Linwood, PA, February 8, 2006--Seventy-seven executives and key employees of Foamex International Inc., which filed for bankruptcy protection Sept. 19, are splitting $4.3 million in retention bonuses, beating the deadline on a federal law that clamped down on the extra compensation, according to the Philadelphia Inquirer.
A new federal bankruptcy law that affects companies that filed for reorganization after Oct. 16 made it vastly harder for judges to approve controversial retention bonuses.
Some believe that retention bonuses reward executives who had a role in a company's financial unraveling.
Others say the bonuses keep qualified executives and managers in place as a troubled company regains its footing, said Thomas E. Biron, a lawyer at Blank Rome L.L.P. in Center City who specializes in bankruptcy issues.
According to the new law, executives of a bankrupt company need proof of a job offer before a judge can grant a retention bonus, Biron said.
In a statement, Foamex said: "The company developed a program to assist in retaining key employees to work through certain key dates and to file, confirm and implement a successful plan of reorganization." In court documents, the company described the retention-bonus recipients as "particularly important to the successful reorganization."
Spokeswoman Denise DesChenes said the cash cost of the plan is $3.6 million and most of the money won't be paid until the company has "an effective plan of reorganization."
The remaining $700,000 would be paid in company stock and disbursed by a new board in the reorganized company, she said.
The company did not identify the participants in the retention program, though it noted in court filings that the plan includes chief executive officer Thomas Chorman.
The program replaces a retention plan formed before the bankruptcy filing, DesChenes said.
If fully disbursed, the retention bonuses work out to an average of $55,844 per employee in the plan, although the amount will vary by individual.
Wayne W. MacManiman Jr., district supervisor for Service Employees International Union Local 32BJ, which represents 45 Foamex workers in Fairless Hills, Bucks County, said his members are working a lot of overtime and report that business has been good. "They offered us a fair contract, but I can tell you that none of our guys shared in that $4.3 million," he said.
Foamex, employs 5,450 workers in 51 plants, is one of the nation's largest manufacturers of foam cushioning and carpet padding. It had $1.3 billion in revenue in 2004.
