thereafter is required to make a payment
of any Excise Tax, Executive shall so notify the Company, which will direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and Executive as promptly as possible. Any such Underpayment will be
promptly paid by the Company to, or for the benefit of, Executive within five
business days after receipt of such determination and calculations.
(iii) The Company and Executive will each provide
the Accounting Firm access to and copies of any books, records and documents in
the possession of the Company or Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determination
contemplated by Section 5.6(ii) hereof.
(iv) The federal, state and local income or other
tax returns filed by Executive will be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the Excise Tax
payable by Executive. Executive will make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of her federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of Executive's federal income tax return, or corresponding state
or local tax return, if relevant, the Accounting Firm determines that the amount
of the Gross-Up Payment should be reduced, Executive will within five business
days pay to the Company the amount of such reduction.
(v) The fees and expenses of the Accounting Firm
for its services in connection with the determinations and calculations
contemplated by Sections 5.6(ii) and (iv) hereof will be borne by the Company.
If such fees and expenses are initially advanced by Executive, the Company will
reimburse Executive the full amount of such fees and expenses within five
business days after receipt from Executive of a statement therefor and
reasonable evidence of her payment thereof.
(vi) Executive will notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notification will be
given as promptly as practicable but no later than ten (10) business days after
Executive actually receives notice of such claim and Executive will further
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid (in each case, to the extent known by Executive).
Executive will not pay such claim prior to the earlier of (i) the expiration of
the 30-calendar-day period following the date on which she gives such notice to
the Company and (ii) the date that any payment of an amount with respect to such
claim is due. If the Company does not notify Executive in writing prior to the
expiration of such period that it desires to contest such claim, then (a) such
amount shall be treated as an Excise Tax subject to Section 5.6(i) with respect
to which Executive shall be entitled to a Gross-Up Payment; and (B) the Company
shall reimburse Executive for any accounting fees incurred by Executive with
respect to responding to such claim. If the Company
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notifies Executive in writing prior to the expiration of such period that it
desires to contest such claim, Executive will:
(A) provide the Company with any written records
or documents in her possession relating to such claim reasonably
requested by the Company;
(B) take such action in connection with
contesting such claim as the Company will reasonably request in writing
from time to time, including without limitation accepting legal
representation with respect to such claim by an attorney competent in
respect of the subject matter and reasonably selected by the Company;
(C) cooperate with the Company in good faith in
order effectively to contest such claim; and
(D) permit the Company to participate in any
proceedings relating to such claim;
PROVIDED, HOWEVER, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless Executive, on an after-tax basis,
for and against any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of such representation and payment of
costs and expenses. Without limiting the foregoing provisions of this Section
5.6(vi), the Company will control all proceedings taken in connection with the
contest of any claim contemplated by this Section 5.6(vi) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided that Executive may participate therein at her own cost and expense)
and may, at its option, either direct Executive to pay the tax claimed and xxx
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company will determine; provided, however, that if the Company
directs Executive to pay the tax claimed and xxx for a refund, the Company will
advance the amount of such payment to Executive on an interest-free basis and
will indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and PROVIDED FURTHER, HOWEVER, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which the contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim will be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and Executive will be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(vii) If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 5.6(vi) hereof, Executive
receives any refund with respect to such claim, Executive will (subject to the
Company's complying with the requirements of Section 5.6(vi) hereof) promptly
pay to the Company the amount of such refund (together with
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any interest paid or credited thereon after any taxes applicable thereto. If,
after the receipt by Executive of an amount advanced by the Company pursuant to
Section 5.6(vi) hereof, a determination is made that Executive will not be
entitled to any refund with respect to such claim and the Company does not
notify Executive in writing of its intent to contest such denial or refund prior
to the expiration of 30 calendar days after such determination, then such
advance will be forgiven and will not be required to be repaid and the amount of
such advance will offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid pursuant to this Section 5.6. If, after the receipt by
Executive of a Gross-Up Payment but before the payment by the Executive of the
Excise Tax, it is determined by the Accounting Firm that the Excise Tax payable
by Executive is less than the amount originally computed by the Accounting Firm
and consequently that the amount of the Gross-Up Payment is larger than that
required by this Section 5.6, the Executive shall promptly refund to the Company
the amount by which the Gross-Up Payment initially made to Executive exceeds the
Gross-Up Payment required under this Section 5.6.
5.7. FULL SETTLEMENT. Except as specifically provided in this
Agreement, Executive shall have no rights to compensation or benefits upon or
after termination of employment except as may be specifically provided under the
Company's employee benefit plans.
5.8. CHANGE IN CONTROL. For purposes of this Agreement, the term
"Change in Control" shall mean:
(a) during the period beginning on the Effective Date and
ending upon the effectiveness of any permitted assignment of this Agreement by
the Company to Newco in connection with an IPO:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either (A) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"), PROVIDED, HOWEVER, that for purposes of this clause
(a) the following acquisitions shall not constitute a Change in Control: (1) any
acquisition directly from the Company, (2) any acquisition by the Company or any
corporation controlled by the Company, (3) any acquisition by any corporation
pursuant to a transaction which complies with (A), (B) and (C) of clause (iii)
of this Section 5.8(a); or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board of Directors; PROVIDED, HOWEVER, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other
11
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(iii) The consummation of a recapitalization,
restructuring, exchange of equity for debt or debt for equity or a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business Transaction"), in
each case, unless, following such Business Transaction, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Transaction beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting form such Business
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially,
the same proportions as their ownership, immediately prior to such Business
Transaction of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person beneficially owns, directly
or indirectly, 50% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Transaction or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Transaction and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Transaction were
members of the Incumbent Board (or considered as such in accordance with Section
5.8(a)(ii) hereof) at the time of the execution of the initial agreement, or of
the action of the Board of Directors, providing for such Business Transaction;
or
(iv) The approval by the shareholders of the
Company of the Company of a complete liquidation or dissolution of the Company.
(b) during the period commencing with the Effective Date
through the end of the Term:
(i) The occurrence of any of the events
described in clauses (i)-(iv) of Section 5.8(a) in respect of Newco; PROVIDED,
HOWEVER, that following the IPO any acquisition by the Company or any
corporation or other entity controlled by the Company of 50% or more of the then
outstanding shares of common stock or the then outstanding voting power of the
then outstanding voting securities of Newco entitled to vote generally in the
election of directors (including, without limitation, a "going private"
transaction) shall not be deemed to be a Change in Control as long as such
acquisition was approved by a majority of the directors of Newco who are not
also directors of the Company; or
(ii) At any time that the Company owns 50% or
more of, respectively, the then outstanding shares of common stock and the then
outstanding voting power of the then outstanding voting securities of the Newco
entitled to vote generally in the election of directors, the occurrence of any
of the events described in clauses (i)-(iv) of Section 5.8(a) in respect of the
Company; provided, however, that a Change in Control shall not be deemed to have
occurred for
12
purposes of this Agreement merely as a result of any circumstances arising in
connection with a distribution by the Company of securities of Newco to the
Company's shareholders or an offering of securities of Newco in the primary or
secondary market.
5.9. OBLIGATIONS ABSOLUTE; WITHHOLDING.
(a) The obligations of the Company under this Agreement
shall be absolute and unconditional and shall not be affected by, or any amounts
payable to Executive reduced by, any circumstances, including without limitation
(i) Executive's receipt of compensation and benefits from another employer in
the event that Executive accepts new employment following the termination of her
employment under this Agreement, or (ii) any set-off, counterclaim, recoupment,
defense or other right which the Company may have against Executive or anyone
else, including but not limited to any claim or defense that Executive failed to
mitigate damages.
(b) All payments to Executive under this Agreement may be
reduced by applicable withholding by federal, state or local law.
ARTICLE VI.
MISCELLANEOUS
6.1. NO MITIGATION. Executive shall not be required to mitigate
damages resulting from her termination of employment nor shall the amount of any
payment or benefit provided for in this Agreement be reduced by any compensation
earned by Executive from any other employer or any other amounts paid or payable
to Executive.
6.2. INDEMNIFICATION. In addition to all other rights Executive may
have under the Company's and any subsidiary's articles and bylaws, under any
director and officer liability policy or as a matter of law, the Company, for
itself and on behalf of all subsidiaries, shall defend, indemnify and hold
Executive harmless from and against any and all claims, demands, actions,
proceedings, losses, damages, and expenses (including reasonable attorneys' fees
and court costs) arising out of Executive's services as a director, officer and
employee of the Company and its subsidiaries, to the fullest extent permitted
under Delaware law. This Section 6.2 shall survive termination of this Agreement
and Executive's employment with the Company for any reason whatsoever.
6.3. REPRESENTATIONS. Each party hereby represents and warrants
that the execution and delivery by it of this Agreement and the performance by
it of its obligations hereunder have been duly authorized by all necessary
action on its part, including, in the case of the Company, all requisite
approval of its Board or an authorized committee thereof, and does not and shall
not violate any indenture, agreement or other instrument to which such party or
any of its affiliates is a party; PROVIDED, HOWEVER, that the KAI Purchase
Transaction requires consent by certain lenders to Foamex L.P.
6.4. RELEASE. Any obligations of the Company or Newco to Executive
under this Agreement, including pursuant to Exhibit B or Exhibit C, following
the termination of
13
Executive's employment by the Company without Cause or by Executive for Good
Reason shall be contingent upon Executive's execution of a release of the
Company, Newco and their respective officers, directors, shareholders and
affiliates substantially in the form of Exhibit E hereto.
6.5. BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY.
(a) This Agreement shall inure to the benefit of and be
binding upon the Company and its permitted successors and assigns which shall
consist solely of any corporation or person which may acquire all or
substantially all of the Company's assets or business, or with or into which the
Company may be consolidated or merged; PROVIDED HOWEVER, that except as set
forth in the immediately following sentence no assignment shall relieve the
Company of its obligations hereunder. Without limiting the generality of the
foregoing, upon the occurrence of the IPO the Company may assign this Agreement
and all of its rights and obligations hereunder to Newco and after such time (i)
the Company will have no further obligations hereunder to Executive, except for
amounts accrued prior to the date of such assignment and (ii) except as
specifically set forth herein, all references under this Agreement to the
Company shall be references to Newco. This Agreement shall also inure to the
benefit of, and be enforceable by, Executive and her personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to Executive hereunder if she had continued to live, all such amounts
shall be paid in accordance with the terms of this Agreement to Executive's
beneficiary, devisee, legatee or other designee, or if there is no such
designee, to Executive's estate.
(b) The Company shall require any successor (whether
direct or indirect, by operation of law, by purchase, merger/consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
6.6. NOTICES. Any notice required or permitted hereunder shall be
in writing and shall be sufficiently given if (i) personally delivered or (ii)
if sent by facsimile transmission (with evidence of receipt) and by registered
or certified mail, postage prepaid, with return receipt requested, addressed:
(a) in the case of the Company to Foamex International Inc., 0000 Xxxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000, Attention: Vice President-Human Resources,
or to such other address and/or to the attention of such other person as the
Company shall designate by written notice to Executive; and (b) in the case of
Executive, to (i) Xxxxxxxx X. Xxxxxx at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or to such other address as Executive shall designate by written notice
to the Company, and (ii) Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, fax: (000) 000-0000, attention: Xxxxxx X. Xxxx, Esq./P. Xxxxxxx Xxxxxx,
Esq. Any notice given hereunder shall be deemed to have been given at the time
of receipt thereof by the person to whom such notice is given.
6.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
exhibits hereto) contains the entire agreement of the parties hereto with
respect to the terms and conditions of Executive's employment during the term
and supersedes any and all prior agreements and understandings, whether written
or oral, between the parties hereto with respect
14
to compensation due for services rendered hereunder. This Agreement may not be
changed or modified except by an instrument in writing signed by both of the
parties hereto.
6.8. WAIVER. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof. The
provisions of this Agreement may not be waived except by an instrument in
writing signed by the party to be charged.
6.9. HEADINGS. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
6.10. GOVERNING LAW. This Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
New York without reference to the principles of conflict of laws.
6.11. AGREEMENT TO TAKE ACTIONS. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to effectuate the purposes hereof.
6.12. FEE REIMBURSEMENT. The Company will reimburse Executive for
the reasonable and documented professional fees and expenses Executive incurs in
connection with this Agreement (including any earlier letter agreement, whether
or not executed), in an aggregate amount not to exceed $100,000.
6.13. ARBITRATION; ATTORNEY'S FEES. Except for the right to seek an
injunction with respect to breaches of Article 4 hereof, any dispute between the
parties hereto in connection with or arising out of this Agreement or any of its
terms and provisions (including the terms and provisions of Exhibit B and
C)shall be submitted to arbitration in New York, New York, before a panel of
three neutral arbitrators in accordance with the Commercial Rules of the
American Arbitration Association then in effect, and the arbitration
determination resulting from any such submission shall be final and binding upon
the parties hereto. Judgment upon any arbitration award may be entered in any
court of competent jurisdiction. The arbitrators shall have the power to award
attorneys fees and costs to the prevailing party, as such arbitrators may decide
in their discretion.
6.14. SURVIVORSHIP. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
6.15. VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision or provisions of this Agreement, which shall remain in
full force and effect.
6.16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15
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16
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
FOAMEX INTERNATIONAL INC.
By: /s/ Xxxxxxxx X. Xxxxx
---------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Chairman of the Board
/s/ Xxxxxxxx Xxxxxx
---------------------------------------
Xxxxxxxx Xxxxxx
17
EXHIBIT A
Such entities as are listed on the schedule delivered by Executive to the
Company under separate cover contemporaneously herewith.
EXHIBIT B
IPO AWARD
1. DEFINITIONS
Capitalized terms used but not defined in this Exhibit B shall have the
meanings assigned to them in the Employment Agreement to which this Exhibit B is
attached. Notwithstanding the foregoing, the following terms shall have the
following meanings:
(a) "COMMITTEE" means the Compensation Committee of the Board of
Directors of Newco or, until such Compensation Committee is established, the
Compensation Committee of the Board of Directors of the Company.
(b) "COMPANY" means Foamex International Inc.
(c) "EFFECTIVE GRANT DATE" means July 18, 2002.
(d) "EMPLOYMENT AGREEMENT" means the Employment Agreement between
Foamex International Inc. and Xxxxxxxx Xxxxxx, dated September 10, 2002, to
which this Exhibit B is attached.
(e) "IMPLIED IPO VALUE" means the equity value of Newco based upon
the IPO Offering Price without regard to the proceeds of the IPO, as determined
pursuant to the offer price set forth on the cover page of the prospectus with
respect thereto.
(f) "INITIAL VALUE" means the value of Newco as of the Effective
Grant Date, determined on a pro forma basis pursuant to the methodology by which
such value is determined and set forth in a spreadsheet (the "Initial
Determination") delivered to Executive under separate cover contemporaneously
herewith, as adjusted on an appropriate and equitable basis for capital
contributions by the Company or Foamex L.P. to Newco, or distributions of cash
or other assets from Newco to the Company or Foamex L.P. (other than in the
ordinary course of business for fair value), after the Initial Determination and
prior to the IPO ("Capital Adjustments").
(g) "IPO" means the first sale in an underwritten offering by
Newco of Newco Common Stock pursuant to a registration statement on Form S-1 or
otherwise under the Securities Act of 1933, as amended.
(h) "IPO DATE" means the date the IPO is consummated.
(i) "IPO OFFERING PRICE" means the price per share of Newco Common
Stock offered to the public in the IPO.
(j) "NEWCO" shall mean the Divisions or have the meaning set forth
in the Employment Agreement, as the case may be.
(k) "NEWCO COMMON STOCK" means the common stock of Newco.
2. EQUITY AWARDS.
(a) RESTRICTED STOCK AWARD.
(i) If Executive is employed by Newco on the IPO Date,
Executive shall be granted an award of restricted shares of Newco Common Stock
("Restricted Stock") equal in number to the result obtained by dividing (x) by
(y) where:
(x) is equal to the product of five percent (5%)
(reduced to reflect the portion, if any, of the Long-Term Award exercised prior
to such date) multiplied by the positive difference between the Implied IPO
Value and the Initial Value.
(y) is equal to the IPO Offering Price.
(ii) The restrictions with respect to one-third of the
shares of Restricted Stock shall lapse on the first, second and third
anniversary of the Effective Grant Date, such that all of the shares of
Restricted Stock shall be 100% vested on the third anniversary of the Effective
Grant Date; PROVIDED, HOWEVER, that the restrictions on any unvested shares of
Restricted Stock shall lapse immediately in the event Executive's employment is
terminated by the Company or Newco, as the case may be, without Cause, by
Executive with Good Reason or as a result of the death or Disability of
Executive.
(iii) Without the prior written consent of the Committee,
Executive may not assign, alienate, pledge, attach, sell or otherwise transfer
or encumber the shares of Restricted Stock, other than by will or by the laws of
descent or distribution, at any time prior to the date the shares of Restricted
Shares become fully vested.
(b) STOCK OPTION AWARD.
(i) If Executive is employed by Newco on the IPO Date,
Executive shall be granted an option to acquire the number of shares of Newco
Common Stock ("Stock Option") equal to the product of five percent (5%) (reduced
to reflect the portion, if any, of the Long-Term Award exercised prior to such
date) multiplied by the result obtained by dividing the Initial Value by the IPO
Offering Price. The per share exercise price of the Stock Option shall be equal
to the IPO Offering Price. Executive may elect to pay the exercise price in cash
or by delivery of shares of Newco Common Stock that Executive has owned for at
least six months or that Executive did not acquire, directly or indirectly, from
Newco.
(ii) Unless the Stock Option expires earlier in accordance
with the terms of this Exhibit B, the Stock Option shall expire on the tenth
anniversary of the Effective Grant Date. One-third of the Stock Option shall
vest on each of the first, second and third anniversaries of the Effective Grant
Date, such that the Stock Option shall be 100% vested on the third anniversary
of the Effective Grant Date; PROVIDED, HOWEVER, that the Stock Option shall
become 100% vested immediately in the event Executive's employment is terminated
by the Company or Newco, as the case may be, without Cause, by Executive with
Good Reason or as a result of the death or Disability of Executive.
2
(iii) If Executive's employment with Newco is terminated by
Newco without Cause or Executive terminates Executive's employment for Good
Reason, the Stock Option shall remain exercisable for six months after such
termination; PROVIDED, HOWEVER, that if Executive's employment with Newco
terminates on account of Executive's death or Disability, the Stock Option shall
remain exercisable by Executive or Executive's estate (as the case may be) for
12 months from the date of such termination. If Executive's employment
terminates for any other reason (other than those set forth in the two preceding
sentences), the unvested portion of the Stock Option shall be forfeited and the
vested portion of the Stock Option shall remain exercisable for ninety (90) days
after such termination.
(iv) Executive may elect at any time or from time to time
to exercise the Stock Option as to any part of the shares of Newco Common Stock
subject to the Stock Option prior to the full vesting of the Stock Option
provided that Executive is employed by Newco at the time of such election. In
the event Executive decides to make an election in accordance with the preceding
sentence, (i) the shares of Newco Common Stock that Executive will receive upon
making such election shall be subject to the same vesting schedule as the
balance of the vesting schedule for the portion of the Stock Option with respect
to which the election has been made, as set forth in Section 2(b)(ii) above;
including the proviso at the end thereof; and (ii) Newco shall have the right,
but not the obligation, to purchase all or a portion of the unvested (after
giving effect to Executive's termination of employment upon the vested status of
said shares) shares of Newco Common Stock that were subject to the Stock Option
at the time Executive's employment with Newco terminates at a purchase price
equal to the lesser of (a) the IPO Offering Price, or (b) the then current fair
market value per share of Newco Common Stock, which right may be exercised upon
written notice to Executive, at any time during the 15 day period commencing
immediately after the termination of employment.
(v) Without the prior written consent of the Committee,
Executive may not assign, alienate, pledge, attach, sell or otherwise transfer
or encumber the Stock Option other than by will or by the laws of descent or
distribution.
3. ADJUSTMENT; ANTI-DILUTION; REGISTRATION RIGHTS; ETC.
(a) ADJUSTMENT. The IPO Award granted to Executive pursuant to
this Exhibit B shall be subject to adjustment or substitution, as determined by
the Committee in its good faith discretion, as to the number, price and/or kind
of a share of Newco stock or other consideration subject to such award or as
otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding stock of Newco or in the capital structure of Newco
by reason of stock or extraordinary cash dividends, stock splits, reverse stock
splits, recapitalization, reorganizations, mergers, consolidations,
combinations, exchanges, or other relevant changes in capitalization after the
date of grant of any such award or (ii) in the event of any change in applicable
laws or the occurrence of an event or transaction which results in or would
result in any substantial dilution or enlargement of the benefits intended to be
made available pursuant to this Exhibit B.
(b) ANTI-DILUTION. The parties acknowledge that it is contemplated
that up to five percent (5%) of the equity in Newco may be awarded to other
directors, officers or employees of Newco on or prior to the IPO Date. The IPO
Award granted to Executive pursuant to this Exhibit B
3
shall be adjusted to prevent dilution on account of any such awards granted on
or prior to the IPO. Executive understands and acknowledges that Executive's IPO
Award will be subject to dilution on the account of the IPO and otherwise from
arm's length investments made in the ordinary course by third parties that are
not affiliates of the Company, as well for Capital Adjustments.
(c) REGISTRATION. Newco will register Executive's shares of Newco
Common Stock on Form S-8, along with a Form S-3 reoffer prospectus, by the date
which is six months following the later of (i) the first anniversary of the
Effective Grant Date, or (ii) the IPO Date.
(d) WITHHOLDING. Executive shall be required to pay Newco, and
Newco shall be entitled to withhold from any other payment due Executive, the
amount of any applicable withholding taxes in respect of the grant, exercise,
transfer or payment of any award granted to Executive pursuant to this Exhibit B
and to take such other actions as may be necessary or appropriate in the opinion
of Newco to satisfy all obligations for the payment of such taxes; PROVIDED,
HOWEVER, that Executive shall be given the opportunity to satisfy the
withholding obligation in any reasonable manner, as determined by the Committee
in good faith.
(e) ADMINISTRATION. The IPO Award shall be administered, and any
determinations required to be made with respect thereto shall be made, by the
Committee; provided, however, that it is contemplated the IPO Award shall be
issued under and governed by a stock incentive plan of Newco to be adopted in
connection with the IPO; provided that in no event may such plan, as applicable
to Executive, be contrary to the terms hereof or otherwise be materially adverse
to Executive.
4
EXHIBIT C
LONG-TERM AWARD
1. DEFINITIONS.
Capitalized terms used but not defined in this Exhibit C shall have the
meanings assigned to them in the Employment Agreement to which this Exhibit C in
attached. Notwithstanding the foregoing, the following terms shall have the
following meanings:
(a) "COMMITTEE" means the Compensation Committee of the Board of
Directors of Newco or, until such Compensation Committee is established, the
Compensation Committee of the Board of Directors of the Company.
(b) "COMPANY" means Foamex International Inc.
(c) "EFFECTIVE GRANT DATE" means July 18, 2002.
(d) "EMPLOYMENT AGREEMENT" means the Employment Agreement between
Foamex International Inc. and Xxxxxxxx Xxxxxx, dated September 10, 2002, to
which this Exhibit C is attached.
(e) "INITIAL DETERMINATION" shall have the meaning set forth in
the definition of "Initial Value."
(f) "INITIAL VALUE" means the value of Newco as of the Effective
Grant Date, determined on a pro forma basis pursuant to the methodology by which
such value is determined and set forth in a spreadsheet (the "Initial
Determination") delivered to Executive under separate cover contemporaneously
herewith, as adjusted on an appropriate and equitable basis for capital
contributions by the Company or Foamex L.P. to Newco, or distributions of cash
or other assets from Newco to the Company or Foamex L.P. (other than in the
ordinary course of business for fair value), after the Initial Determination and
prior to the IPO ("Capital Adjustments")..
(g) "NEWCO" shall mean the Divisions or have the meaning set forth
in the Employment Agreement, as the case may be.
(h) "PERCENTAGE SHARE" shall equal 5%, subject to adjustment as
set forth herein.
(i) "SALE TRANSACTION" shall mean, whether in the form of a sale
of stock, assets, or business, merger, consolidation or otherwise, and whether
in one transaction or a series of transactions, (i) the sale of all or
substantially all of the assets of Newco, other than a sale to the Company or
any of its affiliates, or (ii) the sale by the Company or any of its affiliates
of all or a majority of the stock of Newco.
(j) "SETTLEMENT DATE" shall mean the last day of any fiscal
quarter during which Executive elects to exercise any portion of the Long-Term
Award.
(k) "TOTAL NEWCO VALUE" as of any date shall be a dollar amount
equal to the equity value of Newco as of such date, determined on a pro forma
basis and in accordance with the methodology used in the Initial Determination,
as adjusted as set forth in the definition of Initial Value, as determined in
good faith by the Board.; PROVIDED, HOWEVER, that, in the event of the
occurrence of a Public Offering (as hereinafter defined) within 180 days after
Executive ceases to be employed by the Company or Newco as the result of
Executive's employment being terminated by the Company or Newco without Cause or
by Executive for Good Reason, "Total Newco Value" shall be equal to the Implied
IPO Value (as defined in Exhibit B to the Employment Agreement) with respect to
any portion of the Long-Term Award exercised on or after the date of the Public
Offering.
2. EXERCISE.
(a) SINGLE PARTIAL EXERCISE PERMITTED. To the extent vested and
exercisable, the Long-Term Award may be exercised in whole or in part, but not
more than two partial exercises shall be permitted.
(b) METHOD OF EXERCISE. Executive shall exercise the Long-Term
Award by delivery of written notice of exercise to the Company, on such form and
in such manner as the Committee shall in its reasonable discretion prescribe.
(c) RESTRICTIONS ON EXERCISE.
(i) The Long-Term Award, or any portion thereof, may be
exercised by Executive by providing written notice to the Company during any
fiscal quarter of the Company and the Long-Term Award shall then be
automatically exercised to the extent elected by Executive as of the end of such
fiscal quarter.
(ii) No portion of the Long-Term Award shall be exercised
after, and any unexercised portion of the Long-Term Award shall expire and
Executive shall have no further rights with respect thereto upon, the earlier of
(x) in the event Executive's employment terminates on account of Executive's
death or Disability, the date 12 months from the date of such termination or (y)
in the event of any other termination of Executive's employment, the date 180
days following such termination, and (z) July 17, 2007.
(iii) The Long-Term Award shall expire and cease to be
exercisable upon the first sale in an underwritten offering by Newco of shares
of Newco common stock pursuant to a registration statement on Form S-1 or
otherwise under the Securities Act of 1933, as amended (a "Public Offering"),
provided that Executive is employed by Newco on said date and has received the
IPO Award.
(iv) In the event of the consummation of a "Sale
Transaction," either the Board of Directors of the Company or Executive may
direct that the Long-Term Award be canceled and settle the Long-Term Award as if
the date of the consummation of Sale Transaction were a Settlement Date and as
if the Long-Term Award was fully vested and exercisable; PROVIDED, HOWEVER, that
if such Sale Transaction is only a partial sale of Newco then only that portion
of the Long-Term Award equal to the portion of Newco sold through such Sale
Transaction shall be so settled and the remainder shall continue in effect;
PROVIDED, FURTHER, HOWEVER, that in the event
2
that the consideration payable upon any Sale Transaction is payable in any form
other than the current payment of cash, then, at the option of either the
Company or Executive, in lieu thereof Executive shall be paid upon (and as a
condition to) the consummation of such Sale Transaction an amount in cash equal
to the value of such consideration as then mutually agreed upon by the Company
and Executive.
3. EXERCISABILITY. One third of the Long-Term Award shall vest and become
exercisable on each of the first three anniversaries of the Effective
Grant Date; PROVIDED, HOWEVER, that the Long-Term Award shall become
100% vested and exercisable immediately in the event that Executive's
employment is terminated by the Company without Cause, by Executive
with Good Reason or as a result of the death or Disability of
Executive.
4. PAYMENT UPON EXERCISE. Not later than the earlier of (x) the date of
thirty (30) days after the Company's receipt of the determination of
Total Newco Value in connection with the exercise of the Long-Term
Award or any portion thereof or (y) the date ninety (90) days following
such exercise of the Long-Term Award or any portion thereof, the
Company shall pay to Executive an amount equal to the product of (a)
the product of (i) the Percentage Share multiplied by (ii) the portion
of the Long-Term Award Executive has elected to exercise, multiplied by
(b) the excess of (x) Total Newco Value, determined as of the relevant
Settlement Date over (y) the Initial Value.
5. DEFAULT RULES CONCERNING TERMINATION OF EMPLOYMENT.
(a) GENERAL RULE. Except as specifically set forth in this Section
5, any unexercised portion of the Long-Term Award shall terminate and no longer
be exercisable upon Executive's termination of employment for any reason.
(b) TERMINATION WITHOUT CAUSE; DEATH; DISABILITY; QUIT WITH GOOD
REASON. If Executive's employment with the Company is terminated by the Company
without Cause or Executive terminates Executive's employment for Good Reason,
the Long-Term Award shall remain exercisable for 180 days after such
termination; provided, however, that if Executive's employment with the Company
terminates on account of Executive's death or Disability, the Long-Term Award
shall remain exercisable by Executive or Executive's estate (as the case may be)
for 12 months from the date of such termination. If Executive's employment
terminates for any other reason, the unvested portion of the Long-Term Award
shall be forfeited and the vested portion of the Long-Term Award shall remain
exercisable for ninety (90) days after such termination.
6. NONTRANSFERABILITY. The Long-Term Award shall not be assignable or
transferable by Executive other than by will or by the laws of descent
and distribution. During the lifetime of Executive, all rights with
respect to the Long-Term Award shall be exercisable only by her.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC. If and to the extent
specified by the Committee, all matters affecting the calculation of
the amount to be paid upon exercise of the Long-Term Award (including
without limitation the determination of Total Newco Value) shall be
appropriately adjusted as the Committee may determine in good faith for
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any Capital Adjustments and otherwise in the same manner contemplated
by Sections 3(a) and 3(b) of the IPO Award.
8. RIGHT OF DISCHARGE RESERVED. Neither the Long-Term Award nor this
Exhibit C shall confer upon any person the right to continue in the
employment of the Company or an affiliate or affect any right which the
Company or an affiliate may have to terminate the employment of such
person.
9. NO RIGHTS AS A STOCKHOLDER. Neither Executive nor other person shall
have any of the rights of a stockholder of Newco or the Company with
respect to the Long-Term Award or as a result of this Exhibit C.
10. ADMINISTRATION. Except as specifically set forth in this Exhibit C, the
Long-Term Award shall be administered, and any determinations required
to be made with respect thereto shall be made, by the Committee.
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EXHIBIT D
CURRENT KAI SALARY AND BENEFITS
Such individuals and description of material compensation and benefits are set
forth on the schedule delivered by Executive to the Company contemporaneously
herewith.
EXHIBIT E
[Form of Release]
