Employment Agreement - Thomas E. Chorman

 

 

                                                                 EXECUTION COPY

 

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT

 

     This  Amended and  Restated  Employment  Agreement  ("Agreement")  is dated

January 27,  2004,  and is entered  into between  Foamex  International  Inc., a

Delaware   corporation  and  its  primary   operating   subsidiary  Foamex  L.P.

(collectively the "Company"), and Thomas E. Chorman ("Executive").

 

     WHEREAS, the Company and Executive executed an employment agreement,  dated

August 20,  2002 (the "Prior  Agreement"),  governing  the terms of  Executive's

employment with the Company; and

 

     WHEREAS,  Executive  and the Company  desire to amend and restate the Prior

Agreement and that Executive's  employment with the Company  continues under the

terms and conditions set forth herein.

 

     NOW, THEREFORE, the parties hereby agree:

 

                                   ARTICLE I

 

                     Employment, Duties and Responsibilities

 

     1.1  Employment.  Executive  shall  be  employed  as  President  and  Chief

Executive  Officer of the Company.  Executive  hereby  accepts such  employment.

Executive  agrees to devote his full  business  time and  efforts to promote the

interests of the Company;  provided,  however,  the foregoing  shall not prevent

Executive  from  devoting  a portion  of his time and  efforts  to his  personal

affairs or serving on the boards of other for-profit and not-for-profit entities

so long as such  activities do not materially  interfere with the performance of

his duties  hereunder;  and 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").  Executive shall perform

his  duties at the  principal  executive  offices  of the  Company  in  Linwood,

Pennsylvania, except for required travel on the Company's business.

 

     1.2  Duties and  Responsibilities.  Executive  shall  have such  duties and

responsibilities  as are  consistent  with his  positions as President and Chief

Executive Officer,  and as may be assigned to Executive from time to time by the

Company's Board.

 

                                   ARTICLE II

 

                               Term of Employment

 

     2.1 Term.  (a) The term of this  Agreement  (the "Term") shall  commence on

January __, 2003 (the  "Effective  Date") and shall have an initial  term of two

years;  provided,  however,  that on each anniversary of the Effective Date, the

Term shall be  automatically  extended for one  additional  year,  unless either

party hereto gives

 

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written  notice of its election not to so extend the Term at least 30 days prior

to the applicable anniversary date.

 

          (b) Executive  represents and warrants to the Company that (i) neither

the execution and delivery of this  Agreement nor the  performance of his duties

hereunder  violates or will  violate the  provisions  of any other  agreement to

which he is a party or by which he is bound;  and (ii) except for obligations to

maintain  confidentiality of certain information  relating to previous employers

which  will not  unreasonably  interfere  with  the  performance  of his  duties

hereunder,  there are no agreements by which he is currently  bound  relating to

employment or which contain any post-employment restrictions whatsoever.

 

                                  ARTICLE III

 

                            Compensation and Expenses

 

     3.1 Salary, Bonuses and Benefits. As compensation and consideration for the

performance  by Executive of his  obligations  under this  Agreement,  Executive

shall be entitled to the following (subject,  in each case, to the provisions of

ARTICLE V hereof):

 

          (a) Salary.  The Company  shall pay Executive a base salary during the

Term ("Base Salary"),  payable in accordance with the normal payment  procedures

of the  Company  and  subject to such  withholdings  and other  normal  employee

deductions  as may be  required  by law,  at the rate of at least  $700,000  per

annum. The Base Salary will be reviewed  annually by the Compensation  Committee

of the Board.

 

          (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 plans and programs,  as may be maintained  from time to time by

the  Company  during  the Term,  in each case to the  extent  and in the  manner

available to other senior  executive  officers of the Company and subject to the

terms and provisions of such plans or programs. In addition, the Executive shall

be entitled to a vehicle  reimbursement payment of not to exceed $1500 per month

during the Term.

 

          (c) Bonus. (i) During the Term,  Executive shall be eligible to earn a

fiscal year target bonus award of 100% of Base Salary  ("Annual  Bonus"),  which

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  communicated to Executive for such fiscal year. The Annual

Bonus shall be awarded pursuant the Foamex Salaried  Incentive Plan (the "SIP"),

and, except as otherwise provided for herein,  shall be subject to the terms and

conditions  of the SIP. For each Annual Bonus  received by Executive  during the

Term,  Executive  shall be required to use 20% of the net after-tax  proceeds of

each Annual Bonus to purchase  shares of Company  common stock within the 90-day

period of Executive's receipt of each Annual Bonus;  provided,  however that the

Compensation  Committee may, in its sole discretion,  extend

 

 

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such 90-day  period.  The ninety day period will be extended  automatically  for

each day the Executive is prohibited  from purchasing  Foamex  securities by the

Company's   Securities   Trading  Policy  or  by  applicable   securities  laws.

Notwithstanding the forgoing,  Executive shall be entitled to receive such other

incentive  compensation as the  Compensation  Committee of the Board may, in its

sole discretion, award.

 

               (ii) In the event Executive's employment is terminated on account

of death or Disability (as defined in Section 5.3)  Executive  shall receive and

shall be awarded a pro-rata  portion of the Annual Bonus otherwise  payable with

respect to the fiscal year in which such event occurs.

 

          (d)  Vacation.  Executive  shall be entitled to a paid vacation of not

less than five (5) weeks per year,  in accordance  with Company  policy (but not

necessarily consecutive vacation weeks) for senior executive officers during the

Term.

 

          (e) Options.  From time to time, at the discretion of the Compensation

Committee  of the Board and in  accordance  with the  Company's  existing  stock

option plan the Executive will be eligible to participate in the Company's stock

option program or other equity compensation programs which may be implemented.

 

3.2 Expenses. The Company will reimburse Executive for reasonable

business-related expenses incurred by him in connection with the performance of

his duties hereunder during the Term, subject, however, to the Company's

policies relating to business-related expenses as in effect from time to time

during the Term.

 

                                   ARTICLE IV

 

                                Exclusivity, Etc.

 

     4.1 Exclusivity.  Executive agrees to perform his duties,  responsibilities

and obligations hereunder efficiently and to the best of his ability.  Except as

set forth in  Section  1.1,  Executive  agrees  that he will  devote  his entire

working   time,   care  and   attention   and  best   efforts  to  such  duties,

responsibilities and obligations throughout the Term. Executive also agrees that

during the Term he will not engage in any other business activities, pursued for

gain,  profit  or  other  pecuniary  advantage,  that are  competitive  with the

activities  of the Company,  except as permitted in Section 4.2 and Section 1.1.

Executive  agrees that all of his activities as an employee of the Company shall

be in  substantial  conformity  with all  policies,  rules and  regulations  and

directions of the Company not inconsistent with this Agreement.

 

     4.2  Other  Business  Ventures.  Executive  agrees  that,  so long as he is

employed  by  the  Company,  he  will  not  own,  directly  or  indirectly,  any

controlling or substantial  stock or other  beneficial  interest in any business

enterprise which is engaged in, or competitive  with, any business engaged in by

the Company.  Notwithstanding  the  foregoing,  Executive  may own,  directly or

indirectly,  up to 1% of the outstanding  capital stock of any business having a

class of capital stock which is traded on any national  stock exchange or in the

over-the-counter market.

 

 

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     4.3  Confidentiality;  Non-competition.  (a) Executive  agrees that he will

not, at any time  during or after the Term,  make use of or divulge to any other

person,  firm or corporation any trade or business  secret,  process,  method or

means, or any other confidential information concerning the business or policies

of the Company, which he may have learned in connection with his employment. For

purposes of this  Agreement,  a "trade or business  secret,  process,  method or

means,  or any other  confidential  information"  shall mean and include written

information  reasonably  treated  as  confidential  or as a trade  secret by the

Company.  Executive's  obligation  under this Section 4.3 (a) shall not apply to

any  information  which (i) is known  publicly;  (ii) is in the public domain or

hereafter  enters the public  domain  without the fault of  Executive;  (iii) is

known to Executive prior to his receipt of such information from the Company, as

evidenced by written  records of  Executive  or (iv) is  hereafter  disclosed to

Executive by a third party not under an obligation of confidence to the Company.

Executive  agrees not to remove from the premises of the  Company,  except as an

employee of the  Company in pursuit of the  business of the Company or except as

specifically  permitted in writing by the Company,  any document or other object

containing or reflecting any such confidential information. Executive recognizes

that all such  documents  and  objects,  whether  developed by him or by someone

else, will be the sole exclusive  property of the Company.  Upon  termination of

his employment  hereunder,  Executive shall forthwith deliver to the Company all

such  confidential  information,  including  without  limitation  all  lists  of

customers, correspondence, accounts, records and any other documents or property

made or held by him or under his control in relation to the  business or affairs

of the  Company,  and no copy of any  such  confidential  information  shall  be

retained by him.

 

          (b) If Executive's  employment is terminated for any reason other than

for Cause,  Executive  shall not for a period of two years from the date of such

termination,  directly  or  indirectly,  whether  as  an  employee,  consultant,

independent contractor, partner, or joint venturer, (i) perform any services for

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;  (ii) solicit or induce, or in any manner

attempt  to  solicit or  induce,  any  person  employed  by, or as agent of, the

Company to terminate such person's contract of employment or agency, as the case

may be,  with the  Company or (iii)  divert,  or attempt to divert,  any person,

concern, or entity from doing business with the Company,  nor will he attempt to

induce any such person,  concern or entity to cease being a customer or supplier

of the Company.  Notwithstanding  anything herein to the contrary,  this Section

4.3(b) shall not prevent  Executive from acquiring  securities  representing not

more  than  5% of  the  outstanding  voting  securities  of  any  publicly  held

corporation.

 

                                   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

 

 

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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 including, without limitation,  embezzlement,

fraud, or  misappropriation,  or (iii) the commission of a felony. The Company's

decision  under Section 2.1 to not extend this  Agreement  shall be considered a

termination without Cause.

 

     5.2 Death.  In the event  Executive  dies during the Term,  this  Agreement

shall automatically  terminate,  such termination to be effective on the date of

Executive's death.

 

     5.3  Disability.  In the event that Executive shall suffer a Disability (as

defined  below),  the Company shall have the right to terminate this  Agreement,

such  termination to be effective upon the giving of notice thereof to Executive

in accordance with Section 6.4 hereof. For purposes of this Agreement,  the term

"Disability" means a physical or mental condition which have 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.

 

     5.4  Termination  by  Executive  for Good  Reason.  This  Agreement  may be

terminated  by  Executive  upon thirty (30) days'  prior  written  notice to the

Company at any time within  ninety (90) days after the  occurrence of any of the

following events,  each of which shall constitute "Good Reason" for termination,

unless  otherwise  agreed to in writing by  Executive:  (i) the  Company and any

subsidiaries sell, lease or otherwise transfer all or substantially all of their

assets to an entity which has not either assumed the Company's obligations under

this  Agreement  or entered  into a new  employment  contract  which is mutually

satisfactory to Executive and such entity;  (ii) a material diminution occurs in

the duties or  responsibilities  of  Executive  (e.g.,  Executive is placed in a

reporting  relationship  to anyone other than the Board) and such  diminution is

not cured  within 15 days after  written  notice of the same is  received by the

Company;  (iii) the Company's failure to pay compensation as required  hereunder

and such failure is not cured within 15 days after written notice of the same is

received  by the  Company;  (iv)  Executive  is  removed  from the  position  of

President  and  Chief  Executive  Officer  of the  Company;  (v)  the  principal

executive  offices of the Company  are moved to a location  more than fifty (50)

miles from its  current  location;  (vi) a  liquidation  or  dissolution  of the

Company  occurs;  (vii)  a  Change  in  Control  as  defined  in the  Executives

Executive's  Change in Control  Protection  Agreement with the Company  attached

hereto as Exhibit A; or (viii) a series of  actions  or  failures  to act by any

executive officer or director of the Company that  unreasonably  interferes with

or materially impairs either the Executive's performance of his duties hereunder

or the Executive's  ability to function as President and Chief Executive Officer

of the Company of which the Executive has provided  written  notice to the Board

or to the Nomination & Governance  Committee of the Board;  provided,  that Good

Reason  shall not exist if,  within 30 days after such notice is received by the

Board,  the Board or the Nomination & Governance  Committee of the Board in

 

 

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good faith  takes  reasonable  steps to cure the  effects or the  results of, if

possible,  such series of actions or failures to act and takes  reasonable steps

to prevent the further occurrence of such actions or failures to act (such steps

taken  or to be  taken by  either  the  Board  or the  Nomination  &  Governance

Committee,  as  applicable,  shall  hereinafter  be  referred  to as  "Board  or

Committee Actions"), unless the series of actions or failures to act continue or

recur following the Board or Committee Actions.

 

     5.5  Effect of Termination.

 

          (a) In the event of  termination  of  Executive's  employment  for any

reason,  the Company shall pay Executive (or his beneficiary in the event of his

death) any Base Salary or other  compensation  earned but not paid to  Executive

prior to the effective date of such termination.

 

          (b) In  the  event  of a  termination  of  Executive's  employment  by

Executive  for Good Reason or by the  Company for reasons  other than for Cause,

death or Disability at any time during the eighteen (18) month period  following

the Effective Date,  Executive  shall receive an amount,  payable in twenty-four

equal monthly  installments  in accordance  with the Company's  regular  payroll

policies, equal to the sum of the following: two multiplied by the amount of (i)

Executive's  current Base Salary on the date his employment is  terminated,  and

(ii) 1.5 multiplied by an amount equal to Executive's  Annual Bonus,  calculated

as though the Company and Executive had attained 100% of the performance targets

for the applicable fiscal year in which Executive's employment  terminates,  and

without  regard to the  requirement  that Executive use 20% of the net after-tax

proceeds  of such  Annual  Bonus to  purchase  shares of Company  common  stock.

Notwithstanding the foregoing, in the event Executive's employment is terminated

by Executive for Good Reason on account of a Change in Control or by the Company

for reasons  other than for Cause,  death or  Disability  within the twelve (12)

month period commencing on the date of a Change in Control,  Executive's  Change

in Control  Protection  Agreement with the Company  attached hereto as Exhibit A

shall govern.

 

          (c) 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 at any time following the eighteen (18) month anniversary of

the Effective Date,  Executive  shall receive an amount,  payable in twenty-four

equal monthly  installments  in accordance  with the Company's  regular  payroll

policies,  equal to sum of the  following:  two  multiplied by the amount of (i)

Executive's  current Base Salary on date his employment is terminated,  and (ii)

Executive's  Annual  Bonus,  calculated  as though the Company and Executive had

attained 100% of the performance targets for the applicable fiscal year in which

Executive's  employment  terminates,  and without regard to the requirement that

Executive use 20% of the net after-tax proceeds of such Annual Bonus to purchase

shares  of  Company  common.   Notwithstanding  the  foregoing,   in  the  event

Executive's  employment is terminated by Executive for Good Reason on account of

a Change in Control or by the Company for reasons other than for Cause, death or

Disability  within the  twelve  (12) month  period  commencing  on the date of a

Change in

 

 

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Control,  Executive's  Change in Control  Protection  Agreement with the Company

attached hereto as Exhibit A shall govern.

 

          (d) In  the  event  of a  termination  of  Executive's  employment  by

Executive  for Good Reason or by the  Company  for  reasons  other than Cause or

Disability,  Executive  shall be entitled  medical  coverage under the Company's

medical plan in accordance with Section 3.1(b) during the twenty-four (24) month

period  commencing  on  the  date  Executive's  employment  is  terminated  (the

"Severance Term"). Upon the expiration of the Severance Term, Executive shall be

eligible to elect  medical  continuation  coverage  under the  provisions of the

Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").

 

     5.6  Other Awards.  The  Executive's rights upon  termination of employment

with  respect to stock  options or other  incentive  awards not  covered by this

Agreement shall be governed by the terms and conditions in the respective  stock

option agreements or awards.

 

     5.7  Gross-Up Payment.

 

               (i) If it is determined (as hereafter  provided) that any payment

(other  than  the  Gross-Up  Payment  provided  for  in  this  Section  5.7)  or

distribution by the Company 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

Code (or any successor provision thereto) 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, imposed

upon the Gross-Up  Payment,  Executive retains an amount of the Gross-Up Payment

equal to the Excise Tax imposed upon the Payments.

 

               (ii) Subject to the  provisions of Section  5.7(vi)  hereof,  all

determinations  required to be made under this Section 5.7, 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.  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

 

 

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Executive,  the Company will pay the required  Gross-Up  Payment to Executive no

later than five calendar days prior to the due date for the  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

(or any successor  provision thereto) and the possibility of similar uncertainty

regarding  applicable state or local tax law at the time of any determination by

the Accounting Firm hereunder,  it is possible that Gross-Up Payments which will

not have been made by the  Company  should  have been made (an  "Underpayment"),

consistent with the  calculations  required to be made  hereunder.  In the event

that the Company  exhausts or fails to pursue its  remedies  pursuant to Section

5.7(vi)  hereof 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.

 

               (iii) 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 Section

5.7(ii) hereof.

 

               (iv) 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.

 

               (v) The fees and expenses of the Accounting Firm for its services

in connection with the determinations and calculations  contemplated by Sections

5.7(ii) and (iv) hereof 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.

 

 

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               (vi) 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:

 

                              (A) provide the Company  with any written  records

               or documents in his possession  relating to such claim reasonably

               requested by the Company;

 

                              (B) 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;

 

                              (C)  cooperate  with the  Company in good faith in

               order effectively to contest such claim; and

 

                              (D)  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 Section  5.7(vi),  the Company will control all  proceedings

taken in connection  with the contest of any claim  contemplated by this Section

5.7(vi) 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

 

 

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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.

 

               (vii) If, after the receipt by Executive of an amount advanced by

the Company  pursuant to Section 5.7(vi) hereof,  Executive  receives any refund

with respect to such claim,  Executive will (subject to the Company's  complying

with the requirements of Section 5.7(vi) 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 Section 5.7(vi) hereof,  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 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 Section 5.7.

If, after the receipt by Executive of a Gross-Up  Payment but before the payment

by the Executive of the Excise Tax, it is determined by the Accounting Firm that

the Excise Tax payable by Executive is less than the amount originally  computed

by the Accounting Firm and consequently  that the amount of the Gross-Up Payment

is larger than that required by this Section 5.7, the Executive  shall  promptly

refund to the Company the amount by which the Gross-Up Payment initially made to

Executive exceeds the Gross-Up Payment required under this Section 5.7.

 

     5.8  Full  Settlement.  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.

 

     5.9  Obligations Absolute; Withholding.

 

          (a) The  obligations  of the  Company  under this  Agreement  shall be

absolute  and  unconditional  and shall not be  affected  by any  circumstances,

including  without  limitation  (i)  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 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.

 

 

                                       10

<PAGE>

 

 

                                   ARTICLE VI

 

                                  Miscellaneous

 

     6.1  No  Mitigation.  Executive shall not be required  to mitigate  damages

resulting from his termination of employment.

 

 

     6.2  Indemnification.  In addition to all other rights  Executive  may have

under the Company's and any subsidiary's articles and bylaws, under any director

and officer liability policy or as a matter of law, the Company,  for itself and

on  behalf of all  subsidiaries,  shall  defend,  indemnify  and hold  Executive

harmless  from and against any and all claims,  demands,  actions,  proceedings,

losses,  damages, and expenses (including  reasonable  attorneys' fees and court

costs) arising out of Executive's  services as a director,  officer and employee

of the  Company and its  subsidiaries,  to the fullest  extent  permitted  under

Delaware law. This Section 6.2 shall survive  termination  of this Agreement and

Executive's employment with the Company for any reason whatsoever.

 

     6.3  Benefit of Agreement; Assignment; Beneficiary.

 

          (a) This  Agreement  shall inure to the benefit of and be binding upon

the Company and its successors and assigns,  including,  without limitation, any

corporation  or  person  which  may  acquire  all  or  substantially  all of the

Company's  assets  or  business,  or with  or  into  which  the  Company  may be

consolidated  or merged.  This Agreement shall also inure to the benefit of, and

be  enforceable  by,  Executive  and  his  personal  or  legal  representatives,

executors,   administrators,   successors,  heirs,  distributees,  devisees  and

legatees.  If  Executive  should die while any amount  would still be payable to

Executive  hereunder if he had continued to live, all such amounts shall be paid

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.

 

          (b) The  Company  shall  require  any  successor  (whether  direct  or

indirect, by operation of law, by purchase,  merger/consolidation  or otherwise)

to all or  substantially  all of the  business  and/or  assets of the Company to

expressly  assume and agree to perform this  Agreement in the same manner and to

the same  extent  that the  Company  would be  required to perform it if no such

succession had taken place.

 

     6.4  Notices.  Any  notice  required  or  permitted  hereunder  shall be in

writing and shall be  sufficiently  given if personally  delivered or if sent by

telegram or telex or by  registered or certified  mail,  postage  prepaid,  with

return receipt  requested,  addressed:  (a) in the case of the Company to Foamex

International   Inc.,  1000  Columbia  Avenue,   Linwood,   Pennsylvania  19096,

Attention:  Vice President-Human  Resources,  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.

 

 

                                       11

<PAGE>

 

 

     6.5  Entire  Agreement;  Amendment.  This  Agreement  contains  the  entire

agreement  of the parties  hereto with  respect to the terms and  conditions  of

Executive's  employment  during  the  term  and  supersedes  any and  all  prior

agreements  and  understandings,  whether  written or oral,  between the parties

hereto  with  respect  to  compensation  due for  services  rendered  hereunder,

including,  without limitation,  the Prior Agreement.  This Agreement may not be

changed or modified  except by an  instrument  in writing  signed by both of the

parties hereto.

 

     6.6  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.

 

     6.7  Headings.  The Article and Section headings herein are for convenience

of reference  only, do not  constitute a part of this Agreement and shall not be

deemed to limit or affect any of the provisions hereof.

 

     6.8  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.

 

     6.9  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.

 

     6.10 Arbitration. Except for disputes with respect to Article 4 hereof, any

dispute  between the parties  hereto  respecting  the meaning and intent of this

Agreement or any of its terms and  provisions  shall be submitted to arbitration

in New York, New York, in accordance  with the Commercial  Rules of the American

Arbitration  Association  then  in  effect,  and the  arbitration  determination

resulting from any such  submission  shall be final and binding upon the parties

hereto.  Judgment  upon any  arbitration  award may be  entered  in any court of

competent jurisdiction.

 

     6.11 Survivorship.  The  respective  rights and  obligations of the parties

hereunder  shall  survive  any  termination  of  this  Agreement  to the  extent

necessary to the intended preservation of such rights and obligations.

 

     6.12 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.

 

     6.13 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.

 

 

                                       12

<PAGE>

 

 

     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: General Counsel

 

 

                                         EXECUTIVE

 

 

                                         /s/ Thomas E. Chorman

                                         -----------------------------

                                         Thomas E. Chorman

 

 

                                       13