UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
FOAMEX INTERNATIONAL INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO OF FOAMEX INTERNATIONAL INC. APPEARS HERE]
FOAMEX INTERNATIONAL INC.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
Dear Stockholders:
On behalf of the Board of Directors, it is my pleasure to invite you to attend
the 2000 Annual Meeting of Stockholders of Foamex International Inc. (the
"Company"), which will be held on Friday, June 30, 2000, at 10:00 a.m., local
time, at The Sheraton Suites, 422 Delaware Avenue, Wilmington, Delaware. All
holders of the Company's outstanding common stock as of May 25, 2000 are
entitled to vote at the Annual Meeting.
The accompanying Notice of Annual Meeting of Stockholders and Proxy Statement
describe the formal business to be transacted at the Annual Meeting. Directors
and Officers will be present at the Annual Meeting to respond to any questions
you may have.
Please sign, date and return the enclosed proxy card in the envelope provided as
soon as possible so that your shares can be voted at the meeting in accordance
with your instructions. If you plan to attend the meeting, please mark the box
on the proxy card.
Very truly yours,
/s/ MARSHALL S. COGAN
-------------------------
MARSHALL S. COGAN
CHAIRMAN OF THE BOARD
MAY 31, 2000
<PAGE>
FOAMEX INTERNATIONAL INC.
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 30, 2000
--------------------
The Annual Meeting of Stockholders of Foamex International Inc., a
Delaware corporation (the "Company"), will be held at The Sheraton Suites, 422
Delaware Avenue, Wilmington, Delaware 19801, on Friday, June 30, 2000, at 10:00
a.m., local time, for the purpose of considering and acting upon the following
matters, which are described more fully in the accompanying Proxy Statement:
(a) To elect seven directors to serve until the 2001 Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified;
(b) To consider and act upon a proposal to amend the Foamex International
Inc. 1993 Stock Option Plan (the "1993 Stock Option Plan") to (i)
increase from 3,000,000 to 4,750,000 the number of shares of the
Company's common stock, par value $0.01 per share (the "Common
Stock"), that may be issued under the 1993 Stock Option Plan and (ii)
allow future option grants to qualify as "performance-based
compensation" for purposes of the Internal Revenue Code of 1986, as
amended;
(c) To consider and act upon a proposal to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants
for the year ending December 31, 2000; and
(d) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Holders of common stock of record at the close of business on May 25,
2000 (the "Record Date") are entitled to vote at the Annual Meeting and any
adjournment thereof. A list of stockholders of the Company as of the Record Date
will be available for inspection during business hours through June 29, 2000, at
the Company's offices, 1000 Columbia Avenue, Linwood, Pennsylvania 19061, and
will also be available for inspection at the Annual Meeting.
Stockholders are requested to complete, date and sign the enclosed proxy
card and return it promptly in the enclosed envelope which has been provided for
your convenience and which requires no postage if mailed in the United States.
The prompt return of proxy cards will ensure a quorum. Any stockholder present
at the Annual Meeting may revoke his or her proxy, and vote personally on all
matters brought before the Annual Meeting.
By Order of the Board of Directors,
/s/ GREGORY J. CHRISTIAN
----------------------------
GREGORY J. CHRISTIAN
SECRETARY
<PAGE>
FOAMEX INTERNATIONAL INC.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
----------------------
PROXY STATEMENT
-----------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Foamex International Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company (the "Annual Meeting") to be held on Friday, June 30, 2000, at 10:00
a.m., local time, at The Sheraton Suites, 422 Delaware Avenue, Wilmington,
Delaware 19801, or at any adjournment or postponement thereof, for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders. It is
expected that the Notice of Annual Meeting of Stockholders, this Proxy Statement
and the enclosed proxy card will be mailed to stockholders entitled to vote at
the Annual Meeting commencing on or about June 7, 2000.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Foamex International Inc., Investor
Relations, 1000 Columbia Avenue, Linwood, Pennsylvania 19061, (610) 859-3000. To
provide the Company sufficient time to arrange for reasonable assistance, please
submit all requests by June 23, 2000.
Record Date and Voting of Shares
Stockholders can ensure that their shares are voted at the Annual Meeting
by signing and returning the enclosed proxy card in the envelope provided. The
submission of a signed proxy will not affect a stockholder's right to attend the
Annual Meeting and vote in person. Stockholders who execute proxies retain the
right to revoke them at any time before they are voted by filing with the
Secretary of the Company a written revocation or a proxy bearing a later date.
The presence at the Annual Meeting of a stockholder who has signed a proxy does
not itself revoke that proxy unless the stockholder attending the Annual Meeting
files written notice of revocation of the proxy with the Secretary of the
Company at any time prior to the voting of the proxy.
Except for the election of directors to the Board of Directors, all
proposals described in this Proxy Statement require the approval of a majority
of the shares present and entitled to vote, either in person or by proxy, on
that matter. Directors shall be elected by a plurality of the votes cast by
holders of shares entitled to vote, either in person or by proxy. Broker
non-votes on a matter will be treated as shares not entitled to vote on that
matter, and thus will not be counted in determining whether that matter has been
approved. Shares represented by a proxy card voted as abstaining on any of the
proposals will be treated as shares present and entitled to vote that were not
cast in favor of a particular matter, and thus will be counted as votes against
that matter. Proxies will be voted as specified by the stockholders. Where
specific choices are not indicated, proxies will be voted FOR the proposals
submitted for approval. The proxy card provides space for a stockholder to
withhold voting for any or all nominees to the Board of Directors or to abstain
from voting for any proposal if the stockholder chooses to do so.
The Board of Directors has fixed the close of business on May 25, 2000 as
the record date (the "Record Date") for the determination of the stockholders of
the Company who are entitled to receive notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, the Company had
outstanding 25,059,994 shares of common stock, par value $0.01 per share (the
"Common Stock"), excluding treasury shares.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the issued and outstanding Common Stock is necessary to
constitute a quorum. The holders of Common Stock are entitled to one vote for
each share held on the Record Date.
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors is responsible for the management and direction of
the Company and for establishing broad corporate policies. The Board of
Directors held ten meetings during the year ended December 31, 1999 and acted by
written consent once. No director attended less than 75% of the Board and
committee meetings scheduled during 1999.
Committees of the Board of Directors
The Board of Directors has four standing committees: the Executive
Committee, the Audit Committee, the Compensation Committee and the Stock Option
Plan Committee. The Company does not have a standing Nominating Committee, but
currently the Company does have a Special Nominating Committee. The principal
responsibilities of each committee are described in the following paragraphs.
Executive Committee. The Executive Committee, which was comprised of
Marshall S. Cogan, who served as its Chairman, and Robert J. Hay, held two
meetings in 1999. It is currently comprised of Marshall S. Cogan, John G.
Johnson, Jr., John Televantos and John V. Tunney. The Executive Committee's
primary function is to assist the Board of Directors by acting upon matters when
the Board is not in session. The Executive Committee has the full power and
authority of the Board, except to the extent limited by law or the Company's
Restated Certificate of Incorporation or By-laws.
Audit Committee. The Audit Committee held five meetings in 1999. It is
comprised of Etienne Davignon, who serves as its Chairman, Robert J. Hay and
John V. Tunney, all of whom are non-employee directors. The Audit Committee is
responsible for overseeing the Company's financial reporting process. The Audit
Committee consults with management and the Company's independent accountants
during the year on matters related to the annual audit, internal controls, the
published financial statements, and the accounting principles and auditing
procedures being applied. The Audit Committee also recommends a firm of
certified independent accountants to serve as the Company's independent
accountants, authorizes all audit fees and other professional services rendered
by the independent accountants and periodically reviews the independence of the
accountants.
Compensation Committee. The Compensation Committee held one meeting
during 1999. It is comprised of John V. Tunney, who serves as its Chairman,
Stuart J. Hershon and Robert J. Hay, all of whom are non-employee directors. The
Compensation Committee reviews and recommends to the Board of Directors the
compensation to be paid to the executive officers of the Company.
Stock Option Plan Committee. The Stock Option Plan Committee held no
meetings during 1999 and acted by written consent once. It is currently
comprised of Robert J. Hay, who serves as its Chairman, and Stuart J. Hershon.
The Stock Option Plan Committee administers and makes awards under the Foamex
International Inc. 1993 Stock Option Plan (the "1993 Stock Option Plan").
Special Nominating Committee. The Board of Directors has appointed a
Special Nominating Committee to recommend to the full Board two individuals to
serve as independent directors. The Special Nominating Committee is comprised of
Robert J. Hay, who serves as its Chairman, Stuart J. Hershon, John G. Johnson,
Jr. and John V. Tunney. It is anticipated that the Board of Directors will be
expanded from seven to nine members at the time the two new independent
directors are elected by the Board. The composition of the Special Nominating
Committee was, and the criteria for the "independence" of the nominees are, the
subject of negotiations regarding the possible settlement of certain shareholder
litigation described in the Company's Annual Report on Form 10-K for 1999.
Compensation of Directors
In 1993, the Company instituted the Foamex International Inc.
Non-Employee Director Compensation Plan (the "Non-Employee Plan"), to provide
compensation to its non-employee directors (the "Outside Directors"). Pursuant
to the Non-Employee Plan, each Outside Director receives an annual retainer of
$50,000, payable in cash or Common Stock, and a $1,000 fee for
2
<PAGE>
each meeting of the Board of Directors attended by such Outside Director. In
addition, for serving on a committee of the Board of Directors, each Outside
Director receives a $1,000 fee for each meeting of such committee attended by
such Outside Director and Outside Directors who serve as Chairman of a Committee
receive an additional fee of $1,000 per meeting attended. Currently, there are
four Outside Directors of the Company and three employee directors; although Mr.
Tunney is the Chairman of Foamex Asia, Inc. ("Foamex Asia") and provides
consulting services to the Company, he is considered an Outside Director because
he is not an employee of the Company. All directors are entitled to
reimbursement for their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the Board of Directors or
committees thereof. Directors who are also employees of the Company or its
subsidiaries receive no compensation for serving as Directors or as members of
Board committees.
ELECTION OF DIRECTORS
Seven directors have been nominated by the Board of Directors for
election and to serve in such capacity for a term of one year until the 2001
Annual Meeting of Stockholders and until their successors have been duly elected
and qualified. All directors were elected at the 1999 Annual Meeting of
Stockholders, except for John Televantos.
Unless otherwise specified in the proxy, it is the intention of the
persons named in the proxies solicited by the Board of Directors to vote FOR the
seven nominees whose biographies are set forth below. If events not now known or
anticipated make any of the nominees unable to serve, the proxies will be voted,
at the discretion of the holders thereof, for other nominees supported by the
Board of Directors in lieu of those unable to serve.
Name and Principal Age and Biographical Information
Occupation
MARSHALL S. COGAN Marshall S. Cogan, 63, has been the Chairman of the
Chairman of the Board Board of the Company since March 1999. Mr. Cogan
served as Chairman of the Board and Chief Executive
Officer of the Company from its inception in
September 1993 to May 1997 and served as Vice
Chairman of the Board of the Company from May 1997
until March 1999. Mr. Cogan served as Vice Chairman
of the respective boards of Foamex L.P. and FMXI,
Inc. ("FMXI") from May 1997 until March 1999, and
has been a director of Foamex Carpet Cushion, Inc.
("Foamex Carpet") since its inception in February
1998. Mr. Cogan served as the Chairman of the Board
and Chief Executive Officer of Foamex L.P. and FXMI
from January 1994 to May 1997. Each of Foamex L.P.,
FMXI and Foamex Carpet, directly or indirectly, is a
wholly owned subsidiary of the Company. Mr. Cogan
has been the principal stockholder, Chairman or
Co-Chairman of the Board and Chief Executive Officer
or Co-Chief Executive Officer of Trace International
Holdings, Inc. ("Trace") since 1974. Mr. Cogan has
been a director of Trace Foam Company, Inc. ("Trace
Foam") since January 1992 and a director of Trace
Foam Sub, Inc. ("Trace Foam Sub") since March 1995.
Trace Foam and Trace Foam Sub are wholly owned
subsidiaries of Trace. On July 21, 1999, Trace and
Trace Foam Sub filed petitions for relief under the
Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York. Trace
and Trace Foam Sub are currently under Chapter 7 of
the Bankruptcy Code. Mr. Cogan served as Chairman
and Chief Executive Officer of United Auto Group,
Inc. ("UAG") from April 1997 to May 1999 and remains
a director of UAG. Mr. Cogan has also served as
Chairman and Director of other companies formerly
owned by Trace, including Color Tile, Inc., Knoll
International Inc. and Sheller-Globe Corporation.
Prior to forming Trace, Mr. Cogan was a senior
partner at Cogan, Berlind, Weill & Levitt and
subsequently CBWL-Hayden Stone, Inc. Additionally,
Mr. Cogan serves on the Board of Directors of the
American Friends of the Israel Museum and on the
Board of Trustees of The Museum of Modern Art, the
Boston Latin School and New York University Medical
Center. Mr. Cogan also serves on several committees
of Harvard University.
3
<PAGE>
ETIENNE DAVIGNON Etienne Davignon, 67, has been a director of the
Chairman of Societe Company since December 1993. Mr. Davignon has been
Generale de Belgique the Chairman of Societe Generale de Belgique, a
Belgian bank and holding company, and a director of
its subsidiary Recticel s.a. ("Recticel") since
April 1989. Mr. Davignon was a Vice President of the
EEC Commission in charge of industry, research and
energy from 1977 through 1984. Mr. Davignon was the
first President of the International Energy Agency.
Mr. Davignon currently serves as a director of,
among other companies, Generale de Banque s.a.,
Gilead Sciences, Compagnie de Suez s.a., Solvay s.a.
and Kissinger Associates. Mr. Davignon also serves
as a member of the International Advisory Board of
Fiat S.p.A. Mr. Davignon is the Chairman of the
Association for the Monetary Union of Europe, the
Paul-Henri Spaak Foundation and the Royal Institute
for International Relations and is a member of the
European Roundtable of Industrialists, chairing the
working group on Trade and Investment.
ROBERT J. HAY Robert J. Hay, 74, has been the Chairman Emeritus
Chairman Emeritus and a director of the Company since its inception in
September 1993. Mr. Hay served as Chairman and Chief
Executive Officer of Foamex L.P. from January 1993
until January 1994. Mr. Hay was President of Foamex
L.P. and its predecessor from 1972 through 1992. Mr.
Hay began his career in 1948 as a chemist with The
Firestone Tire and Rubber Company, a predecessor of
Foamex L.P.
STUART J. HERSHON Stuart J. Hershon, 62, has been a director of the
Orthopedic Surgeon Company since December 1993. Dr. Hershon was a
member of the Board of Directors of Trace from April
1986 until May 1994. Dr. Hershon is a board
certified, practicing orthopedic surgeon at North
Shore University Hospital and at Columbia
Presbyterian Medical Center in New York, where he is
an assistant clinical professor of orthopedic
surgery. Dr. Hershon has practiced medicine at North
Shore University Hospital since 1970 and at Columbia
Presbyterian Medical Center since 1989. Dr. Hershon
has served as orthopedic consultant and team
physician for certain New York area professional
sports teams.
JOHN G. JOHNSON, JR. John G. Johnson, Jr., 59, has been a director of the
President and Chief Company since March 1999. Mr. Johnson has served as
Executive Officer of the President and Chief Executive Officer of the Company
Company since March 1999. Prior to joining the Company, Mr.
Johnson was President and Chief Executive Officer of
Safety-Kleen Corp., an environmental services
company, from 1995 to 1997. Mr. Johnson also served
as President, Chief Operating Officer and director
of Safety-Kleen Corp. from 1993 to 1995. From 1982
to 1992, Mr. Johnson held several executive
positions with the ARCO Chemical Company, including
Senior Vice President and Director of ARCO Chemical
Company and President of ARCO Chemical Americas
beginning in 1987. Mr. Johnson began his career with
the Atlantic Richfield Company in 1958.
JOHN TELEVANTOS John Televantos, 47, was elected a director and
Chief Operating Officer Chief Operating Officer of the Company on April 10,
of the Company and 2000. Prior to joining the Company as President of
President of the the Foam Business Group in June 1999, Mr. Televantos
Company's Foam was Vice President, Development Business for
Business Group Lyondell Chemical Company, which he joined in 1998
following the company's acquisition of ARCO Chemical
Company. In his nine-year career with ARCO Chemical
Company, Mr. Televantos was Director of Urethane
Development and, prior to that, Director of
Strategic Planning and Commercial Development. Mr.
Televantos began his career with Union Carbide
Corporation in 1977, serving in a number of urethane
product development and research positions.
4
<PAGE>
JOHN V. TUNNEY John V. Tunney, 65, has been a director of the
Chairman of the Board of Company since May 1994. Mr. Tunney has served as
Cloverleaf Group, Inc. Chairman of the Board of Foamex Asia, a subsidiary
of the Company, since March 1997. Mr. Tunney has
been Chairman of the Board of Cloverleaf Group,
Inc., an investment company, since 1981, a partner
of Sun Valley Ventures, a venture capital firm,
since 1995, and President of JVT Consulting Inc.
since 1997. Mr. Tunney has served as Vice Chairman
of the Board of the Corporate Fund for Housing since
1988. Mr. Tunney served as a U.S. Senator from the
State of California from 1971 until 1977. Prior to
that, Mr. Tunney served as a member of Congress from
the 38th district of California from 1965 until
1971. Mr. Tunney currently serves as a member of the
Board of Directors of Illinois Central Railroad
Corp. and Swiss Army Brands, Inc.
Vote Required
The affirmative vote of a plurality of the shares of Common Stock present
or represented at the Annual Meeting and entitled to vote is required for the
election of directors of the Company.
The Board of Directors recommends a vote "FOR" election of each of the
nominees listed above.
OWNERSHIP OF COMMON STOCK OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of May 1, 2000,
regarding the beneficial ownership of Common Stock by (i) each stockholder who
is known by the Company to own more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all directors and executive officers as a group.
Except as otherwise indicated, each stockholder has (i) sole voting and
investment power with respect to such stockholder's shares of stock, except to
the extent that authority is shared by spouses under applicable law and (ii)
record and beneficial ownership with respect to such stockholder's shares of
stock.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owners Beneficial Ownership (1)(2)
------------------------------------- ------------------------------------------------------
<S> <C> <C>
Number of Shares % of Class Outstanding
Trace International Holdings, Inc. (3) 7,197,426 28.7
c/o Mr. John Pereira
150 E. 58th Street, 24th Floor
New York, New York 10022
Trace Foam Sub, Inc. (3) 7,000,247 27.9
c/o Mr. John Pereira
150 E. 58th Street, 24th Floor
New York, New York 10022
Lion Advisors, L.P. (4) 2,285,072 9.1
1301 Avenue of the Americas
New York, New York 10019
Apollo Advisors, L.P. (4) 2,285,072 9.1
2 Manhattanville Road
Purchase, New York 10577
Rus, Inc. (5) 2,684,903 10.7
Avenue des Pleiades 15
B -1200
Brussels, Belgium
5
<PAGE>
Genfina S.A. (6) 1,592,671 6.4
Rue Royale 30
1000
Brussels, Belgium
Stephens Inc. (7) 1,575,110 6.3
111 Center Street
Little Rock, Arkansas 72201
Marshall S. Cogan (3) (8) 777,500 3.1
Etienne Davignon 20,836 *
Robert J. Hay 4,944 *
Stuart J. Hershon (9) 13,646 *
John G. Johnson, Jr. (8) 278,291 1.1
John V. Tunney (10) 9,000 *
John Televantos (8) 27,300 *
Andrea Farace (8) 176,266 *
Pratt W. Wallace, Jr. (8) 11,000 *
Barry Zimmerman (8) 30,769 *
All executive officers and directors as a group 1,169,606 4.5
(15 persons) (3)(8)(9)(10)
------------------
* Less than 1%.
<FN>
(1) Each named person is deemed to be the beneficial owner of securities
which may be acquired within sixty days through the exercise of options,
warrants and rights, if any, and such securities are deemed to be
outstanding for the purpose of computing the percentage of the class
beneficially owned by such person. However, any such shares are not
deemed to be outstanding for the purpose of computing the percentage of
the class beneficially owned by any other person, except as noted.
(2) The above table includes shares of the Company's Common Stock held by
officers and directors under the Company's 401(k) plan.
(3) Trace Foam Sub is wholly owned by Trace. The number of shares
beneficially owned by Trace includes the shares beneficially owned by
Trace Foam Sub. Additionally, 50,000 shares of the Common Stock are held
in trust for the exclusive benefit of participants under the Trace
International Holdings, Inc. Retirement Plan for Salaried Employees (the
"Trace Retirement Plan"). Marshall S. Cogan, Chairman of the Board and
President of Trace Foam Sub, is the Chairman of the Board, Chief
Executive Officer and majority stockholder of Trace. On July 21, 1999,
Trace and Trace Foam Sub filed petitions for relief under the Bankruptcy
Code in the United States Bankruptcy Court for the Southern District of
New York, and a trustee has been appointed to oversee the liquidation of
Trace's assets. Mr. Cogan disclaims beneficial ownership of the Common
Stock under the Trace Retirement Plan. The address listed is that of the
trustee that was appointed to oversee the liquidation of Trace's assets.
(4) Lion Advisors, L.P. ("Lion"), pursuant to an investment advisory contract
with its client, Marely I s.a. ("Marely"), possesses the sole power to
vote and dispose of 1,017,536 of the indicated shares, which shares are
held for the account of Marely. Apollo Advisors, L.P., which is an
affiliate of Lion, possesses the sole power to vote and dispose of
1,267,536 of the indicated shares in its capacity as managing general
partner of AIF II, L.P., for whose account the shares are held.
6
<PAGE>
(5) Rus, Inc. is a subsidiary of Recticel, s.a., a European polyurethane foam
manufacturer, whose subsidiary was a former partner of Foamex L.P.
(6) Genfina S.A. is a subsidiary of Societe Generale de Belgique, a Belgian
bank and holding company.
(7) Stephens Inc. is a registered broker-dealer, and the number of indicated
shares represents 1,199,700 shares of Common Stock owned by Stephens Inc.
for its own account and 375,410 shares of Common Stock held in
discretionary or advisory accounts for clients. Stephens Inc. has shared
power of disposition, but no voting power and no economic interest, with
respect to shares of Common Stock held in client advisory accounts.
Stephen Group, Inc. is a parent of Stephens Inc. and has shared power of
voting and of disposition with respect to shares of Common Stock owned by
Stephens Inc. for its own account. In addition to the number of shares of
Common Stock reported in the table, principals of Stephens Inc. and
Stephens Group, Inc. own 172,700 shares of Common Stock, over which
Stephens Inc. and Stephens Group, Inc. have no voting power or
dispositive power. All information relating to the beneficial ownership
of Common Stock by Stephens Inc. was taken from a Schedule 13G filed with
the Securities Exchange Commission on February 11, 2000.
(8) Includes shares of Common Stock issuable upon exercise of options granted
under the Company's 1993 Stock Option Plan, which have vested or will
vest within sixty days. In the above table, (i) 377,500 of such shares
have been included for Mr. Cogan, (ii) 250,150 of such shares have been
included for Mr. Johnson, (iii) 176,266 of such shares have been included
for Mr. Farace, (iv) 20,000 shares of such shares have been included for
Mr. Televantos, (v) 21,769 of such shares have been included for Dr.
Zimmerman, (vi) 6,000 of such shares have been included for Mr. Wallace
and (vii) 669,059 of such shares have been included for all executive
officers and directors as a group.
(9) Includes 12,571 shares of Common Stock held in the name of Dr. Hershon's
wife and 1,075 shares of Common Stock held in a trust of which Dr.
Hershon is the sole trustee.
(10) Includes 9,000 shares of Common Stock held in a trust of which Mr. Tunney
serves as a co-trustee.
</FN>
</TABLE>
EXECUTIVE OFFICERS
The following table sets forth the name, age and position or positions
held by each executive officer of the Company, as of May 25, 2000.
<TABLE>
<CAPTION>
Name Age Position(s) Held
---- --- ----------------
<S> <C> <C>
Marshall S. Cogan 63 Chairman of the Board
Lawrence G. Davenport 58 Executive Vice President, Chief Information Officer
Stephen Drap 50 Executive Vice President, Technical Products
John G. Johnson, Jr. 59 President, Chief Executive Officer and Director
Darrell Nance 47 Executive Vice President, Foam Products
David J. Prilutski 46 Senior Vice President, Planning and Acting Chief Financial Officer
John Televantos 47 Chief Operating Officer, President Foam Business Group and Director
James T. Van Horn 54 Senior Vice President, Human Resources
Arthur H. Vartanian 46 Executive Vice President, Automotive Products
Pratt W. Wallace, Jr. 40 Executive Vice President, Foam Products
Kurt M. Werth 42 Executive Vice President, Carpet Cushion Products
</TABLE>
Executive officers are elected by the Board of Directors and hold office
until their successors have been duly elected and qualified or until their
earlier resignation or removal from office. A brief biography of each executive
officer of the Company is provided below (other than Mr. Cogan, Mr. Johnson and
Mr. Televantos, each of whose biography is set forth above under "Directors").
7
<PAGE>
Lawrence G. Davenport has been Executive Vice President, Chief
Information Officer since May 1999. Prior to joining the Company, Mr. Davenport
served as Vice President and Chief Information Officer of Safety-Kleen Corp.
from 1995 to 1998, where he was responsible for the strategic and tactical
direction for information processing. Prior to that, Mr. Davenport was Senior
Vice President, Information Services for JB Hunt Transport, Inc.
Stephen Drap has been Executive Vice President, Technical Products since
March 1998. Prior to that, Mr. Drap served as Vice President, Manufacturing and
Customer Service, Technical Products beginning July 1997. Prior to that, Mr.
Drap has held various management positions since joining the Company in 1980.
Darrell Nance has been Executive Vice President, Foam Products since
March 1998. From 1995 until joining the Company, Mr. Nance served as Vice
President and General Manager of West Coast Operations of Crain Industries, Inc.
("Crain"). From 1994 to 1995, Mr. Nance served as Vice President of Operations,
West Coast Operations of Crain. From 1986 to 1994, Mr. Nance served as General
Manager of Crain Western.
David J. Prilutski has been Senior Vice President, Planning since January
2000 and Acting Chief Financial Officer since March 2000. Prior to joining the
Company, Mr. Prilutski was Business Director, Oxygenated Chemicals for Lyondell
Chemical Company, which acquired ARCO Chemical Company in 1998. Mr. Prilutski
joined ARCO Chemical Company in 1975, and held a range of planning and marketing
positions, including Director Corporate Planning.
James T. Van Horn has been Senior Vice President, Human Resources since
January 2000. Prior to joining the Company, Mr. Van Horn was with Unisys
Corporation for twenty-one years, holding a number of positions of increasing
responsibility, most recently as Corporate Director, Performance Management for
Worldwide Human Resources.
Arthur H. Vartanian has been Executive Vice President, Automotive
Products Group since February 2000. Prior to joining the Company, Mr. Vartanian
held a number of executive positions over an eighteen-year career with Lear
Corporation, most recently as Vice President Operations, Chrysler Division.
Pratt W. Wallace, Jr. has been the Executive Vice President, Foam
Products since January 1999, and was the Executive Vice President, Manufacturing
Technology from March 1998 until January 1999. From 1997 until joining the
Company, Mr. Wallace served as Vice President of the Southeast region of Crain.
From 1993 to 1997, Mr. Wallace served as the General Manager of Crain's Newnan,
Georgia facility.
Kurt M. Werth has been Executive Vice President, Carpet Cushion Products
since March 2000. Prior to joining the Company, Mr. Werth was Vice President,
Sales and Service for the Canadian operations of Safety-Kleen Corp. Mr. Werth
joined Safety-Kleen Corp. in 1987 and during his tenure there held a number of
sales, planning and financial positions, including Vice President, Planning and
Evaluation.
COMPENSATION OF EXECUTIVE OFFICERS
Compensation
The following Summary Compensation Table contains information concerning
annual and long-term compensation provided to each Chief Executive Officer
during 1999 and each of the four next most highly compensated executive officers
of the Company as of the end of 1999, based on salary and bonus (collectively,
the "Named Executive Officers"), for services rendered in all capacities during
fiscal years 1999, 1998 and 1997.
8
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table (1)
Long-Term
Annual Compensation Compensation Awards
Securities Underlying All Other
Name and Principal Position Year Salary Bonus Options/SARs Compensation
--------------------------- ---- ----------- ---------- -------------------------- ------------
<S> <C> <C> <C> <C> <C>
Marshall S. Cogan 1999 $850,000 $ -- -- $ --
Chairman of the Board 1998 850,000 300,000 -- --
1997 848,077 500,000 170,833 --
John G. Johnson, Jr. (2) (3) 1999 $392,308 $250,000 750,450 $3,200
President and Chief
Executive Officer
Barry Zimmerman (4) 1999 $316,000 $ 62,111 15,000 $30,112
Executive Vice President, 1998 316,000 38,146 3,000 1,600
Sourcing & Logistics 1997 316,000 115,000 -- 1,600
John Televantos (3) (5) 1999 $161,539 $185,000 100,000 $1,600
President, Foam Business
Group
Pratt W. Wallace, Jr. (3) (6) 1999 $175,659 $134,041 10,000 $1,600
Executive Vice President, 1998 166,009 139,554 -- 4,336
Foam Products 1997 -- -- 10,000 --
Andrea Farace (7) 1999 $184,615 $ -- -- $666,770
Chief Executive Officer 1998 571,500 -- -- 1,600
1997 430,769 350,000 350,000 --
------------------
<FN>
(1) Because none of the Named Executive Officers received (i) perquisites in
excess of the lesser of $50,000 or 10% of their reported salary and
bonus, (ii) any other annual compensation required to be reported, (iii)
LTIP payouts or (iv) any restricted stock awards, information relating to
"Other Annual Compensation", "LTIP Payouts" and "Restricted Stock Awards"
is inapplicable and has therefore been omitted from the table.
(2) Mr. Johnson commenced his employment with the Company on March 16, 1999.
(3) The amounts shown in "All Other Compensation" represent the Company's
matching contribution to the Company's 401(k) plan.
(4) Included in Dr. Zimmerman's "All Other Compensation" for 1999 is $28,512
for relocation expenses and $1,600 of the Company's matching contribution
to the Company's 401(k) plan. The amounts shown for 1998 and 1997
represent the Company's matching contribution to the Company's 401(k)
plan. Dr. Zimmerman resigned as of April 28, 2000.
(5) Mr. Televantos commenced his employment with the Company on June 14,
1999. On April 10, 2000, Mr. Televantos was named Chief Operating Officer
of the Company.
(6) Mr. Wallace commenced his employment with the Company December 23, 1997
and received no compensation from the Company in 1997, except for a stock
option grant.
9
<PAGE>
(7) Mr. Farace resigned as Chairman and Chief Executive Officer of the
Company on March 16, 1999. The amounts shown in "All Other Compensation"
for 1999 represents $665,385 of severance related payments pursuant to
Mr. Farace's employment agreement and $1,385 of the Company's matching
contribution to the Company's 401(k) plan. For 1998, the amount shown
represents the Company matching contribution to the Company's 401(k)
plan.
</FN>
</TABLE>
Employment Agreements
The Company has employment agreements with the following Named Executive
Officers: Marshall S. Cogan, John G. Johnson, Jr. and John Televantos. The
Company also had employment agreements with Andrea Farace prior to his
resignation on March 16, 1999 and with Barry Zimmerman prior to his resignation
on April 28, 2000. The Securities and Exchange Commission requires disclosure of
any employment agreement between the Company and any Named Executive Officer,
whether or not such officer is still employed by the Company.
Current Employees
On May 21, 1999, the Company entered into an employment agreement with
John Televantos in connection with the hiring of Mr. Televantos as President,
Foam Business Group of the Company. The agreement provides for an initial term
of two years commencing on May 21, 1999, and automatically renews for additional
one-year terms commencing May 21, 2000, unless notice of intent to not extend
the term of the agreement is given by either party. The employment agreement
provides that as compensation for all services rendered by Mr. Televantos, he
will receive an annual salary at the rate of at least $300,000 per annum, which
salary will be reviewed annually by the Compensation Committee of the Board. Mr.
Televantos is eligible to earn an annual target bonus of 90% of his salary; the
actual amount of the bonus is based on the attainment of certain performance
targets. The agreement provides that the bonus be paid to Mr. Televantos for
1999 would not be less than $135,000. Mr. Televantos received a $50,000 bonus in
consideration for his commencement of services. Also, Mr. Televantos will
participate in certain employee or executive benefit plans and receive certain
other perquisites. Mr. Televantos' employment agreement further provides for the
grant by the Company to Mr. Televantos of options to purchase 100,000 shares of
Common Stock, which vest at a rate of 20,000 options per year, commencing on May
21, 2000. Accelerated vesting provisions for options are provided for "change in
control" transactions as well as certain termination events. The employment
agreement automatically terminates upon the death or continued disability of Mr.
Televantos, and the agreement may be terminated by the Company or Mr. Televantos
at any time. Upon termination of the employment agreement by the Company without
"cause" or by Mr. Televantos with "good reason" (which term includes change in
control events), the Company will be required to pay Mr. Televantos, in addition
to any amounts earned but not yet paid, a lump sum payment equal to two times
the sum of (i) annual base salary then in effect plus (ii) the target annual
bonus for such fiscal year or, if higher, the annual bonus paid or payable for
the preceding year. Additionally, Mr. Televantos would be entitled to continue
to receive any health care or insurance benefits for a period of up to eighteen
months. The employment agreement prohibits Mr. Televantos from disclosing any
confidential information of the Company during his employment term or any time
thereafter. Additionally, the employment agreement provides that for a period of
one year following his termination date, Mr. Televantos may not solicit or
attempt to entice away from the Company (including its affiliates or
subsidiaries), or interfere with the relationship of the Company with, any
employee, customer or clients of the Company.
On March 16, 1999, the Company entered into an employment agreement with
John G. Johnson, Jr. in connection with the hiring of Mr. Johnson as President
and Chief Executive Officer of the Company. The agreement provides for an
initial term of two years commencing on March 16, 1999, and automatically renews
for additional one-year terms unless notice of intent to not extend the term of
the agreement is given by either party. The employment agreement provides that
as compensation for all services rendered by Mr. Johnson, he will receive an
annual salary at the rate of at least $500,000 per annum, which salary will be
reviewed annually by the Compensation Committee of the Board. Mr. Johnson is
entitled to earn an annual bonus of up to $500,000; the actual amount of the
bonus is based on the attainment of certain performance targets for that year.
The agreement provides that the bonus be paid to Mr. Johnson for 1999 would not
be less than $250,000. Also, Mr. Johnson will participate in certain employee or
executive benefit plans and receive certain other perquisites, including an
automobile lease allowance. Mr. Johnson's employment agreement further provides
for the grant by the Company to Mr. Johnson of options to purchase 750,450
shares of Common Stock, which vest in equal installments on March 16, 2000,
March 16, 2001 and March 16, 2002. Accelerated vesting provisions for options
are provided for "change
10
<PAGE>
in control" transactions as well as certain termination events. The employment
agreement automatically terminates upon the death or continued disability of Mr.
Johnson, and the agreement may be terminated by the Company or Mr. Johnson at
any time. Upon termination of the employment agreement by the Company without
"cause" or by Mr. Johnson with "good reason" (which term includes change in
control events), the Company would be required to pay Mr. Johnson, in addition
to any amounts earned but not yet paid, a lump sum payment equal to two times
the sum of (i) annual base salary then in effect plus (ii) the target annual
bonus for such fiscal year or, if higher, the annual bonus paid or payable for
the preceding year. Additionally, Mr. Johnson would be entitled to continue to
receive any health care or insurance benefits for a period of up to eighteen
months. The employment agreement prohibits Mr. Johnson from disclosing any
confidential information of the Company during his employment term or any time
thereafter. Additionally, the employment agreement provides that for a period of
one year following his termination date, Mr. Johnson may not solicit or attempt
to entice away from the Company (including its affiliates or subsidiaries), or
interfere with the relationship of the Company with, any employee, customer or
clients of the Company.
On January 1, 1999, the Company entered into an employment agreement with
Marshall S. Cogan, Chairman of the Board and Chairman of the Executive Committee
of the Company. The agreement provides for an initial employment term commencing
on January 1, 1999 and continuing until December 31, 2000, which term is
automatically extended an additional day on each day of the initial term and on
each day thereafter until either Mr. Cogan or the Company provides notice of
termination. The employment agreement provides that Mr. Cogan will receive an
annual salary at the rate of $850,000 per annum with increases, if any, as may
be approved by the Board. Mr. Cogan is also eligible, but not entitled, to
receive any annual bonuses, which may be determined by the Board. Also, Mr.
Cogan will participate in certain employee benefit plans and receive certain
other perquisites. The employment agreement automatically terminates upon the
death or continued disability of Mr. Cogan, and the agreement may be terminated
by the Company or Mr. Cogan at any time. Upon termination of the employment
agreement by the Company without "just cause" or by Mr. Cogan with "good reason"
(which term includes change in control events), the Company will be required to
pay Mr. Cogan, in addition to any amounts earned but not yet paid, the amount of
his then current base salary for a period of twenty-four months. Additionally,
Mr. Cogan would be entitled to continue to receive any health care or insurance
benefits for a period of twenty-four months. The employment agreement prohibits
Mr. Cogan from disclosing any confidential information of the Company during his
employment term or any time thereafter. Additionally, the employment agreement
provides that for a period of one year following his termination date, Mr. Cogan
may not solicit or attempt to entice away from the Company (including its
affiliates or subsidiaries), or interfere with the relationship of the Company
with, any employees, customers or clients of the Company.
Prior Employees
On January 25, 1999, the Company entered into an employment agreement
with Barry Zimmerman, former Executive Vice President, Strategic Sourcing and
Logistics of the Company. The agreement provides for an initial employment term
continuing until December 31, 2000, which term is automatically extended an
additional day on each day of the initial term and on each day thereafter until
either Dr. Zimmerman or the Company provides notice of termination. The
employment agreement provides that Dr. Zimmerman will receive an annual salary
at the rate of $316,000 per annum with increases, if any, as may be approved by
the Board. Dr. Zimmerman is also eligible, but not entitled, to receive any
annual bonuses, which may be determined by the Board. Also, Dr. Zimmerman will
participate in certain employee benefit plans and receive certain other
perquisites. The employment agreement automatically terminates upon the death or
continued disability of Dr. Zimmerman, and the agreement may be terminated by
the Company or Dr. Zimmerman at any time. Upon termination of the employment
agreement by the Company without "just cause" or by Dr. Zimmerman with "good
reason" (which term includes change in control events), the Company will be
required to pay Dr. Zimmerman, in addition to any amounts earned but not yet
paid, the amount of his then current base salary for a period of twenty-four
months. Additionally, Dr. Zimmerman would be entitled to continue to receive any
health care or insurance benefits for a period of twenty-four months. The
employment agreement prohibits Dr. Zimmerman from disclosing any confidential
information of the Company during his employment term or any time thereafter.
Additionally, the employment agreement provides that for a period of one year
following his termination date, Dr. Zimmerman may not solicit or attempt to
entice away from the Company (including its affiliates or subsidiaries), or
interfere with the relationship of the Company with, any employee, customer or
clients of the Company.
11
<PAGE>
On January 1, 1999, the Company entered into an employment agreement with
Andrea Farace, former Chairman of the Board and Chief Executive Officer of the
Company. The agreement provided for an initial employment term commencing on
January 1, 1999 and continuing until December 31, 2000, which term was
automatically extended an additional day on each day of the initial term and on
each day thereafter until either Mr. Farace or the Company provided notice of
termination. The employment agreement provided that Mr. Farace would receive an
annual salary of $600,000 per annum with increases, if any, as may be approved
by the Board. Mr. Farace was also eligible, but not entitled, to receive any
annual bonuses, which would be determined by the Board. Also, Mr. Farace
participated in certain employee benefit plans and received certain other
perquisites. Pursuant to this agreement, Mr. Farace received a severance payment
of $250,000 in connection with the termination of his employment with the
Company on March 16, 1999. In addition to the severance payment as described
above, the Company agreed to pay Mr. Farace the amount of his then current base
salary for a period of twenty-four months. Additionally, Mr. Farace will receive
health care or insurance benefits for a period of twenty-four months from the
date of his termination. The employment agreement prohibits Mr. Farace from
disclosing any confidential information of the Company during his employment
term or any time thereafter. Additionally, the employment agreement provided
that for a period of one year following his termination date, Mr. Farace may not
solicit or attempt to entice away from the Company (including its affiliates or
subsidiaries), or interfere with the relationship of the Company with, any
employees, customers or clients of the Company.
1993 Stock Option Plan
During 1999, 1998 and 1997, the Stock Option Committee granted 1,067,950
options, 132,750 options and 625,833 options to purchase Common Stock to
officers or key employees of the Company, respectively. The 1999 options were
granted at exercise prices ranging from $5.4375 to $9.00 per share, the 1998
options were granted at exercise prices ranging from $11.438 to $13.25 per share
and the 1997 options were granted at exercise prices ranging from $9.688 to
$14.00 per share. All such exercise prices represented the closing price of the
Common Stock on the date of grant. During 1999, 750,450 options were granted
with a three-year vesting period and a ten-year term. All other options
outstanding at the end of 1999 were granted with a five-year vesting period and
a ten-year term.
The following table provides information on option grants in 1999 to the
Named Executive Officers.
<TABLE>
<CAPTION>
Foamex International Option Grants in Last Fiscal Year
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration Grant Date
Granted (#)(1) Fiscal Year ($/Sh) Date Present Value(2)
---------------- ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
John G. Johnson, Jr. 375,225 35.1% $6.5000 03/22/09 $915,549
John G. Johnson, Jr. 375,225 35.1 5.4375 04/20/09 765,459
John Televantos 100,000 9.4 6.5625 05/21/09 248,000
Barry Zimmerman 15,000 1.4 6.2188 05/27/09 35,400
Pratt W. Wallace, Jr. 10,000 0.9 6.2188 05/27/09 23,600
<FN>
(1) Messrs. Cogan and Farace are not included in this table since no options
were granted to such individuals during 1999.
(2) Based on the Black-Scholes option price model. Assumptions included an
expected life of three years, expected volatility of 48.0%, expected
dividend yield of 0% and a risk-free interest rate of 5.21%.
</FN>
</TABLE>
12
<PAGE>
Aggregate Option Values
The following table sets forth, as of December 31, 1999, the number of
options for the Company's Common Stock and the value of the unexercised options
held by the Named Executive Officers. None of the Named Executive Officers
exercised stock options in 1999.
<TABLE>
<CAPTION>
Aggregate Fiscal Year End Option/SAR Values
Number of Securities Underlying Unexercised Value of Unexercised In-the-Money
Name Options/SARs at Fiscal Year End Options/SARs at Fiscal Year End(1)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
John G. Johnson, Jr. - 750,450 $ - $1,758,867
Andrea Farace 156,296 210,000 23,426 -
Marshall S. Cogan 377,500 122,500 444,428 28,750
Barry Zimmerman 18,169 17,400 25,255 31,406
John Televantos - 100,000 - 175,000
Pratt W. Wallace, Jr. 4,000 16,000 - 20,937
<FN>
(1) As of December 31, 1999, the market value of the Company's common stock
was $8.3125 per share. On May 26, 2000, the market value of the Company's
common stock was $5.4375 per share.
</FN>
</TABLE>
Pension Plan
Effective December 31, 1999, the Foamex L.P. Salaried Pension Plan merged
with the Foamex L.P. Hourly Pension Plan. The surviving plan is called the
Foamex L.P. Pension Plan (the "Retirement Plan"). The Retirement Plan is a
defined benefit pension plan that is qualified under the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), and in which executive
officers are eligible to participate.
The following table illustrates estimated annual pensions under the
Retirement Plan for various compensation levels and periods of credited service,
assuming present compensation rates at all points in the past and until Normal
Retirement Date (as defined in the Retirement Plan) and a constant Social
Security Wage Base ($76,200 in 2000). The pension amount is expressed as a life
annuity with certain benefits continuing to the spouse.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Credited Service
15 20 25 30 35
Current Compensation:
<S> <C> <C> <C> <C> <C>
$125,000 $27,098 $36,130 $45,163 $54,195 $63,228
$170,000 and above $38,910 $51,880 $64,850 $77,820 $90,790
</TABLE>
The Retirement Plan is a career pay plan. The Retirement Plan formula is
1.25% of annual compensation up to the Social Security Wage Base and 1.75% of
annual compensation in excess of the Social Security Wage Base, subject to a
2000 annual compensation limit of $170,000 (as adjusted to reflect cost of
living increases). Prior to September 1, 1994, the Retirement Plan was a final
average pay plan, with retirement benefits based upon earnings for the five
consecutive years within the last ten years, which yielded the highest average
yearly salary ("Final Average Compensation"). Annual benefit calculations under
the Retirement Plan for service prior to June 1, 1994, will be the years of
credited service multiplied by the sum of 2.0% of Final Average Compensation and
0.4% of Final Average Compensation in excess of the average of the Social
Security Wage Bases over the 35 year period ending with the year an employee
reaches age 65 (such 35 year average referred to herein as the "Covered
13
<PAGE>
Compensation"). For service subsequent to May 31, 1994, but before September 1,
1994, annual benefit calculations will be the years of credited service
multiplied by the sum of 1.1% of Final Average Compensation and 0.4% of Final
Average Compensation in excess of Covered Compensation. The actuarially
determined cost of providing benefits under the Retirement Plan is provided by
the Company. The participants are neither required nor permitted to make
contributions.
The compensation used as a basis for computing pension is primarily based
on salaries set forth in the Summary Compensation Table and excludes bonuses. In
1999 and 1998, the compensation used as a basis for computing the pension of
each of the executive officers named in the Summary Compensation Table and were
employees at May 1, 2000 was as follows: Mr. Cogan, $160,000 and $160,000,
respectively; Mr. Johnson, $160,000 and $0, respectively; Mr. Televantos,
$160,000 and $0, respectively; and Mr. Wallace, $160,000 and $160,000,
respectively.
The estimated annual benefits under the Retirement Plan payable on
retirement at normal retirement age, or immediately if the individual has
reached normal retirement age, for each of the employees named in the Summary
Compensation Table and employees at May 1, 2000 are as follows: Mr. Cogan,
$23,559; Mr. Johnson, $18,001; Mr. Televantos $47,642; and Mr. Wallace, $68,733.
These amounts assume the employees continue their employment with the Company at
present salary levels until normal retirement age. As of December 31, 1999, the
employees named in the Summary Compensation Table and employees at May 1, 2000
had been credited with years of service under the Retirement Plan as follows:
Mr. Cogan, 6.83 years; and Mr. Wallace, 1.5 years. Mr. Johnson and Mr.
Televantos did not have any credited years of service as of December 31, 1999
because there is a one-year period from the date of hire before an employee
becomes eligible to participate retroactive to the date of hire.
IRS Limitations
Under the Internal Revenue Code, a participant's compensation in excess
of $160,000 (as adjusted to reflect cost of living increases) is disregarded for
purposes of determining pension benefits. Benefits accrued for plan years prior
to 1994 on the basis of certain compensation in excess of the annual
compensation limit are preserved. In addition, as required by law, the maximum
annual pension payable to a participant under a qualified pension plan in 1999
is $130,000, in the form of a qualified joint and survivor annuity, although
certain benefits are not subject to such limitation. Such limits have been
included in the calculation of estimated annual benefit amounts listed above for
each of the Named Executive Officers. The Company does not have a non-qualified
defined benefit plan to provide payments in excess of limits imposed by the
Internal Revenue Service.
Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that might incorporate filings by reference, including this Proxy Statement, in
whole or in part, the following Report of the Compensation Committee (the
"Compensation Committee") and Stock Option Plan Committee (the "Stock Option
Committee") on Executive Compensation and the Performance Graph shall not be
incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK OPTION
PLAN COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee's responsibilities include establishing the
Company's policies governing the compensation of officers and other key
executives of the Company. The Compensation Committee approves all elements of
compensation for Executive Officers. The Stock Option Committee is responsible
for the administration of the 1993 Stock Option Plan.
Executive Compensation The Company's compensation program consists of base
salary, incentive programs, stock options and employee benefits. The goal of the
Company's compensation program is to motivate and reward its executive officers
and other key employees to improve long-term stockholder value and to attract
and retain the highest quality executive and key employee talent available. The
Company's executive compensation program is designed to align executive
compensation practices with increasing the value of the Company's Common Stock
and to foster adherence to, and promotion of, the Company's business mission,
values, strategic goals and annual objectives. The compensation levels for
certain officers of the Company (or its subsidiaries) who are not Named
14
<PAGE>
Executive Officers, are determined pursuant to the terms of their respective
employment agreements. The compensation levels for Mr. Farace were determined
pursuant to the terms of his employment agreement prior to his resignation from
the Company. See "Compensation of Executive Officers--Employment Agreements."
The compensation levels for the other Named Executive Officers were determined
pursuant to the criteria set forth below.
The Compensation Committee annually reviews salary increases for the
current year and incentive payments to be made in connection with the previous
year's performance. The Compensation Committee will consider an executive's
scope of responsibilities, level of experience, individual performance and
attainment of pre-established goals as well as the Company's business plan and
general economic factors. In making its decisions, and to maintain the desired
levels of competitiveness and congruity with the Company's long-term performance
goals, the Compensation Committee will receive input from the Company's Chief
Executive Officer, Chief Operating Officer and from the Company's Human
Resources Department.
Base Salary and Bonus The salary levels for executive officers are determined by
such officer's level of job responsibility and experience, job performance and
attainment of pre-established goals. Additional consideration is given to
salaries for a comparable position within the industry and the Company's ability
to pay. Bonus payouts to executive officers and other key employees of the
Company are based on attainment of general or specific corporate goals.
Options The Stock Option Committee believes strongly that the interests of
senior management must be closely aligned with those of the stockholders.
Long-term incentives in the form of stock options provide a vehicle to reward
executive officers only if there is an increase in stockholder value. Stock
options are granted on a discretionary basis within a guideline range that takes
into account the position responsibilities of executive officers and key
employees of the Company whose contributions and skills are important to the
long-term success of the Company. Stock options to purchase Common Stock
providing long-term incentives may be granted to executive officers or key
employees of the Company with a maximum term of ten years.
In 1999, the Stock Option Committee granted 1,067,950 options to purchase
Common Stock to officers or key employees of the Company pursuant to the Stock
Option Plan. Such options were granted at exercise prices ranging from $5.4375
to $9.00 per share. All such prices represented the closing price of the Common
Stock on the date of grant. During 1999, 750,450 options were granted to Mr.
Johnson with a three-year vesting period and a ten-year term. All other options
granted in 1999 were granted with a five-year vesting period and a ten-year
term. In 2000, the Stock Option Committee granted 387,250 options to purchase
Common Stock to officers or other key employees pursuant to the 1993 Stock
Option Plan. Such options were granted at an exercise price of $5.0625 with a
five-year vesting period and a ten-year term. The exercise price represented the
closing price of the Common Stock on the date of the grant.
Chief Executive Officer Mr. Johnson, who joined the Company in March 1999,
received $372,308 in base salary from the Company in respect to such year. Mr.
Johnson's base salary level ($500,000 per year) was approved based upon a review
of market data for similar positions. Mr. Johnson's $250,000 bonus in 1999 was
based on the terms of his employment agreement, which provided for a minimum
bonus of such amount.
Policy Regarding Qualifying Compensation Section 162(m) of the Internal Revenue
Code imposes a $1,000,000 ceiling on tax-deductible remuneration paid to the
five most highly compensated executive officers of a publicly-held corporation,
unless the compensation is treated as performance related. While the Company's
general policy is that compensation to the Company's executive officers should,
under most circumstances, satisfy the conditions required for full
deductibility, the Company believes that in order to effectively compete with
other similarly situated companies in the acquisition and retention of top
executive talent, the Company must have the flexibility to pay compensation that
may not be fully deductible under Section 162(m) of the Code. The Company
believes that the compensation of all executive officers for 1999 was fully
deductible.
COMPENSATION COMMITTEE STOCK OPTION PLAN COMMITTEE
John V. Tunney, Chairman Robert J. Hay, Chairman
Stuart J. Hershon Stuart J. Hershon
Robert J. Hay
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised entirely of Outside Directors. No
employee of the Company serves on the Compensation Committee. The Company is not
aware of any other corporation in which both (i) an executive officer of the
Company serves on the board of directors and/or compensation committee and (ii)
a director of the Company serves as an executive officer. See "Certain
Relationships and Related Transactions - Tunney Consulting Agreement" for a
discussion of certain transactions between the Company and John V. Tunney, the
Chairman of the Compensation Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of material transactions between the Company
and its affiliates entered into or continuing during 1999. Payments to
affiliates by Foamex L.P. and its subsidiaries in connection with any such
transactions are governed by the provisions of the indentures for its public
debt securities, which generally provide that such transactions be on terms
comparable to those generally available in equivalent transactions with third
parties.
Trace Accounts Receivables
As of December 31, 1999, operating accounts receivables from Trace were
approximately $3.4 million against which an allowance has been taken by the
Company as a result of the financial condition of Trace. Claims have been filed
in the Trace bankruptcy proceedings for such amount.
Airplane Sale
On March 31, 1999, the Company sold its corporate airplane to an
unaffiliated third party for $16.3 million in gross proceeds of which $8.9
million was used to repay debt associated with the airplane. As specified by the
terms of the Aircraft Sales, Lease and Operating Agreement, dated August 1995,
pursuant to which the Company purchased the airplane from Trace, Trace agreed to
reimburse the Company to the extent the net proceeds from the sale of the
airplane were less than a specified amount, and the Company was obligated to
share the net proceeds in excess of such specified amount with Trace. Pursuant
to the terms of such agreement, the Company was obligated to pay Trace $0.6
million or approximately 50% of the "Excess Proceeds", as defined, which was
offset against Trace's two promissory notes payable to Foamex L.P., at Trace's
request. See "Trace Promissory Notes" below.
Employment Arrangements
During 1999, certain employees of the Company were also employees of
Trace and/or affiliates of Trace. The Company paid the salaries or a portion of
the salaries of such employees of Trace based on the amount of time devoted to
the Company's matters by such employees, which payments in 1999 aggregated
approximately $1.8 million. Certain of these employees entered into employment
agreements with the Company in January 1999, which agreements provided for
aggregate annual compensation of approximately $1.1 million. As of December 31,
1999, all such dual employment arrangements have been terminated.
Tunney Consulting Agreement
John V. Tunney, a director of the Company, acts as a business advisor to
the Company. Pursuant to this arrangement, Mr. Tunney provides consulting
services to the Company with respect to various personnel and compensation
issues. In exchange for his services, Mr. Tunney receives a fee of $10,000 per
month. The Company maintains an apartment that is used by Mr. Tunney while on
Company business. The apartment lease was assumed by the Company from Trace
during 1999 and expires in August 2000. Rent paid by the Company totaled $0.1
million in 1999. During 1999, Mr. Tunney earned $0.1 million for his services in
obtaining a Chief Executive Officer for the Company. In addition, Mr. Tunney
serves as the Chairman and has a 5% interest in the value of Foamex Asia's
interest in a joint venture.
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Management Service Agreement
Foamex L.P. had a management service agreement with Trace Foam pursuant
to which Trace Foam provided general managerial services of a financial,
technical, legal, commercial, administrative and/or advisory nature to Foamex
L.P. The management services agreement provided for an annual fee of $3.0
million, plus reimbursement of expenses incurred. An amendment to the Foamex
L.P. Credit Facility on June 30, 1999 no longer permitted Foamex L.P. to pay the
management fee. On July 29, 1999, Foamex L.P. submitted formal notice of the
termination of the management agreement.
Foamex/GFI Note
Foamex L.P. owed a $34.0 million promissory note payable to Foam Funding
LLC, a wholly owned subsidiary of Trace, which was due and paid in March 2000.
Interest was based on a variable rate equal to the higher of (i) the base rate
of The Bank of Nova Scotia or (ii) the Federal Funds rate plus 0.5%. At the
option of Foamex L.P., the note was convertible to a LIBOR-based interest rate
plus 0.75%. The principal and current interest payable under the Foamex/GFI Note
were collateralized by a $34.5 million letter of credit issued under the Foamex
L.P. Credit Facility. During 1999, the Foamex L.P. paid Foam Funding LLC
approximately $2.1 million of interest pursuant to the terms of the Foamex/GFI
Note.
Note Payable to Foam Funding LLC
Foamex Carpet entered into a $70.2 million promissory note payable to
Foam Funding LLC. Principal is payable in quarterly installments that began in
June 1998 with a final installment in February 2004. Interest is based on a
variable rate equal to the sum of 2.25% plus the higher of: (i) the base rate of
The Bank of Nova Scotia or (ii) the Federal Funds rate plus 0.5%. At the option
of Foamex Carpet, interest payable under the note is convertible into
LIBOR-based loans plus 3.25%. Amounts outstanding under the Note Payable to Foam
Funding LLC are collateralized by all of the assets of Foamex Carpet on a pari
passu basis with the Foamex Carpet credit facility. During 1999, Foamex Carpet
paid Foam Funding LLC approximately $5.3 million in interest and approximately
$9.7 million in principal pursuant to the terms of the Note Payable to Foam
Funding LLC.
Technology Sharing Arrangements
In December 1992, Foamex L.P., Recticel and Beamech Group Limited
("Beamech"), an unaffiliated third party, formed a Swiss corporation to develop
new manufacturing technology for the production of polyurethane foam. Each of
Foamex L.P., Recticel and Beamech contributed or caused to be contributed to
such corporation a combination of cash and technology valued at $1.5 million,
$3.0 million and $1.5 million, respectively, for a 25%, 50% and 25% interest,
respectively, in the corporation. Foamex L.P., Recticel and their affiliates
have been granted a royalty-free license to use certain technology, and it is
expected that the corporation will license use of such technology to other foam
producers in exchange for royalty payments.
Indemnification Regarding Environmental Matters
Pursuant to an Asset Transfer Agreement (the "RFC Asset Transfer
Agreement"), dated October 2, 1990, as amended, between Foamex L.P. and Recticel
Foam Corporation ("RFC"), Foamex L.P. is indemnified by RFC for any liabilities
incurred by Foamex L.P. arising out of or resulting from, among other things,
the ownership or use of any of the assets transferred pursuant to the RFC Asset
Transfer Agreement or the conduct of the transferred business on or prior to
October 2, 1990, including, without limitation, any loss actually arising out of
or resulting from any events, occurrences, acts or activities occurring before
October 2, 1990 or occurring after October 2, 1990 to the extent resulting from
conditions existing on or prior to October 2, 1990, relating to (i) injuries to
or the contraction of any diseases by any person resulting from exposure to
Hazardous Substances (as defined in the RFC Asset Transfer Agreement) without
regard to when such injuries or diseases are first manifested, (ii) the
generation, processing, handling, storage or disposition of or contamination by
any waste or Hazardous Substance, whether on or off the premises from which the
transferred business has been conducted, or (iii) any pollution or other damage
or injury to the environment, whether on or off the premises from which the
transferred business has been conducted. Foamex L.P. is also indemnified by RFC
for any liabilities arising under Environmental Laws (as defined in the RFC
Asset Transfer Agreement) relating to current or former RFC assets and for any
liability for property damage
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or bodily harm relating to products of the transferred business shipped on or
prior to October 2, 1990. Such indemnification is limited after December 1993
unless such liability is covered by insurance. Foamex L.P. agreed to assume
certain known environmental liabilities relating to the assets transferred by
RFC to Foamex L.P., with an estimated remediation cost of less than $0.5
million, in exchange for a cash payment by RFC to Foamex L.P. approximately
equal to the remediation cost for such environmental liabilities. During the
first quarter of 2000, RFC paid the Company approximately $0.3 million, which
was owed to the Company on December 31, 1999.
Pursuant to the Asset Transfer Agreement, dated as of October 2, 1990, as
amended, between Trace and Foamex L.P. (the "Trace Asset Transfer Agreement"),
Foamex L.P. is indemnified by Trace for any liabilities incurred by Foamex L.P.
arising out of or resulting from, among other things, the ownership or use of
any of certain assets that were transferred pursuant to the Trace Asset Transfer
Agreement or the conduct of the transferred business on or prior to October 2,
1990, including, without limitation, any loss actually arising out of or
resulting from any events, occurrences, acts or activities occurring after
October 2, 1990, to the extent resulting from conditions existing on or prior to
October 2, 1990, relating to (i) injuries to or the contraction of any diseases
by any person resulting from exposure to Hazardous Substances (as defined in the
Trace Asset Transfer Agreement) without regard to when such injuries or diseases
are first manifested, (ii) the generation, processing, handling, storage or
disposition of or contamination by any waste or Hazardous Substance, whether on
or off the premises from which the transferred business has been conducted or
(iii) any pollution or other damage or injury to the environment, whether on or
off the premises from which the transferred business has been conducted. Foamex
L.P. is also indemnified by Trace for any liabilities arising under
Environmental Laws (as defined in the Trace Asset Transfer Agreement) relating
to current or former Trace assets and for any liability relating to products of
the transferred business shipped on or prior to October 2, 1990. As of December
31, 1999, Trace owned Foamex L.P. approximately $0.3 million pursuant to the
Trace Asset Transfer Agreement, which has not been paid. A claim has been filed
for such amount in the Trace bankruptcy proceedings.
Certain Transactions relating to the Acquisition of General Felt
In connection with Foamex L.P.'s acquisition of General Felt in March
1993, Trace and General Felt entered into the GFI Reimbursement Agreement, as
defined therein, pursuant to which Trace has agreed to reimburse General Felt on
a pro rata basis reflecting the period of time each has occupied the facility
for costs relating to the cleanup plan for a facility in Trenton, New Jersey
formerly owned by General Felt. The GFI Reimbursement Agreement was assigned by
General Felt to Foamex Carpet. A claim has been filed in the Trace bankruptcy
proceeding for approximately $0.6 million.
Trace Promissory Notes
Prior to 1999, Trace had borrowed $9.8 million from Foamex L.P. pursuant
to the terms of two promissory notes (the "Trace Notes"). The Trace Notes are
due and payable on demand or, if no demand is made, on July 7, 2001, and bear
interest at 2 3/8% plus three-month LIBOR, as defined, per annum payable
quarterly in arrears. Trace is in default on the Trace Notes and a claim has
been filed for the full amount in the Trace bankruptcy proceedings.
New York Office Sublease
Prior to September 30, 1999, Foamex L.P. subleased to Trace approximately
5,900 square feet of general, executive and administrative office space in New
York, New York. The terms of the lease were substantially the same terms as
Foamex L.P. leased such space from a third party lessor. The Company has closed
the New York office and Foamex L.P. subleased the premises to a third party at
an amount in excess of Foamex L.P.'s lease commitment. A claim has been filed
for approximately $2.4 million of unpaid rent in the Trace bankruptcy
proceedings.
Pico Rivera Lease
Foam Funding LLC and Foamex Carpet entered into a lease, dated as of
February 27, 1998, pursuant to which Foam Funding LLC leases to Foamex Carpet
the premises located in Pico Rivera, California for an initial term ending on
December 31, 2004, which term may be extended for consecutive one-year periods
commencing on
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January 1, 2005 and expiring on December 31, 2007. The lease is a net lease and
Foamex Carpet has no right to terminate for any reason during the term and all
expenses and impositions in connection with the premises are the obligation of
Foamex Carpet. The basic, or fixed, rent is approximately $0.4 million per year.
If Foam Funding LLC desires to sell or convey all or any part of the leased
premises, and Foam Funding LLC obtains a bona fide arms' length written purchase
offer from a third party (the "Offer"), Foamex Carpet may elect to purchase the
portion of the leased premises which is the subject of the Offer on the precise
terms and conditions of the Offer. Foamex Carpet also has the right (the
"Option") at any time during the term to purchase all of the leased premises
from Foam Funding LLC for a purchase price which is determined to be fair market
value on the date of the exercise of the Option as determined by an appraisal
made by two independent qualified appraisers, one selected by Foam Funding LLC
and one selected by Foamex Carpet.
Investments - Retirement Plan
Prior to 1999, the Company's Retirement Plan had invested approximately
$5.0 million in shares of Trace Global Opportunities Fund, which primarily
invested in companies organized or operating outside the G-7 markets and was a
related party to Trace. In 1999, Trace divested its interest in the Trace Global
Opportunities Fund. The fund changed its name to the GLS Global Opportunities
Fund, which is not a related party to the Company. Prior to 1999, 250,000 shares
of UAG, which is a related party to Trace, were purchased by the Company's
Retirement Plan for approximately $4.8 million. The value of the UAG shares was
$2.2 million at December 31, 1999.
Investments
Prior to 1999, the Company purchased a $2.0 million investment in Trace
Global Opportunities Fund. In 1999, the investment was sold for $0.9 million.
APPROVAL OF AMENDMENTS TO THE 1993 STOCK OPTION PLAN
Background
The 1993 Stock Option Plan was adopted by the Company's Board of
Directors and approved by the Company's sole stockholder in 1993. The Company
has historically utilized stock options as part of its overall compensation
program for key employees, directors and officers. As of May 25, 2000, options
for approximately 2,710,000 shares were outstanding under the 1993 Stock Option
Plan. A balance of approximately 4,800 shares are currently available for future
option grants. The Board of Directors has approved, subject to shareholder
approval, amendments to the 1993 Stock Option Plan (the "Amendments") to (i)
increase from 3,000,000 to 4,750,000 the number of shares of Common Stock that
may be issued under the 1993 Stock Option Plan, and (ii) allow future option
grants to qualify as "performance-based compensation" as described in the next
sentence. The Amendments are being submitted to stockholders because the 1993
Stock Option Plan by its terms requires stockholder approval to increase the
number of shares for issuance thereunder, and because the Company desires that
options granted under the 1993 Stock Option Plan qualify as "performance-based
compensation" for purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). Stockholder approval of the Amendments is
required to qualify for an exception to the deduction limit imposed by 162(m) of
the Code, as well as by the rules of the Nasdaq National Market System.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to adopt the Amendments in order to enable the
Company to continue to attract, retain and provide incentives for officers,
employee-directors and employees of the Company. The Amendments, if approved by
stockholders, will enable the Company to have a sufficient number of stock
options available for future grants, while also permitting the Company to obtain
federal income tax deductions for compensation paid or awarded to such
designated officers, directors and employees of the Company. If the Amendments
are not approved by the stockholders, they will not be adopted. Along with the
Amendments, the major features of the 1993 Stock Option Plan are summarized
below, which summary is qualified in its entirety by reference to the full text
of the 1993 Stock Option Plan, a copy of which may be obtained from the Company.
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The Amendments
If the Amendments are approved by the stockholders, the 1993 Stock Option
Plan will be amended as follows:
The first sentence of Paragraph 5 of the 1993 Stock Option Plan will be
amended to read:
"The aggregate number of shares of the Company's Common Stock that
may be issued upon the exercise of Options shall not exceed 4,750,000
shares, subject to adjustment under the provisions of Paragraph 8."
In order for options granted under the 1993 Stock Option Plan to qualify
as "performance-based compensation" for purposes of Section 162(m) of the Code,
(i) Paragraph 5 will be amended by adding the following new sentence
at the end thereof:
"Subject to the first sentence of this Paragraph 5, no person may be
granted Options under the Plan during any calendar year with respect
to more than 750,000 shares of the Company's Common Stock; provided
that such number shall be adjusted pursuant to Paragraph 8, only in a
manner which will not cause Options granted under the Plan to fail to
qualify as "performance-based compensation" for purposes of Section
162(m) of the Code."
(ii) Paragraph 2(g) of the 1993 Stock Option Plan will be amended to
add the following new sentence at the end thereof:
A "disinterested person" shall also be an "outside director" within
the meaning of Section 162(m) of the Code, and the Treasury
regulations promulgated thereunder to the extent that the Committee
grants Options with respect to which the Company's tax deduction
could be limited by Section 162(m) of the Code if such person were
not a "non-employed director." Although it is intended that each
member of the Committee shall qualify as a "non-employed director"
within the meaning of Rule 16b-3 and as an "outside director" within
the meaning of Section 162(m) of the Code, a failure of a Committee
member so to qualify shall not invalidate any Option granted by the
Committee which Option is otherwise validly made under the Plan".
(iii)The first sentence of Paragraph 7(a) of the 1993 Stock Option
Plan will be amended in its entirety to read:
"The Option Price per share with respect to each Option shall be
determined by the Committee, but shall in no instance be less than
par value of the shares subject to the Option; provided, however,
that all Options which are intended to qualify as "performance-based
compensation" under Section 162(m) of the Code shall have an Option
Price per share of Common Stock no less than the fair market value of
a share of Common Stock on the Date of Grant."
SUMMARY OF THE AMENDED 1993 STOCK OPTION PLAN
Purpose
The 1993 Stock Option Plan was established in 1993 to enable the Company
and its subsidiaries to attract able persons to enter and remain in the employ
of the Company and its subsidiaries and to provide a means whereby employees,
employee-directors of the Company and its subsidiaries can acquire and maintain
Common Stock ownership, thereby strengthening their commitment to the welfare of
the Company and its subsidiaries and promoting an identity of interest between
stockholders and these employees and to encourage them to put forth maximum
effort toward the success of the business. The approximate number of persons
participating in the 1993 Stock Option Plan is 120.
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Administration
The 1993 Stock Option Plan is administered by the Stock Option Committee
(the "Committee") of the Company's Board of Directors consisting of two or more
directors appointed by the Board of Directors of the Company. It is intended,
but not required, that the directors appointed to serve on the Committee will be
"Non-Employee Directors" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934) and "Outside Directors" within the meaning of
Section 162(m) of the Code, to the extent Rule 16b-3 and 162(m) are applicable;
however, the fact that a Committee member fails to qualify under the foregoing
requirements will not invalidate any option which is otherwise validly made
under the 1993 Stock Option Plan. Subject to the terms of the 1993 Stock Option
Plan, the Committee has the authority to grant options, to determine the number
of Shares for which each option shall be granted and the option price or prices
(which may, in the case of Incentive Stock Options ("ISOs") and options intended
to qualify as "performance-based compensation" under Section 162(m) of the Code,
be no less than the fair market value of the Common Stock on the date of grant)
and to determine any conditions pertaining to the exercise or to the vesting of
each option. The Committee has full power to construe and interpret the 1993
Stock Option Plan and any agreement executed pursuant to the 1993 Stock Option
Plan, to establish and amend rules for its administration and to establish in
its discretion terms and conditions applicable to the exercise of options. The
determination of the Committee on all matters relating to the 1993 Stock Option
Plan or any stock option agreement is conclusive.
Eligibility
Any officer, employee or employee-director of the Company or any of its
subsidiaries or parent shall be eligible to be designated a participant under
the 1993 Stock Option Plan (the "Participant" or "Participants"); provided
however, that no ISO may be granted to any individual who is not an employee of
the Company or a "parent" or a "subsidiary" of the Company as such term is
defined in Section 422 of the Code. The Committee has the sole and complete
authority to determine the individuals to whom options shall be granted under
the 1993 Stock Option Plan, and in so determining, the Committee may take into
account the services rendered by the respective persons, their present and
potential contributions to the Company's success and such other factors as the
Committee deems relevant.
Number of Shares Authorized
Under the Amendments, a maximum of 4,750,000 aggregate shares of Common
Stock would be available for granting options under the 1993 Stock Option Plan.
The Amendments further provide that in no event may the aggregate number of
shares of Common Stock with respect to which options are granted under the 1993
Stock Option Plan to any individual exceed 750,000 in any one calendar year. As
described more fully in the 1993 Stock Option Plan, if an option expires or
terminates for any reason during the term of the 1993 Stock Option Plan and
prior to the exercise in full of such option, the number of shares previously
subject to but not delivered under such option shall be available to be awarded
thereafter. As of May 26, 2000, the closing price of one share of Common Stock
on NASDAQ was $5.4375.
In addition, if the Committee determines that certain corporate
transactions or events (as described in the 1993 Stock Option Plan) affect the
shares such that an adjustment is determined by the Committee in its discretion
to be consistent with such event and necessary or equitable to carry out the
purposes of the 1993 Stock Option Plan, the 1993 Stock Option Plan provides the
Committee the discretion to appropriately adjust (a) the aggregate number of
shares of Common Stock available for options, (b) the number of such shares
covered by outstanding options, and (c) the price per share of such options so
as to in the Committee's discretion prevent the diminution or enlargement of the
benefits intended by the 1993 Stock Option Plan.
Terms and Conditions of Options
Under the 1993 Stock Option Plan, the Committee may grant awards of
options that are either nonqualified stock options ("NSOs") or ISOs. An option
granted under the 1993 Stock Option Plan provides a Participant with the right
to purchase, within a specified period of time, a stated number of shares at the
price specified in the option. Options granted under the 1993 Stock Option Plan
will be subject to such terms, including exercise price and the conditions and
timing of exercise, not inconsistent with the 1993 Stock Option Plan, as may be
determined by the
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Committee and specified in the applicable option agreement or thereafter.
Payment in respect of the exercise of an option may be made in cash or by check,
or any other manner permitted by law as determined by the Committee, or by a
combination of the foregoing.
Transferability
Each option, and each right under any option may be exercised, during the
Participant's lifetime, only by the Participant or, if permissible under
applicable law, by the Participant's guardian or legal representative, and may
not be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant other than by will or by the laws of descent and
distribution provided that the designation of a beneficiary will not constitute
an assignment, alienation, pledge, attachment, sale, transfer or encumbrance for
purposes of the 1993 Stock Option Plan.
Amendment
The Board may at any time suspend terminate, modify or amend the 1993
Stock Option Plan or any portion thereof, provided that no such action may be
taken without shareholder approval if such approval is necessary to comply with
any regulatory requirement, and provided further, that any such amendment or
modification, suspension or modification or termination that would impair any
rights under any option theretofore made under the 1993 Stock Option Plan shall
not to that extent be effective without the consent of the person to whom such
option was made.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of the grant
and exercise of NSOs and ISOs awarded under the 1993 Stock Option Plan and the
disposition of Common Stock purchased pursuant to the exercise of such options
(the "Shares") is intended to reflect the current provisions of the Code and the
regulations thereunder. This summary is not intended to be a complete statement
of applicable law, it does not address state and local tax considerations, nor
does it address the tax consequences of options granted to individual taxpayers
located outside the U.S. Moreover, the U.S. federal income tax consequences to
any particular individual may differ from those described herein by reason of,
among other things, the particular circumstances of such individual. For these
reasons, Participants are urged to consult their own tax advisors with respect
to the consequences of their participation in the 1993 Stock Option Plan.
No income will be realized by an optionee upon grant of an NSO. Upon
exercise of an NSO, the optionee will recognize ordinary compensation income in
an amount equal to the excess, if any, of the fair market value of the
underlying stock over the option exercise price (the "Spread") at the time of
exercise. The Spread will be deductible by the Company for federal income tax
purposes, subject to the possible limitations on deductibility under Sections
280G and 162(m) of the Code of compensation paid to executives designated in
those sections. The optionee's tax basis in the underlying Shares acquired by
exercise of an NSO will equal the exercise price plus the amount taxable as
compensation to the optionee. Upon sale of the Shares received by the optionee
upon exercise of the NSO, any gain or loss is generally long-term or short-term
capital gain or loss, depending on the holding period. The optionee's holding
period for Shares acquired pursuant to the exercise of an NSO will begin on the
date of exercise of such Option.
Pursuant to currently applicable rules under Section 16(b) of the
Exchange Act, the grant of an option (and not its exercise) to a person who is
subject to the reporting and short-swing profit provisions under Section 16 of
the Exchange Act (a "Section 16 Person") begins the six-month period of
potential short-swing liability. The taxable event for the exercise of an option
that has been outstanding at least six months ordinarily will be the date of
exercise. If an option is exercised by a Section 16 Person within six months
after the date of grant, however, taxation ordinarily will be deferred until the
date which is six months after the date of grant, unless the person has filed a
timely election pursuant to Section 83(b) of the Code to be taxed on the date of
exercise. Under current rules promulgated under Section 16(b) of the Exchange
Act, the six month period of potential short-swing liability may be eliminated
if the option grant (i) is approved in advance by the Company's board of
directors (or a committee composed solely of two or more non-employee Directors)
or (ii) approved in advance, or subsequently ratified by the Company's
shareholders no later than the next annual meeting of shareholders.
Consequently, the taxable event
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for the exercise of an option that satisfies either of the conditions described
in clauses (i) or (ii) above will be the date of exercise.
The Code requires that, for ISO treatment, Shares acquired through
exercise of an ISO cannot be disposed of before two years from the date of grant
of the option and one year from the date of exercise. ISO holders will generally
incur no federal income tax liability at the time of grant or upon exercise of
such options. However, the spread at exercise will be an "item of tax
preference" which may give rise to "alternative minimum tax" liability for the
taxable year in which the exercise occurs at the time of exercise. If the
optionee does not dispose of the Shares before two years following the date of
grant and one year following the date of exercise, the difference between the
exercise price and the amount realized upon disposition of the Shares will
constitute long-term capital gain or loss, as the case may be. Assuming both
holding periods are satisfied, no deduction will be allowed to the Company for
federal income tax purposes in connection with the grant or exercise of the
option. If, within two years following the date of grant or within one year
following the date of exercise, the holder of Shares acquired through the
exercise of an ISO disposes of such Shares, the optionee will generally realize
ordinary taxable compensation at the time of such disposition equal to the
difference between the exercise price and the lesser of the fair market value of
the stock on the date of initial exercise or the amount realized on the
subsequent disposition, and such amount will generally be deductible by the
Company for federal income tax purposes, subject to the possible limitations on
deductibility under Sections 280G and 162(m) of the Code for compensation paid
to executives designated in those sections.
The payment by an optionee of the exercise price, in full or in part,
with previously acquired Shares will not affect the tax treatment of the
exercise described above. No gain or loss generally will be recognized by the
optionee upon the surrender of the previously acquired Shares to the Company,
and Shares received by the optionee, equal in number to the previously
surrendered Shares, will have the same tax basis as the Shares surrendered to
the Company and will have a holding period that includes the holding period of
the Shares surrendered. The value of Shares received by the optionee in excess
of the number of Shares surrendered to the Company will be taxable to the
optionee. Such additional Shares will have a tax basis equal to the fair market
value of such additional Shares as of the date ordinary income is recognized,
and will have a holding period that begins on the date ordinary income is
recognized.
In general, Section 162(m) of the Code denies a publicly held corporation
a deduction for federal income tax purposes for compensation in excess of
$1,000,000 per year per person to its chief executive officer and the four other
officers whose compensation is disclosed in its proxy statement, subject to
certain exceptions. Options will generally qualify under one of these exceptions
if they are granted under a plan that states the maximum number of shares with
respect to which options may be granted to any employee during a specified
period, the exercise price is not less than the fair market value of the common
stock at the time of grant, and the plan under which the options are granted is
approved by stockholders and is administered by a compensation committee
comprised of outside directors. The 1993 Stock Option Plan as amended is
intended to satisfy these requirements with respect to grants of options to
covered employees.
New Plan Benefits
The grant of options under the 1993 Stock Option Plan is subject to the
discretion of the Committee. Accordingly, the options that will be received by
the various potential participants and options that might have been received by
the various potential participants had the Amendments been in effect for the
Company's last completed fiscal year are not determinable.
Vote Required
The affirmative vote of a majority of the shares of Common Stock present
or represented at the Annual Meeting and entitled to vote is required for
approval of the proposed amendments to the 1993 Stock Option Plan.
The Board of Directors recommends a vote "FOR" the approval of the
Amendments to the 1993 Stock Option Plan.
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RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee, has
appointed the firm of PricewaterhouseCoopers LLP as the independent accountants
of the Company for 2000. PricewaterhouseCoopers LLP will examine the financial
statements of the Company for the year 2000. This firm has examined the accounts
of the Company since its inception in 1993 and for Foamex L.P. and its
subsidiaries since fiscal year 1992. If the stockholders do not ratify this
appointment, the Board will consider other independent accountants. One or more
members of PricewaterhouseCoopers LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they so desire and
will be available to respond to questions.
Vote Required
The affirmative vote of a majority of the shares of Common Stock present
or represented at the Annual Meeting and entitled to vote is required for the
ratification of the independent accountants.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants.
SHARE INVESTMENT PERFORMANCE
The following graph compares the cumulative total stockholder returns on
the Common Stock based on an investment of $100 on December 31, 1994, after the
close of the market on (i) December 31, 1995; (ii) December 31, 1996; (iii)
December 31, 1997; (iv) December 31, 1998; and (v) December 31, 1999, against
the Standard & Poor's Index ("S&P 500") and an industry peer group consisting of
the following companies: Armstrong World Industries, Inc., Leggett & Platt,
Inc., Sealed Air Corporation and Shaw Industries, Inc.
<TABLE>
<CAPTION>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG FOAMEX INTERNATIONAL INC., THE S & P 500 INDEX
AND A PEER GROUP
(Line graph omitted)
Cumulative Total Return
----------------------------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
(Dollars)
<S> <C> <C> <C> <C> <C> <C>
FOAMEX INTERNATIONAL INC. 100.00 73.75 165.00 108.75 124.25 83.46
PEER GROUP 100.00 134.42 161.02 192.99 210.31 178.11
S & P 500 100.00 137.58 169.17 225.61 290.09 351.13
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
24
<PAGE>
FILINGS UNDER SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires executive officers and
directors, and persons who beneficially own more than 10% of the Company's
stock, to file initial reports of ownership and reports of changes of ownership
with the SEC and the NASDAQ National Market System, Inc. Executive officers,
directors and greater than 10% beneficial owners are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
furnished to the Company and written representations from the executive
officers, directors and greater than 10% beneficial owners, the Company believes
that all Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10% owners were complied with.
STOCKHOLDER PROPOSALS FOR 2001
Any proposals intended to be presented to stockholders at the Company's
2001 Annual Meeting of Stockholders must be received by the Company for
inclusion in the Proxy Statement for such Annual Meeting by February 8, 2001.
Such proposals must also meet other requirements of the rules of the SEC
relating to stockholders' proposals and the requirements set forth in the
Company's By-Laws.
Pursuant to the By-Laws, stockholders proposing business to be brought
before the Annual Meeting must deliver written notice thereof to the Secretary
of the Company not later than the close of business on the tenth day following
the date on which the Company first makes public disclosure of the date of the
annual meeting. The stockholder's notice must contain a brief description of the
business and reasons for conducting the business at an annual meeting, the name
and address of the stockholder making the proposal, and any material interest of
the stockholder in the business. The stockholder is also required to furnish a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at such meeting to propose such business.
OTHER BUSINESS
It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors and the proposals described
herein, and the Board of Directors was not aware, a reasonable time before this
solicitation of proxies, of any other matters which might properly be presented
for action at the meeting. If any other business should come before the Annual
Meeting, the persons named on the enclosed proxy card will have discretionary
authority to vote all proxies in accordance with their best judgment.
Proxies in the form enclosed are solicited by or on behalf of the Board
of Directors. The cost of this solicitation will be borne by the Company. In
addition to the solicitation of the proxies by use of the mails, some of the
officers and regular employees of the Company, without extra remuneration, may
solicit proxies personally, or by telephone or otherwise. In addition,
arrangements will be made with brokerage houses and other custodian, nominees
and fiduciaries to forward proxies and proxy material to their principals, and
the Company will reimburse them for their expenses in forwarding soliciting
materials, which are not expected to exceed $5,000. The Company has agreed to
engage Georgeson Shareholder Communications Inc. for $7,500 plus expenses, to
assist in soliciting proxies.
It is important the proxies be returned promptly. Therefore,
stockholders are urged to sign, date and return the enclosed proxy card in the
accompanying stamped and addressed envelope.
By Order of the Board of Directors
/s/ Gregory J. Christian
---------------------------
Gregory J. Christian
May 31, 2000
25
<PAGE>
FOAMEX INTERNATIONAL INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby revokes all prior proxies and appoints Robert J.
Hay and John V. Tunney, and each of them, as proxies with full power of
substitution, to vote on behalf of the undersigned the same number of shares of
Foamex International Inc. Common Stock which the undersigned is then entitled to
vote, at the Annual Meeting of Stockholders to be held on Friday, June 30, 2000,
at 10:00 a.m., at The Sheraton Suites, 422 Delaware Avenue, Wilmington, Delaware
19801, and at any adjournments thereof, on any matter properly coming before the
meeting, and specifically the following:
The proxy will be voted as specified. If no specification is made, it will
be voted for proposals 1,2 and 3.
(Continued on reverse side)
^ FOLD AND DETACH HERE ^
<PAGE>
The Board of Directors recommends stockholders vote "FOR" the proposals below.
1. To elect seven directors to serve until the 2001 Annual Meeting of
Stockholders or until their respective successors are duly elected and
qualified;
|_| FOR all nominees listed |_| WITHHOLD authority
(except as marked to the contrary)
MARSHALL S. COGAN, ETIENNE DAVIGNON, ROBERT J. HAY, STUART J. HERSHON,
JOHN G. JOHNSON, JR., JOHN TELEVANTOS, JOHN V. TUNNEY
Instructions: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below.
------------------------------------------------------------------------------
2. To amend the Foamex International Inc. 1993 Stock Option Plan to (i) increase
from 3,000,000 to 4,750,000 the number of shares of the Company's Common Stock,
par value $.01 per share, that may be issued under the 1993 Stock Option Plan
and (ii) allow future option grants to qualify as "performance-based
compensation" for purposes of the Internal Revenue Code of 1986, as amended.
|_| FOR |_| AGAINST |_| ABSTAIN
3. To ratify the selection of PricewaterhouseCoopers LLP as the Company's
independent accountants for the year ending December 31, 2000 ("Fiscal 2000")
|_| FOR |_| AGAINST |_| ABSTAIN
4. To transact such other business as may properly come before the meeting or
any adjournment or and postponement thereof.
Mark here if you plan to attend the meeting |_|
-------------------------------------------------
-------------------------------------------------
Signature of Stockholder(s)
-------------------------------------------------
Date
Note: Please sign your name exactly as it is
shown at the left. When signing as attorney,
executor, administrator, trustee, guardian or
corporate officer, please give your full
title as such. EACH joint owner is requested
to sign.
Please sign, date and return this proxy promptly in the
enclosed postage paid envelope.
^ FOLD AND DETACH HERE ^
<PAGE>
Appendix A
FOAMEX INTERNATIONAL INC.
AMENDED & RESTATED
1993 STOCK OPTION PLAN
1. Purpose. The purpose of this Foamex International, Inc. 1993 Stock
Option Plan (hereinafter referred to as the "Plan") is to further the success of
Foamex International Inc., a Delaware corporation (the "Company"), and certain
of its affiliates by making available Common Stock of the Company for purchase
by officers, employees, and director-employees of the Company or its affiliates,
and thus to provide an additional incentive to such individuals to continue in
the service of the Company or its affiliates and to give them a greater interest
as stockholders in the success of the Company. Accordingly, the Committee is
hereby authorized to designate those Participants who are to receive Options
under this Plan, and upon the due execution of an Option Agreement, to grant
Options to such Participants.
2. Definitions. As used in this Plan, the terms set forth below shall
have the following meanings:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Committee administering the Plan described
in Paragraph 3 hereof.
(d) "Common Stock" means the Company's common stock, par value $0.01
per share.
(e) "Company" means Foamex International Inc., a Delaware corporation,
and any successor in interest.
(f) "Date of Grant" means the date on which an Option is granted under
a written Option Agreement executed by the Company and a
Participant pursuant to the Plan.
(g) "Disinterested Person" means a "disinterested person" as defined
in Rule 16b-3 promulgated under the Exchange Act or any successor
provision. In general, and subject to Rule 16b-3, a "disinterested
person" is a director who, during the one-year period prior to his
or her service on the Committee, was not granted a stock option or
other equity security of the Company or any of its affiliates,
except as expressly permitted under the Rule. A "disinterested
person" shall also be an "outside director" within the meaning of
Section 162(m) of the Code, and the Treasury regulations
promulgated thereunder to the extent that the Committee grants
Options with respect to which the Company's tax deduction could be
limited by Section 162(m) of the Code if such person were not a
"non-employed director." Although it is intended that each member
of the Committee shall qualify as a "non-employed director" within
the meaning of Rule 16b-3 and as an "outside director" within the
meaning of Section 162(m) of the Code, a failure of a Committee
member so to qualify shall not invalidate any Option granted by
the Committee which Option is otherwise validly made under the
Plan.
(h) "Effective Date" means the effective date of this Plan specified
in Paragraph 14 hereof.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as it
may be amended from time to time.
(j) "Incentive Stock Option" means an Option qualifying under Section
422 of the Code.
(k) "Option" means an Option granted pursuant to this Plan and may be
either an Incentive Stock Option or a Non-qualified Stock Option.
(1) "Option Agreement" means a written agreement between the Company
and a Participant pursuant to which Options are granted to a
Participant under this Plan.
(m) "Option Price" means the price per share of Common Stock,
determined under Paragraph 7(a) hereof, for which an Option may be
exercised.
(n) "Optionee" shall mean the person who is entitled to exercise an
Option.
(o) "Non-qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(p) "Parent" means a parent corporation of the Company as defined in
Section 424(e) of the Code.
(q) "Participants" means the employees (including employee-directors)
and officers of the Company, and its affiliates, including without
limitation Foamex L.P., `21' International Holdings, Inc., General
Felt Industries, Inc., Perfect Fit Industries, Inc., Foamex Latin
America, Inc. and any Parents
<PAGE>
or Subsidiaries; provided, however, that with respect to grants of
Incentive Stock Options, "Participants" shall mean only the
employees (including employee-directors) and officers of the
Company and its Parents and Subsidiaries.
(r) "Plan" means this Foamex International Inc. 1993 Stock Option
Plan.
(s) "Relinquished Options" means Options relinquished pursuant to
Paragraph 9 hereof.
(t) "Subsidiary" means a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
3. Administration of Plan. The Board shall appoint a committee (the
"Committee") composed of not less than two persons to administer the Plan. Only
Disinterested Persons shall be eligible to serve as members of the Committee.
The Committee shall report all action taken by it to the Board, which shall
review and ratify or approve those actions that are by law required to be so
reviewed and ratified or approved by the Board. The Committee shall have full
and final authority in its discretion, subject to the provisions of the Plan, to
determine the Participants to whom, and the time or times at which, Options
shall be granted and the number of shares and purchase price of Common Stock
covered by each Option; to construe and interpret the Plan and any agreements
made pursuant to the Plan; to determine the terms and provisions (which need not
be identical or consistent with respect to each Participant) of the respective
Option Agreements and any agreements ancillary thereto, including, without
limitation, terms covering the payment of the Option Price; and to make all
other determinations and take all other actions deemed necessary or advisable
for the proper administration of this Plan. All such actions and determinations
shall be conclusively binding for all purposes and upon all persons.
4. Options Authorized. The Options granted under this Plan may be
Incentive Stock Options or Non-qualified Stock Options. The Committee shall have
the full power and authority to determine which Options shall be Non-qualified
Stock Options and which shall be Incentive Stock Options; to grant only
Incentive Stock Options or only Non-qualified Stock Options or any combination
thereof; and, in its sole discretion, to grant to an Optionee, in exchange for
the surrender and cancellation of an Option, a new Option having a purchase
price lower than that provided in the Option so surrendered and cancelled and
containing such other terms and conditions as the Committee may prescribe in
accordance with the provisions of this Plan. Under no circumstances may
Non-qualified Stock Options be granted where the exercise of such Non-qualified
Stock Options may affect the exercise of Incentive Stock Options granted
pursuant to the Plan. No Options may be granted under the Plan prior to the
Effective Date. In addition to any other limitations set forth herein, the
aggregate fair market value (determined in accordance with Paragraph 7(a) of the
Plan as of the time the Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by a
Participant in any calendar year (under all plans of the Company and of any
Parent or Subsidiary) shall not exceed $100,000.
5. Common Stock Subject to Options. The aggregate number of shares of the
Company's Common Stock that may be issued upon the exercise of Options shall not
exceed 4,750,000 shares, subject to adjustment under the provisions of Paragraph
8. The shares of Common Stock to be issued upon the exercise of Options may be
authorized but unissued shares, or shares issued and reacquired by the Company.
In the event any Option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option shall again be available for Options to be granted under the Plan, except
that shares for which Relinquished Options (or portions thereof) are exercisable
shall not again be available for Options under the Plan. Subject to the first
sentence of this Paragraph 5, no person may be granted Options under the Plan
during any calendar year with respect to more than 750,000 shares of the
Company's Common Stock; provided that such number shall be adjusted pursuant to
Paragraph 8, only in a manner which will not cause Options granted under the
Plan to fail to qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code.
6. Participants. Except as hereinafter provided, Options may be granted
under the Plan to any Participant. In determining the Participants to whom
Options shall be granted and the number of shares to be covered by such Option,
the Committee may take into account the nature of the services rendered by the
respective Participants, their present and potential contributions to the
Company's success, and such other factors as the Committee in its discretion
shall deem relevant. A Participant who has been granted an Option under the Plan
may be granted an additional Option or Options under the Plan, in the
Committee's discretion.
7. Terms and Conditions of Options. The grant of an Option under the Plan
shall be evidenced by an Option Agreement executed by the Company and the
applicable Participant and shall contain such terms and be in such form as the
Committee may from time to time approve, subject to the following limitations
and conditions:
2
<PAGE>
(a) Option Price. The Option Price per share with respect to each
Option shall be determined by the Committee, but shall in no instance be less
than the par value of the shares subject to the Option; provided, however, that
all Options which are intended to qualify as "performance-based compensation"
under Section 162(m) of the Code shall have an Option Price per share of Common
Stock no less than the fair market value of a share of Common Stock on the Date
of Grant. In addition and subject to Paragraph 7(g) below, the Option Price per
share with respect to Incentive Stock Options granted hereunder shall in no
instance be less than the fair market value of the shares subject to the Option
as of the Date of Grant. The Committee may permit the Option Price to be payable
in Common Stock owned by the holder of an Option. For purposes of this Paragraph
7(a), fair market value shall be, where applicable, the closing price of the
Common Stock on the Date of Grant as reported on the New York Stock Exchange
composite tape or, if the Common Stock is not traded on such exchange, as
reported on any other national securities exchange on which the Common Stock may
be traded. If the Common Stock was not traded on the Date of Grant, the nearest
present date shall be substituted in the preceding sentence. Notwithstanding the
foregoing, however, fair market value shall be determined consistent with Code
Section 422(b)(4) or any successor provisions.
(b) Period of Option. The expiration date of each Option shall be
fixed by the Committee, but, notwithstanding any provision of the Plan to the
contrary, such expiration date shall not be more than 10 years from the Date of
Grant.
(c) Vesting of Stockholder Rights. Neither an Optionee nor his
successor in interest shall have any of the rights of a shareholder of the
Company solely by virtue of the ownership of such Option until the Option is
exercised and the shares relating to the Option are properly delivered to such
Optionee or successor.
(d) Exercise of Option. Each Option shall be exercisable from time to
time over such period and upon such terms and conditions as the Committee shall
determine, but not at any time as to less than 25 shares unless the remaining
shares that have become so purchasable are less than 25 shares. After the death
of the Optionee, an Option may be exercised as provided in Paragraph 16 hereof.
The purchase price of the shares with respect to which an Option is exercised
shall be payable in full at the time of exercise in cash, in Common Stock of the
Company (valued at fair market value as defined above at Paragraph 7(a)) or by
any combination of cash and Common Stock, subject, however, to the terms of any
Option Agreement.
(e) Nontransferability of Option. No Option shall be transferable or
assignable by an Optionee, other than by will or the laws of descent and
distribution, and each Option shall be exercisable, during the Optionee's
lifetime, only by him or her or, during periods of legal disability, by his or
her legal representative. No Option shall be subject to execution, attachment,
or similar process.
(f) Disqualifying Disposition. The Option Agreement evidencing any
Incentive Stock Options granted under this Plan shall provide that if the
Optionee makes a disposition, within the meaning of Section 424(c) of the Code
and regulations promulgated thereunder, of any share or shares of Common Stock
issued to him or her pursuant to exercise of the Option within the two-year
period commencing on the day after the Date of Grant of such Option or within
the one-year period commencing on the day after the date of issuance of the
share or shares to him or her pursuant to the exercise of such Option, he or she
shall, within 10 days of such disposition date, notify the Company of the sales
price or other value ascribed to or used to measure the disposition of the share
or shares thereof and immediately deliver to the Company any amount of federal
or state income tax or other amounts required to be withheld by law.
(g) Limitation on Grants to Certain Shareholders. An Incentive Stock
Option may be granted to a Participant only if such Participant, at the time the
Option is granted, does not own, after application of the attribution rules of
Section 424(d) of the Code, stock possessing more than l0% of the total combined
voting power of all classes of stock of the Company or of its Parent or
Subsidiary. The preceding restriction shall not apply if at the time the Option
is granted the Option Price is at least 110% of the fair market value (as
defined in Paragraph 7(a) above) of the Common Stock subject to the Option and
such Option by its terms is not exercisable after the expiration of five years
from the Date of Grant.
(h) Consistency with Code. Notwithstanding any other provision in
this Plan to the contrary, the provisions of all Option Agreements shall not
violate the requirements of the Code applicable to the Incentive Stock Options
authorized hereunder.
8. Adjustments. The Committee, in its discretion, may make such
adjustments in the Option Price and the number of shares covered by outstanding
Options if such adjustments are required to prevent any dilution or enlargement
of the rights of the holders of such Options that would otherwise result from
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, issuance of rights, or other change in the
capital structure of the Company. The Committee, in its discretion, may also
make such adjustments in the aggregate number of shares that may be subject to
the future grant of Options if such adjustments are appropriate to reflect any
transaction or event described in the preceding sentence.
3
<PAGE>
9. Relinquishment of Options.
(a) The Committee, in granting Options hereunder, shall have
discretion to provide that an Optionee, or his or her heirs or other legal
representatives (to the extent entitled to exercise the Option under the terms
of this Plan), in lieu of purchasing the entire number of shares subject to
purchase pursuant to such Option, shall have the right to relinquish all or any
part of the unexercised portion of the Option (such portion of the Option
relinquished being hereinafter referred to as the "Relinquished Option") for a
number of whole shares of Common Stock equal to the product of (i) the number of
shares of Common Stock subject to the Relinquished Option and (ii) a fraction,
the numerator of which is the excess of (A) the current fair market value per
share of Common Stock covered by the Relinquished Option over (B) the Option
Price of such Relinquished Option, and the denominator of which is the then
current fair market value per share of such Common Stock. No fractional shares
of Common Stock will be issued pursuant to the exercise of Relinquished Options.
Rather, cash equal to the fractional amount of such share multiplied by the fair
market value per share will be paid to the Optionee, subject to the federal
income and other tax withholding requirements of Paragraph 13 hereof.
(b) The Committee, in granting Options hereunder, shall have
discretion to determine the terms upon which such Options shall be
relinquishable, subject to the applicable provisions of the Plan, and including
such provisions as deemed advisable to permit the exemption from the operation
of Section 16(b) of the Exchange Act, in whole or in part, of any such
transaction involving such relinquishment. Outstanding Option Agreements may be
amended, if necessary, to permit such exemption.
10. Restrictions on Issuing Shares. The exercise of each Option shall be
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
11. Use of Proceeds. The proceeds received by the Company from the sale
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
12. Amendment, Suspension, and Termination of Plan. The Board may at any
time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the Options granted
thereunder may conform to any changes in the law or in any other respect which
the Board may deem to be in the best interests of the Company, provided,
however, that without approval by the shareholders of the Company voting the
required percentage of its voting power, no such amendment shall make any change
in the Plan for which shareholder approval is required of the Company by (a)
Rule 16b-3, promulgated under the Exchange Act; (b) the Code or regulatory
provisions dealing with Incentive Stock Options; (c) any rules for listed
companies promulgated by any national stock exchange on which the Company's
stock is traded; or (d) any other applicable rule or law. Unless sooner
terminated hereunder, the Plan shall terminate 10 years after the Effective
Date. No Option may be granted during any suspension or after the termination of
the Plan. Except as provided in Paragraph 13, no amendment, suspension, or
termination of the Plan shall, without an Optionee's consent, impair or negate
any of the rights or obligations under any Option theretofore granted to such
Optionee under the Plan.
13. Tax Withholding. The Committee may, in its sole discretion, (a) require an
Optionee to remit to the Company a cash amount sufficient to satisfy, in whole
or in part, any federal, state, and local withholding tax requirements prior to
the delivery of any certificate for shares pursuant to the exercise of an Option
hereunder; (b) grant to an Optionee the right, or require an Optionee, to
satisfy, in whole or in part, any such withholding tax requirements by causing
the Company, upon any exercise of the Option, to withhold from the shares of
Common Stock issuable to the Optionee upon the exercise of the Option, that
number of full shares of Common Stock having a fair market value equal to the
amount or portion of the amount required to be withheld; or (c) satisfy such
withholding requirements through another lawful method, including through
additional withholdings against the Optionee's other compensation.
4
<PAGE>
14. Effective Date of Plan. This Plan shall become effective on the date
(the "Effective Date") of the adoption of the Plan by the Board, November 29,
1993, provided the Plan is approved, within 12 months of such adoption, by a
majority (or such other proportion as may be required by state law or the
Certificate of Incorporation of the Company) of the outstanding voting shares of
stock of the Company.
15. Termination of Employment. In the event of the retirement (with the
written consent of the Company or an affiliate) or other termination of the
employment of a Participant to whom an Option has been granted under the Plan,
other than (a) a termination that is voluntary on the part of the employee and
without the written consent of the Company or an affiliate or (b) a termination
by reason of death, the employee may (unless otherwise provided in his Option
Agreement) exercise his Option at any time within three months after such
retirement or such other termination of employment (or within one year after
termination of employment due to disability within the meaning of Code Section
422(c)(6)), or within such other time as the Committee shall authorize, but in
no event after 10 years from the date of granting thereof (or such lesser period
as may be specified in the Option Agreement), but only to the extent of the
number of shares for which his Options were exercisable by him at the date of
the termination of his employment. In the event of the termination of the
employment of an employee to whom an Option has been granted under the Plan that
is voluntary on the part of the employee and without the written consent of the
Company or an affiliate, any Option held by him under the Plan, to the extent
not previously exercised, shall (unless otherwise provided in the Option
Agreement) forthwith terminate on the date of such termination of employment.
Options granted under the Plan shall not be affected by any change of employment
so long as the holder continues to be an employee of the Company or an
affiliate. The Option Agreement may contain such provisions as the Committee
shall approve with respect to the effect of approved leaves of absence. Nothing
in the Plan or in any Option granted pursuant to the Plan shall confer on any
individual any right to continue in the employ of the Company or an affiliate or
interfere in any way with the right of the Company or an affiliate to terminate
his employment at any time.
16. Death of Holder of Option. In the event a Participant to whom an
Option has been granted under the Plan dies during, or within three months after
the termination of, his employment by the Company or an affiliate, such Option
(unless it shall have been previously terminated pursuant to the provisions of
the Plan or unless otherwise provided in his Option Agreement) may be exercised
(to the extent of the entire number of shares covered by the Option whether or
not purchasable by the employee at the date of his death) by the executor or
administrator of the Optionee's estate or by the person or persons to whom the
Optionee shall have transferred such Option by will or by the laws of descent
and distribution, at any time within a period of 12 months after his death, but
not after the exercise termination date set forth in the relevant Option
Agreement.
17. Loans to Assist in Exercise of Options. If approved by the Board, the
Company or any affiliate may lend money or guarantee loans by third parties to
an individual to finance the exercise of any Option granted under the Plan to
carry Common Stock thereby acquired. No such loan to finance the exercise of an
Incentive Stock Option shall have an interest rate or other terms that would
cause any part of the principal amount to be characterized as interest for
purposes of the Code.
5
