SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .......... to ..........
Commission file number: 0-22624
FOAMEX INTERNATIONAL INC.
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(Exact Name of registrant as Specified in its Charter)
Delaware 05-0473908
- --------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1000 Columbia Avenue, Linwood, PA 19061
- --------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 859-3000
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share, which is traded through the
National Association of Securities Dealers, Inc. National Market
System.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Annual Report on Form
10-K or any amendment to this Annual Report on Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 2, 2000, was $82.8 million.
The number of shares outstanding of the registrant's common stock as of
March 14, 2000 was 25,059,994.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
This Annual Report on Form 10-K is hereby amended to add the information
required by Part III.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Directors as of April 28, 2000
<TABLE>
<CAPTION>
Name and Principal Occupation Age and Biographical Information
<S> <C>
MARSHALL S. COGAN Marshall S. Cogan, 62, has been the Chairman of the Board of the Company since March
Chairman of the Board 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.
ETIENNE DAVIGNON Etienne Davignon, 67, has been a director of the Company since December 1993. Mr.
Chairman of Societe Davignon has been the Chairman of Societe Generale de Belgique, a Belgian bank and
Generale de Belgique 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.
2
<PAGE>
JOHN H. GUTFREUND John H. Gutfreund, 70, has been a director of the Company since February 1998. Mr.
President, Gutfreund & Gutfreund is President of Gutfreund & Company, Inc., a financial consulting and
Company, Inc. investment-banking firm, which he formed in 1992. Prior to that, Mr. Gutfreund
served in various positions with Salomon Brothers (the predecessor to Salomon Smith
Barney) from 1953 until 1991, most recently as Chairman of the Board and Chief
Executive Officer. Mr. Gutfreund is also a director of AMBI, Inc., Ascent
Assurance, Inc., Baldwin Piano & Organ Company, Inc., Evercel, Inc., LCA-Vision,
Inc., and The Universal Bond Fund and is on the Board of Trustees of the New York
Public Library. Mr. Gutfreund served as Vice Chairman of the New York Stock
Exchange from 1985 until 1987.
ROBERT J. HAY Robert J. Hay, 74, has been the Chairman Emeritus and a director of the Company
Chairman Emeritus 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 Company since December 1993. Dr.
Orthopedic Surgeon 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 Company since March 1999. Mr.
President and Chief Johnson has served as President and Chief Executive Officer of the Company since
Executive Officer of the March 1999. Prior to joining the Company, Mr. Johnson was President and Chief
Company 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 of the
Chief Operating Officer of Company on April 10, 2000. Prior to joining the Company as President of the Foam
the Company and President of Business Group in June 1999, Mr. Televantos was Vice President, Development Business
the Company's Foam Business for Lyondell Chemical Company, which he joined in 1998 following the company's
Group 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.
JOHN V. TUNNEY John V. Tunney, 65, has been a director of the Company since May 1994. Mr. Tunney has
Chairman of the Board of served as Chairman of the Board of Foamex Asia, Inc. ("Foamex Asia"), a subsidiary of
Cloverleaf Group, Inc. 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.
</TABLE>
3
<PAGE>
b. Executives as of April 28, 2000
<TABLE>
<CAPTION>
Name Age Position(s) Held
- ---- --- ----------------
<S> <C> <C>
Marshall S. Cogan 62 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").
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
joining the Company in 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.
4
<PAGE>
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.
c. 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.
ITEM 11. EXECUTIVE 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.
<TABLE>
<CAPTION>
Summary Compensation Table (1)
Long-Term
Compensation Awards
Annual Compensation ------------------------
------------------------------ Securities Underlying All Other
Name of 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>
- -------------------
5
<PAGE>
(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.
(7) Mr. Farace resigned as President 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 will 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
6
<PAGE>
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 will 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 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.
7
<PAGE>
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.
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 provides
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, respectively, to purchase Common
Stock to officers or key employees of the Company. 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 $14.00 per
share. All such exercise prices represented the closing price of the Common
Stock on the date of grant. During 1999, 750,450 options were granted with a
three-year vesting period and a ten-year term. All other options outstanding at
the end of 1999 were granted with a five-year vesting period and a ten-year
term.
The following table provides information on option grants in 1999 to the
Named Executive Officers.
8
<PAGE>
Foamex International Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration Grant Date
Granted (#)(1) Fiscal Year ($/Sh) Date Present Value (2)
---------------- ---------- ---------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <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>
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.
Aggregate Fiscal Year End Option/SAR Values
<TABLE>
<CAPTION>
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 April 28, 2000, the market value of the
Company's common stock was $5.3125 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.
9
<PAGE>
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.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Credited Service
-------------------------
15 20 25 30 35
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Current Compensation:
$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
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 April 28, 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 April 28, 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 April 28,
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.
10
<PAGE>
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
was $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.
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 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 five Outside
Directors of the Company and three employee directors; although Mr. Tunney is
the Chairman of Foamex Asia, 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
cash compensation for serving as Directors or as members of Board committees.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of Common Stock of Certain Beneficial Owners and Management
The following table sets forth certain information, as of April 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)
- ------------------------------------- ----------------------------------------------
Number of Shares % of Class Outstanding
---------------- ----------------------
<S> <C> <C>
Trace International Holdings, Inc. (3) 7,197,426 28.7
c/o Mr. John Pereira
150 E. 58th Street, 24th Floor
New York, NY 10022
Trace Foam Sub, Inc. (3) 7,000,247 27.9
c/o Mr. John Pereira
150 E. 58th Street, 24th Floor
New York, NY 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
11
<PAGE>
Rus, Inc. (5) 2,684,903 10.7
Avenue des Pleiades 15
B -1200
Brussels, Belgium
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 *
John H. Gutfreund -- *
Robert J. Hay 4,944 *
Stuart J. Hershon (9) 13,646 *
John G. Johnson, Jr. (8) 277,055 1.1
John V. Tunney (10) 9,000 *
John Televantos (8) 24,300 *
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 1,164,648 4.5
(16 persons) (3)(8)(9)(10)
<FN>
- ------------------
* Less than 1%.
(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 reported
herein 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 June 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.
12
<PAGE>
(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.
(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>
ITEM 13. 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
13
<PAGE>
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.
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, 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.
14
<PAGE>
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 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
15
<PAGE>
formerly owned by General Felt. In connection with the GFI Transaction, 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
In connection with the GFI Transaction, 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 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.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized as of the 28th day of
April 2000.
FOAMEX INTERNATIONAL INC.
By: /s/ John G. Johnson, Jr.
------------------------
Name: John G. Johnson, Jr.
Title: President and Chief Executive Officer
By: /s/ David J. Prilutski
Name: David J. Prilutski
Title: Senior Vice President, Planning
and Acting Chief Financial Officer
By: /s/ Robert S. Graham, Jr.
-------------------------
Name: Robert S. Graham, Jr.
Title: Senior Vice President, Corporate
Controller and Chief Accounting
Officer
17
<PAGE>
SIGNATURES
(continued)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on its behalf by the
registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Marshall S. Cogan Chairman of the Board April 28, 2000
- -------------------------
Marshall S. Cogan
/s/ Robert J. Hay Chairman Emeritus April 28, 2000
- ---------------------------- and Director
Robert J. Hay
/s/ John G. Johnson, Jr. President, Chief Executive April 28, 2000
- ------------------------- Officer and Director
John G. Johnson, Jr.
/s/ Etienne Davignon Director April 28, 2000
- --------------------------
Etienne Davignon
/s/ John H. Gutfreund Director April 28, 2000
- --------------------------
John H. Gutfreund
/s/ Stuart J. Hershon Director April 28, 2000
- ---------------------------
Stuart J. Hershon
/s/ John Televantos Chief Operating Officer, April 28, 2000
- --------------------------- President, Foam Business
John Televantos Group and Director
/s/ John V. Tunney Director April 28, 2000
- ---------------------------
John V. Tunney
