This Employment Agreement (“Agreement”) is dated April 16, 2007, and is entered into between Foamex International Inc., a Delaware corporation and its primary operating subsidiary Foamex L.P. (together with their subsidiaries, successors and assigns, collectively the “Company”), and John Johnson (“Executive”).
WHEREAS, the Company desires to employ Executive as its Chief Executive Officer and Executive desires to accept such employment; and
WHEREAS, Executive and the Company desire to set forth the terms and conditions of Executive’s continued employment with the Company in this Agreement.
NOW, THEREFORE, the parties hereby agree:
Employment, Duties and Responsibilities
1.1 Employment. During the Term (as defined in Section 2.1 hereof), Executive shall be employed as the Chief Executive Officer of Foamex International Inc. and Foamex L.P. and shall report directly to the Board of Directors of Foamex International Inc. (the “Board”), or its designee. Executive agrees to devote his full business time and efforts to promote the interests of the Company. Nothing herein, however, shall preclude Executive from devoting a portion of his time and efforts (and retaining remuneration, if any, for such services) to (i) his personal and family affairs and investments, (ii) charitable, educational, civic and political activities, or (iii) service on the boards of other for-profit and not-for-profit entities, in each case so long as such activities do not materially interfere with the performance of his duties hereunder; and further provided that with respect to serving on the board of any for-profit entity, Executive shall have first obtained the prior consent of the Board. Notwithstanding the foregoing, the Board has approved Executive’s service on the board of directors of GenTek Inc. (the “GenTek Board”). However, if the Board determines that Executive’s continued service on the GenTek Board materially interferes with the performance of his duties hereunder, and Executive is required to resign (or reduce his involvement) on the GenTek Board or in any activities permitted pursuant to clauses (ii), (iii) and (iv) hereunder because such activities materially interfere with the performance of his duties hereunder, Executive shall so resign (or reduce his involvement) as soon as he can practicably do so without violating any fiduciary duty he may have to any other entity. For purposes of clarification, the parties acknowledge and agree that the Company has not requested, required or promoted Executive’s service on the GenTek Board.
1.2 Board Membership. During the Term, the Company shall also cause Executive to be nominated for election or appointment to the Board and, if so elected or appointed, Executive agrees to serve in such capacity.
1.3 Duties and Responsibilities. During the Term, Executive shall have such duties, responsibilities and authorities commensurate with his position as Chief Executive Officer and as may be assigned to Executive from time to time by the Board consistent with Executive’s position. In addition, the parties intend that Executive will actively assist the Company in developing a succession plan for the replacement of Executive as Chief Executive Officer by a successor chief executive officer at the expiration of the Term. The Company will consider Executive for nomination or appointment to the position of non-executive chairman of the Board at an appropriate time.
1.4 Principal Work Location. During the Term, Executive shall perform his duties at the principal executive officers of the Company in Linwood, Pennsylvania, except for any required business travel in connection with the performance of his duties hereunder.
Term of Employment
(a) The “Initial Term” of Executive’s employment under this Agreement shall commence on April 16, 2007 (the “Effective Date”) and shall continue through the close of business on the second anniversary of the Effective Date (the “Scheduled Expiration Date”), unless sooner terminated in accordance with Section 5 below. Executive’s employment hereunder shall be automatically extended on the terms and conditions set forth herein for an additional one-year period commencing on the Scheduled Expiration Date, unless either party hereto gives written notice to the other party of its or his election not to so extend Executive’s employment hereunder at least 45 days prior to the Scheduled Expiration Date. The period during which Executive is employed pursuant to this Agreement (including the Initial Term and any extension thereof in accordance with the preceding sentence) shall be referred to as the “Term.”
(b) Executive represents and warrants to the Company that as of the Effective Date (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 written 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 written agreements by which he is currently bound which would prevent him from performing his duties hereunder.
(c) Foamex International Inc. and Foamex L.P. each represent and warrant to Executive that (i) the execution, delivery and performance of this Agreement by it has been fully and validly authorized by all necessary corporate action, (ii) the officer signing this Agreement on its behalf is duly authorized to do so, and (iii) the execution, delivery and performance of this Agreement does not violate any applicable law, regulation, order, judgment or decree or any agreement, plan or corporate governance document to which it is a party or by which it is bound.
Compensation and Expenses
3.1 Salary, Bonuses and Benefits. During the Term, Executive shall be entitled to the following:
(a) Salary. The Company shall pay Executive a base salary during the Term at a rate of $650,000 per annum (“Base Salary”), payable in accordance with the normal payment procedures of the Company (but in no event less frequently than semi-monthly) and subject to such withholdings and other normal employee deductions as may be required by applicable law. The Board or a committee thereof shall review the Base Salary annually for increase (but not decrease), and may in its discretion increase the Base Salary or retain the then-current Base Salary following any such review. For purposes of this Agreement, after any increase to the Base Salary, the term “Base Salary” shall mean such increased amount.
(b) Benefits. Executive shall participate during the Term in such 401(k), pension, supplemental executive retirement plan, life insurance, health, disability and major medical insurance plans, and in such other senior executive officer benefit and perquisite plans, programs or policies, as may be maintained from time to time by the Company or its affiliates during the Term, in each case on a basis no less favorable to Executive than the basis generally provided to other similarly-situated senior executive officers of the Company and subject to the terms and provisions of such plans, programs or policies. During the Term, the Company shall pay Executive a car allowance of $1,200 per month, payable in accordance with the Company’s practices for other senior executive officers of the Company. Subject to confirmation by legal counsel to the Company that it is permissible under the terms of the Company’s 401(k) plan and will not cause any qualification issues for such plan, the Company will credit Executive with two (2) additional years of service under such plan, in respect of Executive’s prior service with the Company.
(c) Bonus. During the Term, Executive shall be eligible to earn bonus awards in accordance with the incentive programs in effect for senior executives of the Company for such performance year based on a target bonus opportunity of 80% of Base Salary (“Target Bonus”). During each year of the Term, Executive shall propose performance targets and criteria to be used in determining his bonus to the Board or Compensation Committee for their consideration in determining the applicable performance criteria for such fiscal year. The bonus payable to Executive for each year (“Annual Bonus”) 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 established by the Board or the Compensation Committee of the Board (the “Compensation Committee”) and communicated to Executive for such fiscal year prior to the end of the first quarter of such fiscal year. If the performance criteria established for the relevant year are met, Executive shall be paid an Annual Bonus equal to no less than the Target Bonus. The Annual Bonus shall be awarded pursuant to the Company’s annual bonus plan for the calendar year in question (the “Bonus Plan”) and except as otherwise provided for herein, shall be subject to the terms and conditions of the Bonus Plan. The Board or the
Compensation Committee will review the target bonus opportunity as a percentage of Base Salary (the “Opportunity Percentage”) annually and may in its discretion increase the Opportunity Percentage as deemed appropriate by the Board or the Compensation Committee, but may not decrease such Opportunity Percentage without Executive’s prior written consent. For purposes of this Agreement, after any permitted adjustment hereunder, “Target Bonus” shall mean such adjusted amount. Any Annual Bonus shall be paid in cash and at the same time as bonuses are generally paid to other senior executive officers of the Company, but in no event later than March 15th of the year following the end of the applicable performance period.
(d) During the Term, while Executive is serving as Chief Executive Officer of the Company, from time to time, at the discretion of the Board or the Compensation Committee, Executive will be entitled to participate in the Company’s equity plans and programs for senior executive officers of the Company on a basis that is consistent with the basis upon which any other similarly-situated senior executive officer participates. The Company will cause the Board or Compensation Committee to grant Executive an equity incentive award with an aggregate value of $1,000,000, 50% of which will be comprised of options to purchase common stock of the Company and 50% of which will be comprised of shares of restricted common stock of the Company, pursuant to the Foamex International Inc. 2007 Management Incentive Plan (the “MIP”) within thirty (30) days following the Effective Date (the “2007 Grant”). For purposes of determining the aggregate value of the 2007 Grant, the value of the portion of the grant which will be comprised of options will be determined based on the Black-Scholes value of such options, and the value of the portion of the grant which will be comprised of shares of restricted common stock will be determined based on the average fair market value of shares of common stock of the Company over the thirty (30) trading days preceding the date of grant, with the daily fair market value of a share of common stock over this period determined in accordance with the methodology set forth in the MIP. All options that form part of the 2007 Grant will be issued with an exercise price equal to the fair market value of the underlying common stock of the Company on the date of grant. The 2007 Grant will vest no less frequently than in equal annual installments of 25% each over the four years following the Effective Date, commencing on the first anniversary of the Effective Date, it being understood that in the event of any discrepancy between the vesting schedule set forth herein and the terms and conditions of the MIP and applicable grant agreement for the 2007 Equity Award, this vesting schedule shall prevail. Except as set forth herein or in Articles V or VI of this Agreement, all terms and conditions of the 2007 Grant shall be as set forth in the MIP and the applicable award agreement for the 2007 Grant. In the event the Executive becomes non-executive chairman of the Board, the 2007 Grant will continue to vest while Executive serves as non-executive chairman.
If, after the Effective Time, the Company is eligible to file a registration statement on Form S-8 to register the offer and sale of its securities under the MIP with the Securities and Exchange Commission, the Company will use reasonable best efforts to file such a registration statement on Form S-8 within ninety (90) days of the Effective Date; provided, that, nothing herein will be construed to limit the Company's right to deregister any class of securities with the Securities and Exchange Commission at any time or require the Company to file a registration statement on Form S-8 at such time as the Company has taken any action to commence a deregistration of its securities that would result in its ineligibility to file a registration statement on Form S-8.
(e) Vacation. Executive shall be entitled to a paid vacation of not less than five (5) weeks per year during the Term, in accordance with Company policy (but not necessarily consecutive vacation weeks) for senior executive officers during the Term.
3.2 Expenses. The Company will promptly 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.
3.3 Reimbursement of Legal Fees. The Company will promptly reimburse Executive for his reasonable legal fees and related costs incurred in connection with the negotiation and preparation of this Agreement, up to $10,000.