EXECUTION COPY

 

EMPLOYMENT AGREEMENT

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.

 

 

 

 

 

 

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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

 

2.1

Term.

(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.

 

 

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•

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

 

 

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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.

 

 

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(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.

•

Exclusivity, Etc.

 

4.1

Exclusivity.

(a)          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 hereof, Executive agrees that he will devote his full
business time, care and attention and use his reasonable best efforts to perform
his duties, responsibilities and obligations during the Term. 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.

(b)          Executive 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.

4.2          Other Business Ventures. Executive agrees that during the Term, 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 such entity.

 

4.3

Confidentiality; Non-competition.

(a)          Executive agrees that he will not, at any time during or after the
Term, other than in the ordinary course of performing his duties for the
Company, make use of or divulge to any other person, firm or corporation any of
the Company’s confidential or proprietary 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,

 

 

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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 (including information
known publicly within the relevant trade or industry); (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 a director or an employee of the Company in the performance of his
duties for the Company and its affiliates 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; provided, however, that nothing herein shall prevent Executive from
retaining (i) his papers and other materials of a personal nature, including,
without limitation, photographs, correspondence, personal diaries, calendars,
personal files and phone books, (ii) information showing his compensation or
relating to reimbursement of his business expenses, (iii) information that is
necessary for tax purposes, and (iv) copies of plans, programs, policies and
agreements relating to his employment, or termination thereof, with the Company
and its affiliates. Anything herein or elsewhere to the contrary
notwithstanding, the provision of this Section 4.3(a) shall not apply (i) when
disclosure is required by law or by any court, arbitrator, mediator or
administrative or legislative body (including any committee thereof) with
jurisdiction to order Executive to disclose or make accessible any information
or (ii) with respect to any other litigation, arbitration or mediation involving
this Agreement or any other agreement between the parties, including, without
limitation, the enforcement of such agreements.

(b)          If Executive’s employment is terminated for any reason during the
Term other than for Cause, Executive shall not for a period of (i) two years
from the date of such termination if such termination occurs prior to the first
anniversary of the Effective Date or (ii) one year from the date of such
termination if such termination occurs at any time on or after the first
anniversary of the Effective Date, directly or indirectly, whether as an
employee, consultant, independent contractor, partner, or joint venturer, (A)
perform any services for a 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 (“Competitive
Business”); (B) 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 (C) divert, or attempt to divert, any person, concern, or entity from doing
business with the Company, nor will he solicit or cause any other person or
entity to solicit any 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)

 

 

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shall not prevent Executive from acquiring securities representing not more than
1% of the outstanding voting securities of any entity.

(c)          In the event of any conflict between the provisions of this Section
4.3 and the provisions of any other Company agreement, plan, policy, program or
arrangement, whether entered into before, on or after the date of this
Agreement, the provisions of this Section 4.3 shall control, unless Executive
has expressly agreed in writing that the conflicting provision will override or
amend this Section 4.3.

•

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 relating to the performance of
Executive’s duties for the Company and its affiliates, including, without
limitation, embezzlement, fraud, or misappropriation of the Company’s property,
(iii) the conviction of, or entry of a plea of guilty or nolo contendere to, a
felony or other crime involving moral turpitude, or (iv) any material breach by
Executive of any material obligation to the Company or any of its affiliates
under Sections 4.1(b), 4.2 or 4.3, which breach is not cured (if curable) by
Executive within 60 days after written notice of such failure is delivered to
Executive by the Company. Anything herein to the contrary notwithstanding,
Executive shall not be terminated for “Cause” within the meaning of clauses (i),
(ii) or (iv) unless he receives written notice from the Company stating the
basis for such termination and there is a majority vote of all non-employee
members of the Board to terminate him for Cause. The Company’s decision under
Section 2.1 to not extend the Term of this Agreement shall be considered a
termination of Executive’s employment without Cause with such termination taking
effect on the last day of the Term.

5.2          Death. In the event Executive dies during the Term, Executive’s
employment under 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 or Executive shall have the right to terminate
Executive’s employment under this Agreement, such termination to be effective
upon the giving of notice thereof to the other party in accordance with Section
6.5 hereof. For purposes of this Agreement, the term “Disability” means
Executive is receiving long-term disability benefits under the Company’s plan(s)
or, if there is no such plan, a physical or mental condition which has prevented
Executive from performing satisfactorily his duties hereunder for a period of at
least 120 days within any 365

 

 

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day period as determined by a medical doctor mutually agreeable to Executive and
the Company. If the parties cannot agree on a medical doctor, Executive and the
Company shall each chose a medical doctor and the two medical doctors shall
chose a third medical doctor, who shall be the approved “medical doctor” for
this purpose.

5.4          Termination by Executive with or without Good Reason. Executive may
terminate his employment hereunder at any time, with or without Good Reason;
provided that any termination by Executive of his employment under this
Agreement for Good Reason shall not be effective unless Executive has provided
notice to the Company of the event giving rise to Good Reason no later than 90
days after the date the event occurs or, if later, the date Executive learns (or
should have learned) of such event. Each of the following will constitute Good
Reason for purposes of this Agreement, unless otherwise agreed to in writing by
Executive: (i) Foamex International Inc. sells, leases or otherwise transfers
all or substantially all of its assets and that of its subsidiaries (including,
without limitation, Foamex L.P.) to an entity which has not, as of the date of
such transaction, 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; (ii) a material diminution occurs in the duties,
responsibilities or authorities of Executive as Chief Executive Officer of the
Company that is not cured within 15 days after written notice of the same is
received by the Company; (iii) the failure to pay compensation required
hereunder and such failure is not cured within 15 days after written notice of
the same is received by the Company; (iv) any change in the reporting structure
so that Executive reports to someone other than the Board; (v) failure to
appoint or elect (or re-elect) Executive as a member of the Board or removal of
Executive from his position on the Board; (vi) the principal executive offices
of the Company are moved to a location more than fifty (50) miles from its
present location; (vii) any decrease in Executive’s Base Salary or Target Bonus
opportunity, or failure to use its best efforts to make the 2007 Grant; or
(viii) any material breach by the Company, or any of its affiliates, of any
material obligation to Executive under this Agreement. Notwithstanding the
above, Good Reason shall not exist unless the Executive has notified the Board
of the actions or failures to act giving rise to Good Reason, and such actions
or failures, if capable of being cured, shall not have been cured by the Company
within 60 days of the receipt of such notice, it being understood that if the
Company makes the 2007 Grant at the fair market value at the time of grant
within the 60 day cure period, Good Reason shall not exist.

 

5.5

Effect of Termination.

(a)          In the event of termination of Executive’s employment for any
reason (including a termination of Executive’s employment on or after the third
anniversary of the Effective Date pursuant to the expiration of the Term), the
Company shall pay or provide Executive (or his beneficiary or, if he has not
selected a beneficiary, his estate, in the event of his death) (i) any Base
Salary or other compensation earned but not paid to Executive prior to the
effective date of such termination, (ii) any business expenses that remain
unreimbursed as of the date of termination and (iii) any payments, benefits, or
entitlements which are vested, fully and unconditionally earned or due pursuant
to this Agreement or any Company plan, policy, program or arrangement or other
agreement (clauses (i) through (iii), “Accrued/Other Obligations”), and shall
not have any other obligations to pay or provide any amount or benefits to
Executive except

 

 

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as expressly set forth below. Except as specifically set forth herein with
respect to the equity awarded to Executive in 2007 (“2007 Equity Awards”),
Executive’s outstanding equity awards will be treated in accordance with the
terms of the applicable plans and award agreements governing such awards.

(b)          In the event of a termination of Executive’s employment during the
Term by Executive for Good Reason or by the Company for reasons other than for
Cause, death or Disability, in either case at any time prior to the first
anniversary of the Effective Date, Executive shall, subject to the effectiveness
of his execution of a release and waiver in the form attached hereto as Exhibit
A, be entitled to:

(i)           a cash amount, payable in twenty four (24) equal monthly
installments following the date of Executive’s termination of employment in
accordance with the Company’s regular payroll practices, equal to two times the
sum of (i) Executive’s Base Salary, plus (ii) Executive’s Target Bonus;

 

(ii)          payment of an Annual Bonus in cash for the year of termination,
determined by multiplying the Target Bonus by a fraction, the numerator of which
is the number of days Executive was employed during the performance year in
which the date of termination occurs and the denominator of which is 365
(“Pro-Rata Bonus”) in a lump-sum at such time as such Annual Bonus is generally
paid to other senior executives of the Company; and

 

(iii)         accelerated vesting of the portion of Executive’s 2007 Equity
Awards that would have vested during the one-year period following the date of
the termination of Executive’s employment with the Company, with any such 2007
Equity Awards that are vested stock options remaining exercisable for the lesser
of the period ending on the six (6) month anniversary of the last day of the
fiscal quarter in which Executive’s employment with the Company terminates and
the remainder of their original terms (it being understood that in the event of
any discrepancy between this provision and the terms and conditions of the MIP
and applicable grant agreement for the 2007 Equity Award, this provision shall
prevail); and

 

(iv)         continued participation for Executive and his eligible dependents
under the Company’s medical and dental plans in accordance with Section 3.1(b)
at the same cost Executive was paying as an employee during the twenty-four (24)
month period commencing on the date Executive’s employment is terminated. Upon
the expiration of such 24-month period, Executive shall be eligible to elect
medical and/or dental continuation coverage under the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).

(c)          In the event of a termination of Executive’s employment during the
Term by Executive for Good Reason or by the Company for reasons other than for
Cause, death or Disability at any time on or after the first anniversary of the
Effective Date, in addition to any Accrued/Other Obligations, Executive shall,
subject to the effectiveness of his execution of a release and waiver in the
form attached hereto as Exhibit A, be entitled to:

 

 

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(i)           a cash amount, payable in twelve (12) equal monthly installments
following Executive’s termination of employment in accordance with the Company’s
regular payroll practices, equal to the sum of (i) Executive’s Base Salary, plus
(ii) Executive’s Target Bonus;

(ii)          payment of a Pro-Rata Bonus in a lump-sum at such time as such
Annual Bonus is generally paid to other senior executives of the Company;

 

(iii)         accelerated vesting of the portion of Executive’s 2007 Equity
Awards that would have vested during the one-year period following the date of
the termination of Executive’s employment with the Company, with any such 2007
Equity Awards that are vested stock options Awards remaining exercisable for the
lesser of the period ending on the six (6) month anniversary of the last day of
the fiscal quarter in which Executive’s employment with the Company terminates
and the remainder of their original terms (it being understood that in the event
of any discrepancy between this provision and the terms and conditions of the
MIP and applicable grant agreement for the 2007 Equity Award, this provision
shall prevail); and

 

(iv)         continued participation for Executive and his eligible dependents
under the Company’s medical and dental plans in accordance with Section 3.1(b)
at the same cost Executive was paying as an employee during the twelve (12)
month period commencing on the date Executive’s employment is terminated. Upon
the expiration of such 12-month period, Executive shall be eligible to elect
medical and/or dental continuation coverage under the provisions of the COBRA.

(d)          In the event Executive’s employment is terminated during the Term
on account of death or Disability (as defined in Section 5.3 hereof), in
addition to any Accrued/Other Obligations, Executive (or his beneficiary or, if
he has not selected a beneficiary, his estate, in the event of his death) shall
be entitled to:

 

(i)           a Pro-Rata Bonus for the year of termination in a lump-sum at such
time as such Annual Bonus is generally paid to other senior executives of the
Company;

 

(ii)          continued participation for Executive (in the case of Disability)
and his eligible dependents under the Company’s medical and dental plans in
accordance with Section 3.1(b) at the same cost Executive was paying as an
employee during the twelve (12) month period commencing on the date Executive’s
employment is terminated. Upon the expiration of such 12-month period, Executive
(or his eligible dependents, as the case may be) shall be eligible to elect
medical and/or dental continuation coverage under the provisions of COBRA; and

 

(iii)         accelerated vesting of the portion of Executive’s 2007 Equity
Awards that would have vested during the one-year period following the date of
the termination of Executive’s employment with the Company, with any such 2007
Equity Awards that are vested stock options Awards remaining exercisable for the
lesser of one year following such termination and the remainder of their
original terms (it being

 

 

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understood that in the event of any discrepancy between this provision and the
terms and conditions of the MIP and applicable grant agreement for the 2007
Equity Award, this provision shall prevail).

5.6          Full Settlement; Payment Date. 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. All payments due under Section 5.5(a)(iii)
shall be paid in accordance with the applicable plan, policy, program,
arrangement or other agreement, and for any termination covered by Section
5.5(b) hereof which occurs during the period from the occurrence of a Change in
Control (as defined in Section 6.1) through the second anniversary of such
Change in Control (as defined in Section 6.1), 50% of the severance in Section
5.5(b)(i) shall be paid to Executive in a lump-sum no later than 30 days
following the date of Executive’s termination of employment, and the remainder
shall be paid in equal monthly installments during the twelve month period
following such termination of employment, as applicable.

 

5.7

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 or any of its subsidiaries or affiliates 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.

•

Miscellaneous

6.1          Change in Control Protections. Upon the occurrence of a Change in
Control (as defined below), Executive’s outstanding equity and long-term
incentive awards shall immediately vest (and not be subject to forfeiture for
any reason) in a manner to enable Executive to fully participate in the Change
in Control transaction and, to the extent any vested stock options granted on or
after the Effective Date survive such Change in Control, shall thereafter remain
exercisable in accordance with their original terms (including termination in
connection with a termination of Executive’s employment with the Company),
except that all such stock options will remain vested. Executive shall also be
entitled to the benefits and payments as set forth on Exhibit B attached hereto.
For purposes of this Agreement, including Exhibit B attached hereto, “Change in
Control” shall mean the occurrence, after the consummation of the transactions
contemplated by the Reorganization Plan, of any of the following events:

 

 

11

 

 

 

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(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” (as
defined below) 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, that beneficial ownership by any of D. E.
Shaw Laminar Portfolios, L.L.C., Goldman, Sachs & Co., Par IV Master Fund, Ltd,
Sigma Capital Associates, LLC, Sunrise Partners Limited Partnership, or any of
their respective affiliates shall not be taken into account in the numerator for
purposes of determining whether the limit set forth above has been exceeded and,
provided further that for purposes of this clause (i) 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) or (B) of clause (iii) of this Section 6.1;

(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;

(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 (as defined below), respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Transaction beneficially own, directly or
indirectly, 50% or more 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 from 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 proportion 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; and (B) 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 at the time of the execution of the

 

 

12

 

 

 

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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 a complete
liquidation or dissolution of the Company.

 

For purposes of this Section 6.1, “beneficial ownership” or “beneficial owner”
shall have the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial ownership of any
Person, such Person shall be deemed to have beneficial ownership of all
securities that such Person has the right to acquire by conversion or exercise
of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition; provided,
however, that such Person shall not be deemed to have beneficial ownership of
securities subject to a stock purchase agreement, a merger agreement, or similar
agreement, until the consummation of the transaction contemplated by such
agreement.

6.2          No Mitigation. Executive shall not be required to mitigate damages
resulting from his termination of employment.

6.3          Indemnification/D&O Liability Insurance. The Company agrees before,
during and after the Term to indemnify and hold harmless Executive (and advance
him expenses) to the fullest extent permitted by the Company’s or any
affiliates’ articles of incorporation and/or by-laws, which for Foamex
International Inc. shall be the articles and by-laws as in effect as of the
Effective Date (unless such documents are amended in a manner favorable to
Executive, in which case Executive shall be afforded the benefits of such
amendment), or if greater, in accordance with applicable law for actions or
inactions of Executive as an officer, director, employee or agent of the Company
or any affiliate or as a fiduciary of any benefit plan of any of the foregoing
or as otherwise set forth in the applicable document. The Company also agrees to
provide Executive with directors’ and officers’ liability insurance coverage
both during and, with regard to matters occurring during, employment or while
serving as a director of the Company or any affiliate, which coverage will be at
a level at least equal to the level being maintained at such time for the then
current officers and directors and shall continue until such time as suits can
no longer be brought against Executive as a matter of law.

 

6.4

Benefit of Agreement; Assignment; Beneficiary.

 

(i)         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.

(ii)       No rights or obligations of Executive hereunder may be assigned or
transferred by Executive, without the prior written consent of the Company,
except to the

 

 

13

 

 

 

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extent permitted under any applicable plan, policy, program, arrangement of, or
other agreement with, the Company or its affiliates or by will or operation of
law. No rights or obligations of Foamex International Inc. or Foamex L.P. under
this Agreement may be assigned by either entity, without the prior written
consent of Executive, except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which Foamex International
Inc. is not the continuing entity or a sale or liquidation or other disposition
of all or substantially all of the assets of Foamex International Inc., provided
that the assignee or transferee is the successor to all or substantially all of
the assets of Foamex International Inc. and assumes the liabilities, obligations
and duties of Foamex International Inc. and Foamex L.P. (and to the extent
applicable their respective subsidiaries and affiliates) under this Agreement.
For the avoidance of doubt, “Company” shall include any successor entity to
Foamex International Inc.; provided, however, upon any Change in Control, if
such successor, transferee or assignee conducts businesses which were not
conducted by the Company immediately prior to such transaction (“Other
Businesses”), references to the Company and its affiliates or subsidiaries in
Article IV of this Agreement shall not include such Other Businesses nor shall
any reference to employees, agents, customers or suppliers include a reference
to an employee, agent, customer or supplier of such successor entity unless such
employee, agent, customer or supplier was also an employee, agent, customer or
supplier of the Company immediately prior to such transaction. Any action taken
by Foamex International Inc. under this Agreement shall be deemed to be an
action by the Company.

(iii)       If Executive should die while any amount, benefit or entitlement
would still be payable (or due) to Executive hereunder if he had continued to
live, all such amounts, benefits and entitlements shall be paid or provided 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.

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
registered or certified mail, postage prepaid, with return receipt requested, or
by a nationally recognized overnight courier addressed: (a) in the case of the
Company to Foamex International Inc., Attention: General Counsel at the address
of the Company’s headquarters at the time such notice is delivered, 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
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 (which in the case of
registered or certified mail or overnight courier, shall be the date
acknowledgement of delivery is obtained by such service). Any notice given to
Foamex International Inc. by Executive shall be deemed to be a notice to the
Company for purposes of this Agreement.

6.6          Entire Agreement; Amendment. This Agreement shall be effective and
binding on the parties as of the date first written above. Except as noted in
this Agreement, this Agreement contains the entire agreement of the parties
hereto with respect to the subject matter hereof, including, without limitation,
the terms and conditions of Executive’s employment during

 

 

14

 

 

 

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the Term, and supersedes any and all prior agreements and understandings,
whether written or oral, between the parties hereto with respect to such subject
matter, including, without limitation, the term sheet dated March 29, 2007. This
Agreement may not be changed or modified except by an instrument in writing
signed by both of the parties hereto, specifically referencing the provision
being so changed or modified.

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
Pennsylvania 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 Section 4.1(b), 4.2
or Section 4.3 hereof, any dispute between the parties hereto respecting the
meaning and intent of this Agreement or any of its terms and provisions (each, a
“Covered Claim”) shall be submitted to arbitration in Philadelphia,
Pennsylvania, 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. Each party will be responsible for his or its own legal fees and
expenses in connection with any Covered Claim. Judgment upon any such
arbitration award may be entered in any court of competent jurisdiction.

6.12       Section 409A. The parties agree that if any payment or the provision
of any amount, benefit or entitlement hereunder at the time specified in this
Agreement would subject Executive to any additional tax or interest or penalties
under Section 409A of the Internal Revenue Code of 1986, as amended and its
implementing regulations or guidance (“Section 409A”), the payment or provision
of such amount, benefit or entitlement shall be postponed to the earliest
commencement date on which the payment or the provision of such amount, benefit
or entitlement could be made without incurring such additional tax, interest or
penalties (including paying any severance that is delayed in a lump sum upon the
earliest possible payment date which is consistent with Section 409A). In
addition, to the extent that any regulations or guidance issued under Section
409A (after application of the previous provision of this paragraph) would
result in Executive being subject to the payment of interest, penalties or any
additional tax under Section 409A, the Company and Executive agree, to the
extent reasonably possible, to amend this Agreement in order to avoid the
imposition of any such interest, penalties or additional tax under Section 409A,
which amendment shall be reasonably determined in good faith by the Company and
Executive.

 

 

15

 

 

 

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6.13       Survivorship. The respective rights and obligations of the parties
hereunder shall survive any expiration or termination of the Term of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.

6.14       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.

6.15       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. Signatures delivered by
facsimile shall be effective for all purposes.

 

 

 

16

 

 

 

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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/ Gregory J. Christian

 

Name:

Gregory J. Christian

 

Title:

President

 

 

By:

/s/ Eugene I. Davis

 

Name:

Eugene I. Davis

 

Title:

Non-Executive Chairman of the Board

 

 

FOAMEX L.P.

 

 

By:

/s/ Gregory J. Christian

 

Name:

Gregory J. Christian

 

Title:

President

 

 

By:

/s/ Eugene I. Davis

 

Name:

Eugene I. Davis

 

Title:

Non-Executive Chairman of the Board

 

 

EXECUTIVE

 

/s/ John Johnson

John Johnson

 

 

 

 

17

 

 

 

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Exhibit A

 

Release

 

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John Johnson (“Executive”) has executed this release (“Release”) as of the date
set forth below.

 

WHEREAS, Executive’s employment has been terminated without Cause or for Good
Reason pursuant to an employment agreement among Executive and Foamex
International, Inc. and Foamex, L.P. (together with their subsidiaries,
successors and assigns, “Foamex”) dated as of April ___, 2007 (“Employment
Agreement”).

 

WHEREAS, Executive is entitled to certain payments and benefits under the
Employment Agreement subject to his execution and delivery of this Release to
Foamex.

 

 

THEREFORE, Executive agrees as follows:

 

 

1.

Release of Claims. In consideration for the severance payments by Foamex as set
forth in the Employment Agreement and other good and valuable consideration set
forth herein, Executive hereby releases Foamex, its shareholders, directors,
officers, employees, agents, attorneys, affiliates, parents, subsidiaries,
predecessors, successors, assigns, and all persons acting by, through, under or
in concert with any of them (but with respect to any entity, individual, agent,
attorney or their affiliates, including any one acting by, through, under or in
concert with any of them, only in its or his official capacity relating to
Foamex and not in its or his individual capacity unrelated to Foamex), from any
and all charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses, and from any claims of any nature
whatsoever, except for vested pension benefits under the Employment Retirement
Income Security Act ("ERISA"), known or unknown, which Executive now has, claims
to have, own, hold or which Executive at any time heretofore had, held, or
claims to have, including without limitation, claims for: wrongful discharge;
breach of covenant of good faith and fair dealing; intentional or negligent
infliction of emotional distress; breach of contract or implied contract;
negligence; misrepresentation; fraud; detrimental reliance; promissory estoppel;
defamation; invasion of privacy; sexual harassment; breach of laws governing
safety in the workplace; discrimination on the basis of sex, race, color,
religion, age, national origin, status as a handicapped of disabled person or
status of a non-citizen; any and

 

 

 

 

 

 

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all claims under the Age Discrimination in Employment Act ("ADEA"); any and all
claims under Title VII of the Civil Rights Act of 1964; any and all claims under
the Americans with Disabilities Act; any and all claims under state or local
laws which prohibit improper discrimination; and any and all claims for benefits
under the ERISA, except for all claims for vested pension benefits under ERISA.
Notwithstanding the preceding sentence or any other provision of this Agreement,
this Release is not intended to interfere with Executive’s right to file a
charge with the Equal Employment Opportunity Commission (the “EEOC”) in
connection with any claim he believes he may have against Foamex. However, by
executing this Release, Executive hereby waives the right to recover in any
proceeding Executive may bring before the EEOC or any state human rights
commission or in any proceeding brought by the EEOC or any state human rights
commission on Executive’s behalf. Notwithstanding the foregoing, Executive is
not releasing any claims hereunder with respect to (1) Executive’s right to
receive the Accrued Obligations, (2) the Executive’s rights under Articles V and
VI of the Employment Agreement, (3) Executive’s right to be indemnified and
advanced expenses pursuant to any corporate document of Foamex or applicable law
or Executive’s right to be covered under any applicable directors’ and officers’
liability insurance policies, (4) any rights that Executive has with respect to
any equity awards other than the 2007 Equity Awards (as described in Section
5.5(a) of the Employment Agreement), (5) any rights as a shareholder of Foamex
or (6) any rights which arise after the date of this Release with respect to
matters that occurred after such date.

 

 

2.

No Right to Re-employment. Executive hereby agrees and recognizes that his
employment relationship with Foamex or its affiliates is being severed and that
Foamex has no obligation, contractual or otherwise, to rehire, re-employ, recall
or to hire him in the future, or return him to active status.

 

 

3.

Additional Covenants and Acknowledgments. Executive further understands and
agrees:

 

a)      that by signing this Release he is voluntarily making a full and final
compromise and settlement of any and all claims, disputed or otherwise, arising
out of his employment relationship with Foamex including claims under the Age
Discrimination in Employment Act (ADEA) which he may have, and that this
Agreement will preclude any further or additional claims arising out of said
relationship, but will not preclude any claims which might arise after the
Agreement is executed; provided, that this Release is not intended to interfere
with Executive’s right to challenge that his waiver of any and all ADEA claims
pursuant to this Agreement is a knowing and voluntary waiver, notwithstanding
Executive’s specific representation that he has executed this Release knowingly
and voluntarily;

 

b)      that, in accordance with the federal law, Executive has twenty-one (21)
calendar days from the date this Agreement is received by him to consider and
accept the Agreement by signing and returning it to Foamex, and if so accepted,
another seven (7) calendar days to revoke that acceptance should he change his
mind; and

 

 

 

2

 

 

 

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c)      that Executive has the right to consult any attorney prior to signing
this Agreement and has been encouraged to do so by Foamex.

 

d)      that Executive acknowledges that this Agreement is contractual and not a
mere recital; and agrees that this Agreement shall be given full force and
effect and that it shall be binding upon Executive’s heirs, executors,
successors, administrators and assigns.

 

4.            Period for Acceptance of Agreement. Executive shall have no less
than twenty-one (21) calendar days from the date his employment is terminated
under the Employment Agreement to consider this Release and he should execute
and deliver this Release to Foamex in accordance with the notice provisions of
the Employment Agreement.

 

5.            Applicable Law. This Release shall be construed and enforced under
and in accordance with the laws of the Commonwealth of Pennsylvania.

 

Executive represents and certifies that he has carefully read and fully
understands all of the provisions of this Release and that he is signing this
Release voluntarily, of his own free will and without duress; and that Foamex,
its agents, representatives or attorneys have made no representations concerning
the terms or effects of this Agreement other than contained herein.

 

IN WITNESS THEREOF, Executive has duly executed this Agreement on this day of
_________, 20___.

 

 

_________________________________

__________________________

John Johnson

Date

 

 

 

3

 

 

 

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Exhibit B

 

280G Gross-Up Provision

 

(a)          If it is determined (as hereafter provided) that any payment (other
than the Gross-Up Payment provided for in this Exhibit B), benefit, entitlement
or distribution by the Company or its affiliates (or by any party effecting a
Change in Control) 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 any stock option, stock
appreciation right or similar right, 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
Internal Revenue Code of 1986, as amended from time to time, 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”), 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 or other taxes imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

(b)          Subject to the provisions of clause (f) of this Exhibit B, all
determinations required to be made under this Exhibit B, 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 as promptly as practicable 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. In the event the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint another nationally recognized
firm of certified public accountants to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). 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 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 he has substantial authority not to report any
Excise Tax on his 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 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
“Underpayment”), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its

 

 

 

 

 

 

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remedies pursuant to clause (f) of this Exhibit B 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.

(c)          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 clause
(b) of this Exhibit B.

(d)          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
not withheld and paid by the Company, and at the request of the Company, provide
to the Company true and correct copies (with any amendments) of his 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; provided the Accounting Firm has provided to Executive
written documentation supporting such reduction prior to Executive’s filing of
such tax returns.

(e)          The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by clauses (b)
and (d) of this Exhibit B 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
his payment thereof.

(f)           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 he 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 notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive will:

 

 

2

 

 

 

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(i)

provide the Company with any written records or documents in his possession
relating to such claim reasonably requested by the Company;

 

(ii)

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;

 

(iii)

cooperate with the Company in good faith in order effectively to contest such
claim; and

 

(iv)

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 clause
(f), the Company will control all proceedings taken in connection with the
contest of any claim contemplated by this clause (f) 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 his own cost and expense) and may, at
its option, either direct Executive to pay the tax claimed and sue 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 sue 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.

(g)          If, after the receipt by Executive of an amount advanced by the
Company pursuant to clause (f) of this Exhibit B, Executive receives any refund
with respect to such claim, Executive will (subject to the Company's complying
with the requirements of clause (f) hereof) promptly pay to the Company the
amount of such refund (together with 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 clause (f) of this Exhibit B, 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

 

 

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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 Exhibit B.

 

 

 

 

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