EMPLOYMENT AGREEMENT
This employment Agreement is dated as of May 21, 1999, and is entered
into between Foamex International., Inc a Delaware corporation (the "Company"),
and Xxxx Xxxxxxxxxx ("Executive").
WHEREAS, Executive and the Company desire to embody in this Agreement
the terms and conditions of Executive's employment by the Company.
NOW, THEREFORE, the parties hereby agree:
ARTICLE 1
Employment, Duties and Responsibilities
1.1 Employment. Executive shall be employed as President, Foam
Business Group of the Company. Executive hereby accepts such employment.
Executive agrees to devote his full business time and efforts to promote the
interests of the Company; provided, however, the foregoing shall not prevent
Executive from devoting a portion of his time and efforts to his personal
affairs or serving on the boards of other for profit and not for profit entities
so long as such activities do not materially interfere with the performance of
his duties hereunder and provided that, with respect to serving on the board of
any for profit entity, Executive has obtained the prior consent of the Board of
Directors of the Company (the "Board"). During the term of Executive's
employment, Executive shall also serve on the Company's Operating Committee, and
shall be nominated for appointment by the Board as an officer of the Company.
Executive shall perform his duties at the principal executive offices of the
Company in Linwood, Pennsylvania, except for required travel on the Company's
business.
1.2 Duties and Responsibilities. Executive shall have such duties and
responsibilities as are consistent with his position including, but not limited
to, full responsibility for all business management, marketing, sales and new
business development relating to the Company's foam products, tech products and
automotive products, together with such additional duties, commensurate with
Executive's position as President, Foam Business Group, as may be assigned to
Executive from time to time by the Company's Chief Executive Officer or the
Board.
ARTICLE 2
2.1. Term. (a) The term of this Agreement (the "Term") shall commence
on May 21, 1999 (the "Effective Date") and shall have an initial term of two
years; provided, however, that on each anniversary of the Effective Date
commencing May 21, 2000, the Term shall be automatically extended for one
additional year, unless either party hereto gives written notice of its election
not to so extend the Term at least 30 days prior to the applicable anniversary
date. Executive's actual commencement of employment shall be on such date as is
mutually agreed to by Executive and the Company's Chief Executive Officer,
consistent with Executive completing transitional work assignments with his
current employer.
(b) Executive represent and warrants to the Company that (i) neither
the execution and delivery of this Agreement nor the performance of his duties
hereunder violates or will violate the provisions of any other agreement to
which he is a party or by which he is bound; and (ii) except for obligations to
maintain confidentiality of certain information relating to previous employers
which will not unreasonably interfere with the performance of his duties
hereunder, there are no agreements by which he is currently bound relating to
employment or which contain any post-employment restrictions whatsoever.
ARTICLE 3
Compensation and Expenses
3.1. Salary, Bonuses and Benefits. As compensation and consideration
for the performance by Executive of his obligations under this Agreement,
Executive shall be entitled to the following (subject, in each case, to the
provisions of ARTICLE 5 hereof):
(a) Salary. The company shall pay Executive a base salary during the
Term ("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 the rate of at least $300,000 per
annum. The Base Salary will be reviewed annually by the Compensation Committee
of the Board of Directors.
(b) Benefits. Executive shall participate during the Term in such
401(k), pension, life insurance, health, disability and major medical insurance
plans, and in such other senior executive officer benefit plans and programs, as
may be maintained from time to time by the Company during the Term, in each case
to the extent and in the manner available to other senior executive officers of
the Company and subject to the terms and provisions of such plans or programs.
(c) Bonus. (i) Executive shall be paid a $50,000 bonus by the Company
in consideration for Executive's commencement of services under this Agreement
("Signing Bonus"), subject to such withholdings and other normal employee
deductions as may be required by law. The Signing Bonus shall be paid by the
Company within 60 days after the Effective Date.
(ii) Executive shall be eligible to earn a fiscal year target
bonus award of 90% of Base Salary during the Term ("Annual Bonus"), which shall
be based upon the attainment of Company performance targets for the applicable
fiscal year, as measured against a written set of reasonable performance
criteria communicated to Executive for such fiscal year. It is expressly agreed
by the parties that with respect to fiscal year 1999, the Annual Bonus shall not
be less than $135,000 (the "Guaranteed Bonus"). The bonus for fiscal year 1999
and all subsequent years shall be paid within 30 days after final determination
by the Board of the amount payable, but in no event later than 100 days after
the end of the fiscal year to which the bonus relates.
(iii) In the event Executive dies or becomes Disabled (as
hereinafter defined) or Executive's employment is terminated by Executive for
Good Reason (as hereinafter defined) or by the Company without Cause (as
hereinafter defined), Executive shall receive and shall be awarded a pro rata
portion of the Annual Bonus otherwise payable with respect to the fiscal year in
which such event occurs; provided, however, if any of the foregoing events occur
prior to the second anniversary of the Effective Date, Executive shall receive
and shall be awarded the entire Annual Bonus otherwise payable for such year.
(iv) The Annual Bonus may be awarded as part of a bonus plan or
other incentive compensation plan established by the Board for the Company's
senior executive officers.
(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 during the
Term.
(e) Options. (i) Executive shall be granted options (the "Options") to
purchase 100,000 shares of common stock of the Company (the "Common Stock") on
the Effective Date at a price per share equal to the fair market value of a
share of the Common Stock on the Effective Date. Such Options shall be granted
under the Company's existing stock option plan to the extent shares are
available for issuance thereunder, and shall be granted outside such plan to the
extent of any excess. The Options shall be "incentive stock options" to fullest
extent permissible under Section 422 of the Internal Revenue Code of 1986. The
Options shall vest as to 20,000 of the Options on each of the first, second,
third, fourth and fifth anniversaries after the Effective Date; provided,
however, that in the event (i) a Change in Control (as hereinafter defined)
occurs or a transaction occurs which is not a Change in Control but as a result
of which all of the Company's Common Stock ceases to be registered under the
Securities Act of 1933 (a "Going Private Transaction"), or (ii) Executive's
employment is terminated by the Company without Cause (as hereinafter defined),
or by Executive for Good Reason (as hereinafter defined), or by reason of his
death or Disability, the Options shall become immediately and fully exercisable.
In the event that Executive's employment is terminated for any reason other than
a reason referenced in the preceding sentence, all unvested Options shall lapse
and be canceled. Upon any termination of employment, all Options which were
vested or which vest as of the date of such termination shall continue to be
exercisable for a period of (A) one year, if such termination is for a reason
described in the second preceding sentence, and (B) 90 days from such date if
such termination occurs for any other reason, and in any event shall thereafter
lapse and be canceled. The Options shall be evidenced by a Stock Option
Agreement substantially in the form attached hereto as Exhibit A.
3.2. Expenses. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his 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.
ARTICLE 4
Exclusivity, Etc.
4.1. Exclusivity. Executive agrees to perform his duties,
responsibilities and obligations hereunder efficiently and to the best of his
ability. Except as set forth in Section 1.1, Executive agrees that he will
devote his 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 he 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 4.2 and Section
1.1. Executive agrees that all of his 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. Other Business Ventures. Executive agrees that, so long as he is
employed by the Company, he will not own, directly or indirectly, any
controlling or substantial stock or other beneficial interest in any business
enterprise which is engaged in, or competitive with, any business engaged in by
the Company. Notwithstanding the foregoing, Executive may own, directly or
indirectly, up to 1% of the outstanding capital stock of any business having a
class of capital stock which is traded on any national stock exchange or in the
over-the-counter market.
4.3. Confidentiality; Non-competition. (a) Executive agrees that he
will not, at any time during or after the Term, make use of or divulge to any
other person, firm or corporation any trade or business secret, process, method
or means, or any other confidential information concerning the business or
policies of the Company, which he may have learned in connection with his
employment. For purposes of this Agreement, a "trade or business secret,
process, method or means, or any other confidential information" shall mean and
include written information reasonably treated as confidential or as a trade
secret by the Company. Executive's obligation under this Section 4.3(a) shall
not apply to any information which (i) is known publicly; (ii) is in the public
domain or hereafter enters the public domain without the fault of Executive;
(iii) is known to Executive prior to his receipt of such information from the
Company, as evidenced by written records of Executive or (iv) is hereafter
disclosed to Executive by a third party not under an obligation of confidence to
the Company. Executive agrees not to remove from the premises of the Company,
except as an employee of the Company in pursuit of the business of the Company
or except as specifically permitted in writing by the Company, any document or
other object containing or reflecting any such confidential information.
Executive recognizes that all such documents and objects, whether developed by
him or by someone else, will be the sole exclusive property of the Company. Upon
termination of his employment hereunder, Executive shall forthwith deliver to
the Company all such confidential information, including without limitation all
lists of customers, correspondence, accounts, records and any other documents or
property made or held by him or under his control in relation to the business or
affairs of the Company, and no copy of any such confidential information shall
be retained by him.
(b) If Executive's employment is terminated for any reason other
than for Cause, Executive shall not for a period of two years from the date of
such termination, directly or indirectly, whether as an employee, consultant,
independent contractor, partner, or joint venturer, (i) perform any services for
a major competitor which has material operations which directly compete with the
Company in the sale of any products sold by the Company at the time of the
termination of Executive's employment; (ii) solicit or induce, or in any manner
attempt to solicit or induce, any person employed by, or as agent of, the
Company to terminate such person's contract of employment or agency, as the case
may be, with the Company or (iii) divert, or attempt to divert, any person,
concern, or entity from doing business with the Company, nor will he attempt to
induce any such person, concern or entity to cease being a customer or supplier
of the Company. Notwithstanding anything herein to the contrary, this Section
4.3(b) shall not prevent Executive from acquiring securities representing not
more than 5% of the outstanding voting securities of any publicly held
corporation.
ARTICLE 5
Termination
5.1. Termination by the Company. The Company shall have the right to
terminate Executive's employment at any time, with or without "Cause", subject
to the specific contractual obligations of the Company to Executive described
herein. For purposes of this Agreement, "Cause" shall mean (i) substantial and
continued willful failure by Executive to perform his duties hereunder which
results, or could reasonably be expected to result, in material harm to the
business or reputation of the Company, which failure is not cured (if curable)
by Executive within 60 days after written notice of such failure is delivered to
Executive by the Company, (ii) gross misconduct including, without limitation,
embezzlement, fraud, or misappropriation, or (iii) the commission of a felony.
The Company's decision under Section 2.1 to not extend this Agreement shall be
considered a termination without Cause.
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
which shall have prevented him from performing satisfactorily his obligations
hereunder for a period of at least 90 consecutive days, or 120 non-consecutive
days within any 365 day period, 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 6.5 hereof.
5.4. Termination by Executive for Good Reason. This Agreement may be
terminated by Executive 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) there is a Change in
Control of the Company (as hereinafter defined); (ii) the Company and any
subsidiaries sell, lease or otherwise transfer all or substantially all of their
assets to an entity which has not either assumed the Company's obligations under
this Agreement or entered into a new employment contract which is mutually
satisfactory to Executive and such entity; (iii) a material diminution occurs in
the duties or responsibilities of Executive (e.g., Executive is placed in a
reporting relationship to anyone other than the Board or the Company's Chief
Executive Officer) and such diminution is not cured within 15 days after written
notice of the same is received by the Company; (iv) the Company's failure to pay
compensation or grant Options as required hereunder and such failure is not
cured within 15 days after written notice of the same is received by the
Company; (v) Executive is removed from the position of President, Foam Business
Group of the Company; (vi) the principal executive offices of the Company are
moved to a location more than fifty (50) miles from its current location; (vii)
a liquidation or dissolution of the Company occurs; or (viii) a Going Private
Transaction occurs within six months after the Effective Date.
5.5. Effect of Termination. (a) In the event of termination of
Executive's employment for any reason, the Company shall pay Executive (or his
beneficiary in the event of his death) any Base Salary or other compensation
earned but not paid to Executive prior to the effective date of such
termination.
(b) 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 or
Disability, the Company shall pay Executive, in a lump sum within 30 days after
such termination, an amount equal to two times the sum of (i) Executive's then
Base Salary plus (ii) the target Bonus for such fiscal year or, if higher, the
Annual Bonus paid or payable to Executive for the preceding fiscal year.
(c) In the event of a termination of Executive's employment by
Executive for Good Reason or by the Company for reasons other than Cause or
Disability, the Company shall pay all premiums required by Executive to maintain
medical continuation coverage under the provisions of the Consolidated Omnibus
Budget Reconciliation At of 1986 ("COBRA") for a period of up to 18 months, or
for such shorter period as Executive is eligible for medical continuation
coverage under COBRA.
5.6. Other Awards. Executive's rights upon termination of employment
with respect to stock options or other incentive awards not covered by this
Agreement shall be governed by the terms and conditions in the respective stock
option agreements or awards.
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, a "Change in
Control" shall be deemed to have occurred if: (i) (A) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") (a "Person"), other than (1) the Company, (2) any trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its subsidiaries, (3) any corporation owned, directly or indirectly,
by the stockholders of the Company as of the Effective Date, in substantially
the same proportions as their ownership of common stock of the Company as of the
Effective Date, (4) Trace International Holdings, Inc. ("Trace"), (5) the
officers, directors or employees of the Company (collectively, the "Permitted
Holders"), is or becomes the "beneficial owner" (as defined in Rule 13 d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than 35% of the combined voting power of the Company's then
outstanding voting securities and (B) the percentage of the combined voting
power of the Company's voting securities beneficially owned by such Person is
greater than the percentage of the combined voting power of the Company's
voting securities beneficially owned collectively, by Trace, Xxxxxxxx Xxxxx or
any other entities directly or indirectly controlled by Trace or Xxxxxxxx Xxxxx;
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; 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 actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
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 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 his 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.
(b) All payments to Executive under this Agreement may be reduced
by applicable withholding by federal, state or local law.
ARTICLE 6
Miscellaneous
6.1. No Mitigation. Executive shall not be required to mitigate
damages resulting from his termination of employment.
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 Benefit of Agreement; Assignment; Beneficiary.
(a) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns, including, without limitation,
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. This Agreement shall also inure to the benefit of, and
be enforceable by, Executive and his 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 he 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.
6.4 Legal Fees. The Company shall reimburse Executive for all
reasonable legal fees and expenses incurred in connection with the negotiation
of this Agreement.
6.5 Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Company to Foamex
International Inc., 000 xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Attention:
Xxxxxx X. Xxxxx, Xx., 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 Xxxx Xxxxxxxxxx, at his then current home
address as shown on the Company's records, or to such other address as Executive
shall designate by written notice to the Company. 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.
6.6 Entire Agreement; Amendment. This Agreement 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 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.
6.7 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.
6.8 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.
6.9 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.
6.10 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.
6.11 Arbitration. Except for disputes with respect to Article 4
hereof, any dispute between the parties hereto respecting the meaning and intent
of this Agreement or any of its terms and provisions shall be submitted to
arbitration in New York, New York, 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.
6.12 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.
6.13 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.
6.14 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.
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/ Xxxx X. Xxxxxxx, Xx.
----------------------------
Name Xxxx X. Xxxxxxx, Xx.
Title President and Chief
Executive Officer
/s/ Xxxx Xxxxxxxxxx
----------------------------
Xxxx Xxxxxxxxxx
