EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of March 16, 1999, and
is entered into between Foamex International, Inc., a Delaware corporation
("Company"), and Xxxx Xxxxxxx ("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 I.
Employment, Duties and Responsibilities
1.1. Employment. Executive shall be employed as President and
Chief Executive Officer 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 the 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, the Executive has obtained the prior
consent of the Board of Directors of the Company (the "Board"). Executive
currently serves as a member of the Board of Directors of XxXxxxxxx
Technologies, Inc. and as a Trustee of Drexel University, and the Company hereby
consents to his so serving. The 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. During the Term the Executive also
shall be nominated for appointment to the Board of Directors of the Company as a
voting Director. Provided Executive satisfies the Performance Criteria described
in Section 3.1(c) for fiscal year 1999, the Board will consider him for
appointment as Chairman thereof.
1.2. Duties and Responsibilities. Executive shall have such
duties and responsibilities as are consistent with his positions including, but
not limited to, full authority for operating, personnel (including officer
positions, subject to approval by the Board), and capital expenditures
decisions, subject to the supervision of the Board.
ARTICLE II.
Term
2.1. Term. (a) The term of Executive's employment under this
Agreement (the "Term") shall commence on March 16, 1999 (the "Effective Date")
and shall have an initial term of two years; provided, however, that on each
anniversary of the Effective Date commencing March 16, 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.
(a)(b) Executive represents 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 III.
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 V hereof):
(a) Salary. The Company shall pay Executive on a biweekly
basis 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 $500,000 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 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 during the Term, in each case to the extent
and in
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the manner available to other senior executive officers of the Company
and subject to the terms and provisions of such plans or programs. Executive
shall be entitled to an automobile lease allowance of up to $875 per month and
shall be reimbursed for all related expenses such as repair, insurance, and
gasoline. The Company shall pay the annual dues, assessments and
business-related expenses incurred during the Term for the Executive's
membership in one country club selected by the Executive and approved by the
Company.
(c) Bonus. (i) The Executive shall be eligible to earn a
fiscal year bonus of up to $500,000 during the Term ("Annual Bonus"), which
shall be based upon the attainment of Company performance targets for that
fiscal year, as measured against a written set of reasonable performance
criteria for such fiscal year established by the Board following its review with
the Executive of the Company's operating budget, financial position and business
prospects for such fiscal year (the "Performance Criteria").
(ii) It is expressly agreed by the parties that with
respect to fiscal year 1999 the Annual Bonus shall not be less than $250,000
(the "Guaranteed Bonus") and shall be $500,000 if the Performance Criteria for
the last half of the Company's 1999 fiscal year (which shall be established by
the Board and Executive before the end of June 1999) is attained. The bonus for
fiscal year 1999 and all subsequent years shall be paid within thirty (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 the Executive dies or becomes
Disabled (as hereinafter defined) or the Executive's employment is terminated by
the Executive for Good Reason (as hereinafter defined) or by the Company without
Cause (as hereinafter defined), the Executive shall be eligible to 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.
(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 no 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 750,450 shares of common stock of the
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Company (the "Common Stock"), of which 50% shall be granted five days after the
Effective Date at a price per share equal to the fair market value of a share of
the Common Stock five days after the Effective Date, and the remaining 50% shall
be granted 35 days after the Effective Date at a price per share equal to the
fair market value of a share of Common Stock 35 days after 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. The Options shall vest in equal installments on each of the first,
second and third anniversaries after the Effective Date, provided, however, that
in the event (i) a Change in Control (as hereinafter defined) occurs after six
months following the Effective Date, (ii) the Executive's employment is
terminated by the Company without Cause (as hereinafter defined), or by the
Executive for Good Reason (as hereinafter defined, but except as a result of a
Change in Control or a Going Private Transaction (as hereinafter defined) which
occurs within six months after the Effective Date), or by reason of his death or
Disability, the Options shall become immediately and fully exercisable. In the
event that a Going Private Transaction occurs more than six months but less than
12 months after the Effective Date, one-third of the Options shall become
immediately and fully exercisable. In the event that the Executive's employment
is terminated for any reason other than a reason referenced in the second
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 third 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
preceding provisions of this Section 3.1(e) nothwithstanding, in the event that,
within six months following the Effective Date, either (x) a Change in Control
occurs, or (y) 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"), all of the Options
shall immediately terminate 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
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relating to business-related expenses as in effect from time to time during the
Term.
ARTICLE IV.
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
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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 (i) by the
Company for Cause, (ii) by the Executive other than for Good Reason, or (iii) by
the Company without Cause or by the Executive for Good Reason within six months
after the Effective Date, the 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 any entity 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. If Executive's employment is terminated by the Company without
Cause or by the Executive for Good Reason more than six months after the
Effective Date, the Executive shall be subject to the restrictions described in
the preceding sentence for a period of one year from the date of such
termination. In the event of a termination by the Company without Cause or by
the Executive for Good Reason, the restrictions described in the two preceding
sentences shall apply only if Executive is paid the severance described in
Section 5.5(b) hereof. Notwithstanding anything herein to the contrary, this
Section 4.3(b) shall not prevent the Executive from acquiring securities
representing not more than 5% of the outstanding voting securities of any
publicly held corporation.
(c) Executive agrees that, at any time and from time to time
during and for two years after the Term, he will execute any and all documents
which the Company may deem reasonably
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necessary or appropriate to effectuate the provisions of this Section 4.3.
ARTICLE V.
Termination
5.1. Termination by the Company. The Company shall have the
right to terminate the 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 failure by the 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 15 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.
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 the Executive for Good Reason. This
Agreement may be terminated by the 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 the Executive: (i) there
is a Change in Control of the Company (as hereinafter defined); (ii) the Company
(including any subsidiaries in the aggregate) 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 the Executive and such
entity; (iii) a material diminution occurs in the duties or responsibilities of
the Executive (e.g., the Executive is placed in a reporting relationship to
anyone other than the Board) and such diminution
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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) the Executive is removed from
the position of President or Chief Executive Officer; (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 to 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 termination of Executive's employment
by the Company for reasons other than for Cause or Disability or by the
Executive for Good Reason within six months after the Effective Date, the
Company shall pay Executive, in a lump sum within 30 days after such
termination, an amount equal to two times the sum of (x) the Executive's Base
Salary plus (y) the Guaranteed Bonus. If the Executive's employment is
terminated by the Company for reasons other than Cause or Disability or by the
Executive for Good Reason more than six months after the Effective Date, the
Company shall pay the Executive, in a lump sum within 30 days after such
termination, the sum of (x) the Executive's Base Salary plus (y) the Guaranteed
Bonus or, if higher, the Annual Bonus paid or payable to the Executive for the
preceding fiscal year.
(c) In the event of a termination of Executive's employment by
the Company for reasons other than Cause or Disability or by the Executive for
Good Reason, the Company shall pay all premiums required for Executive to
maintain medical continuation coverage under the provisions of the Consolidated
Omnibus Budget Reconciliation Act 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. The 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.
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5.7. Full Settlement. Except as specifically provided in this
Agreement, the 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 13d-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) the Executive's receipt of compensation and
benefits from another employer in the event that the Executive accepts new
employment
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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 the Executive or anyone else.
(b) All payments to the 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 his termination of employment.
6.2. Indemnification. In addition to all other rights the
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 the 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, the Executive and his
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount would still be payable to the Executive hereunder if he had continued to
live, all such amounts shall be paid in accordance with the terms of this
Agreement to the Executive's beneficiary, devisee, legatee or other designee, or
if there is no such designee, to the 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
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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 Xxxxxxx, 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.
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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 perform his or its obligations under this Agreement or
to effectuate the purposes hereof.
6.11. Arbitration. Except for disputes with respect to
Article IV 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: ___________________________
Name:
Title:
-------------------------------
Xxxx Xxxxxxx
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