EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is dated August 6, 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 Robert Larney (“Executive”).

WHEREAS, Executive will commence employment with the Company on August 6, 2007;

WHEREAS, effective August 13, 2007, the Company desires to employ Executive as
its Executive Vice President and Chief Financial Officer and Executive is
willing to accept such employment; and

WHEREAS, Executive and the Company desire to set forth the terms and conditions
of Executive’s employment with the Company in this Agreement.

NOW, THEREFORE, the parties hereby agree:

ARTICLE I.

Employment, Duties and Responsibilities

1.1     Employment. During the Term (as defined in Section 2.1 hereof),
Executive shall be employed as the Executive Vice President and Chief Financial
Officer of Foamex International Inc. and Foamex L.P. and shall report directly
to the Chief Executive Officer. 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 obtained the prior consent of the Board of Directors of the
Company (the “Board”), which consent shall not be unreasonably withheld.

1.2       Duties and Responsibilities. During the Term, Executive shall have
such duties, responsibilities and authorities commensurate with his position as
Chief Financial Officer and as may be assigned to Executive from time to time by
the Chief Executive Officer or the Audit Committee of the Board consistent with
Executive’s position.

 

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ARTICLE II.

Term of Employment

 

2.1

Term.

(a)       The “Initial Term” of Executive’s employment under this Agreement
shall commence on August 6, 2007 (“Effective Date”) and shall continue through
the close of business on December 31, 2009 (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 successive one-year periods 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 or any anniversary
thereof. 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.

ARTICLE III.

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 $375,000 per annum (“Base Salary”), payable in accordance with the
normal

 

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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. The Company shall pay relocation benefits as described in the
Company’s Tier 1 relocation policy. As a supplement to same, Executive will
receive a payment of $12,000 to offset certain relocation expenses and or
penalties associated with his decision to enter into this agreement.

(c)       Bonus. During the Term, Executive shall be eligible to earn bonus
awards in accordance with the incentive programs in effect for such performance
year based on a target bonus opportunity of 50% of Base Salary (“Target Bonus”).
The bonus 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. 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 annually and may in its discretion increase the target bonus opportunity
as deemed appropriate by the Board or the Compensation Committee, but may not
decrease such target bonus opportunity without Executive’s prior written
consent; provided, that, by written notice to Executive on or before the
forty-fifth day preceding the Scheduled Expiration Date of the Initial Term, the
Board or Compensation Committee may decrease the target bonus opportunity for
the next fiscal year after 2009 without Executive’s written consent (any such
decrease, together with any decrease consented to by Executive in writing, a
“Permitted Decrease”). 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

 

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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)       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 use its best efforts to cause
the Board or Compensation Committee to grant Executive options to purchase
common stock of the Company pursuant to the Foamex International Inc. 2007
Management Incentive Plan as approved by the Bankruptcy Court no later than
forty-five (45) days following the Effective Date (the “2007 Grant”). The 2007
Grant will vest no less frequently than in equal annual installments 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. The 2007 Grant
shall be granted pursuant to the form of award agreement attached hereto as
Exhibit A.

(e)       Vacation. Executive shall be entitled to a paid vacation of not less
than four (4) 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.

ARTICLE IV.

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.

 

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(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
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 (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,

 

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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 two years from the
date of such termination, which period will be reduced to one year in the event
that such termination occurs in connection with an IT Non-Renewal Notice (as
defined in Section 5.5(b)), directly or indirectly, whether as an employee,
consultant, independent contractor, partner, or joint venturer, (i) 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”); (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 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) 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.

ARTICLE V.

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

 

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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 90 consecutive days in any 365 day period or 120 non-consecutive days
within any 365 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 Executive Vice President and
Chief Financial 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
Executive Vice President and Chief Executive Officer; (v) following a Change in
Control (as defined in Section 6.1 hereof), the principal executive offices of
the Company are moved to a location more than fifty (50) miles from its location
immediately prior to the Change in Control; (vi) any decrease in Executive’s
Base Salary or Target Bonus opportunity, other than a Permitted Decrease in
Executive’s Target Bonus opportunity, or failure to use its best efforts to make
the 2007 Grant; or (vii) 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

 

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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.

 

5.5

Effect of Termination.

(a)       In the event of termination of Executive’s employment for any reason,
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”). 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 by Executive
for Good Reason or by the Company for reasons other than for Cause, death,
Disability or Change in Control where such termination by the Company is not
made pursuant to a notice of non-renewal given by the Company to Executive at
least forty-five (45) days prior to the expiration of the Initial Term (an “IT
Non-Renewal Notice”), in addition to any Accrued/Other Obligations, Executive
shall receive, subject to the effectiveness of his execution of a release and
waiver in the form attached hereto as Exhibit B:

(i)        a cash amount, payable in twelve (12) equal monthly installments
following the date of 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 (it being understood that if
Executive’s employment is so terminated after December 31, 2009 and there has
been a Permitted Decrease (other than any such decrease that Executive has
agreed to in writing prior to such decrease), the Target Bonus (as used in
Section 5.5(b) and Section 5.5(c) and Section 5.5(e) hereof) will mean the
Target Bonus in effect immediately prior to the Scheduled Expiration Date);

 

(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 Awards remaining exercisable for the
lesser of

 

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through the six (6) month anniversary of the date of termination of employment
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
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).

(c)       In the event the Company provides an IT Non-Renewal Notice (in which
event Executive’s employment shall be terminated on December 31, 2009), in
addition to any Accrued/Other Obligations, Executive shall be entitled to:

(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 through six (6) month anniversary of the date of termination of
employment 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 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:

 

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(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 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

 

(e)       In the event of termination of Executive’s employment for a Change in
Control as defined in section 6.1 of this Agreement, Company shall pay or
provide Executive 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 the sum of (i)
Executive’s Base Salary, plus (ii) Executive’s Target Bonus (it being understood
that if Executive’s employment is so terminated after December 31, 2009 and
there has been a Permitted Decrease (other than any such decrease that Executive
has agreed to in writing prior to such decrease), the Target Bonus will mean the
Target Bonus in effect immediately prior to the Scheduled Expiration Date).

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

 

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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.

ARTICLE VI.

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, and shall thereafter
remain exercisable in accordance with their original terms (including
termination in connection with a termination of Executive’s employment with the
Company). Executive shall also be entitled to the benefits and payments as set
forth on Exhibit C attached hereto. For purposes of this Agreement, including
Exhibit C 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:

(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), (B) and (C) 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

 

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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 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. For purposes of clarification, the parties acknowledge and agree that
the Company’s emergence from bankruptcy and the consummation of the transactions
contemplated by the Reorganization Plan (and all related transactions) shall not
constitute a Change in Control.

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

 

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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 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

 

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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, but shall become null
and void ab initio and without further effect if the consummation of the
Reorganization Plan does not occur. 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 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, any compensation due for services rendered hereunder, [insert title
of existing employment agreement for Christian and] the Change in Control
Agreement (but excluding the Executive’s right to receive any bonus payment
pursuant to the KERP). 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.

 

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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 Sections 4.1(b), 4.2
or 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.

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.

 

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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/ John G. Johnson, Jr.

 

Name: John G. Johnson, Jr.

 

Title:   Chief Executive Officer

 

 

 

 

 

FOAMEX L.P.

 

 

 

By:        /s/ John G. Johnson, Jr.

 

Name: John G. Johnson, Jr.

 

Title:   Chief Executive Officer

 

 

 

EXECUTIVE

 

 

 

/s/ Robert M. Larney

 

 

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