EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is dated February 12, 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 Andrew M. Thompson
(“Executive”).

WHEREAS, the Company desires to continue to employ Executive as its Executive
Vice President, Foam & Technical Products and Executive is willing to accept
such continued 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:

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, Foam & Technical
Products of Foamex International Inc. and Foamex L.P. and shall report directly
to the Chief Executive Officer or his 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 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
Executive Vice President, Foam & Technical Products and as may be assigned to
Executive from time to time by the Chief Executive Officer or his designee
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 the date and time of the consummation (“Effective Date”) of
the Reorganization Plan (as defined in Section 3.3 hereof) 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:

 

 

 

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(a)       Salary. The Company shall pay Executive a base salary during the Term
at a rate of $350,000 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.

(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 are generally paid
to other senior executive officers of the Company, but in no event later than
March 15th of the year

 

 

 

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following the end of the applicable performance period. Notwithstanding the
foregoing, Executive shall be entitled to receive an Annual Bonus for fiscal
year 2006 in accordance with the 2006 Foamex Salaried Incentive Plan and shall
be entitled to receive such other incentive compensation as the Board or the
Compensation Committee may, in its sole discretion, award. In addition to any
other compensation payable hereunder, Executive shall be entitled to any
payments due pursuant to the Key Employee Retention Plan, payable in accordance
with such plan and any bankruptcy court order regarding the same (including,
without limitation, timing, method and form of payment (collectively, the
“KERP”)).

(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.

If, after the Effective Time, the Company is eligible to file a registration
statement on Form S-8 to register the offer and sale of its securities under the
MIP with the Securities and Exchange Commission, the Company will use reasonable
best efforts to file such a registration statement on Form S-8 within ninety
(90) days of the Effective Date; provided, that, nothing herein will be
construed to limit the Company's right to deregister any class of securities
with the Securities and Exchange Commission at any time or require the Company
to file a registration statement on Form S-8 at such time as the Company has
taken any action to commence a deregistration of its securities that would
result in its ineligibility to file a registration statement on Form S-8.

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

 

 

 

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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      Waiver. Executive hereby agrees that notwithstanding anything to the
contrary set forth therein, the consummation of the transactions contemplated by
the Debtors’ Second Amended Joint Plan of Reorganization Under Chapter 11 of the
Bankruptcy Code (the “Reorganization Plan”), including the transactions
contemplated by the Rights Offering and Equity Commitment Agreement (each as
defined in the Reorganization Plan), alone or in combination with any other
event, will not constitute a “Change in Control” as defined in the Foamex
International Inc. Change in Control Protection Agreement (the “Change in
Control Agreement”) and Executive is not entitled to any payments or benefits
(including without limitation accelerated vesting of any equity awards)
thereunder prior to, on or following the Effective Date. In addition, Executive
and the Company agree that, effective as of the Effective Date, the Change in
Control Agreement will terminate with no further obligation of either party to
the other thereunder.

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.

(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.

 

 

 

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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, 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

 

 

 

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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 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

 

 

 

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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, Foam &
Technical Products 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
Chief Executive Officer or his designee; (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

 

 

 

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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 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,
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, and any payments due to Executive in
accordance with the KERP shall be paid in accordance with the terms set forth in
the KERP.

(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 or
Disability, 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, subject to the
effectiveness of his execution of a release and waiver in the form attached
hereto as Exhibit B, be entitled to:

(i)       a cash amount, payable in twenty (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 (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) hereof) will mean the Target Bonus in effect
immediately prior to the Scheduled Expiration Date);

 

 

 

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(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 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 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, subject to the
effectiveness of his execution of a release and waiver in the form attached
hereto as Exhibit B, 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;

 

(v)      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;

 

 

 

 

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(vi)     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

 

(vii)    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:

 

(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

 

 

 

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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.

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, 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

 

 

 

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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 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,

 

 

 

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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.

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

 

 

 

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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 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.

 

 

 

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(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 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 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.

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.

 

 

 

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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.

 

 

 

 

18

 

 

 

 

 

 

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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:

Executive Vice President

 

and General Counsel

 

 

FOAMEX L.P.

 

 

By:

/s/ Gregory J. Christian

 

Name:

Gregory J. Christian

 

Title:

Executive Vice President

 

and General Counsel

 

 

EXECUTIVE

 

/s/ Andrew M. Thompson

Andrew M. Thompson

 

 

 

 

19

 

 

 

 

 

 

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Exhibit A

[Form grant agreement to come]

 

 

 

 

 

 

 

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Exhibit B

 

Release

 

[img1.gif]

 

Andrew M. Thompson (“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 January ___, 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 othergood 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 permanently and
irrevocably 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

 

 

 

 

 

 

 

 

 

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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

 

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___.

 

 

_________________________________

__________________________

Andrew M. Thompson

Date

 

 

 

 

 

 

 

 

 

 

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Exhibit C

 

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 C), 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 C, all
determinations required to be made under this Exhibit C, 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 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

 

 

 

 

 

 

 

 

 

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required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to clause (f) of this Exhibit C 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 C.

(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,
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 C 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:

 

 

 

 

 

 

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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 C, 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 C, 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 C.