UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK NOTICE OF CLASS ACTION, PROPOSED SETTLEMENT AND HEARING THEREON

Transcription

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE FOAMEX SECURITIES LITIGATION 99 CV 3004 (DC) NOTICE OF CLASS ACTION, PROPOSED SETTLEMENT AND HEARING THEREON TO: ALL PERSONS AND ENTITIES WHO PURCHASED THE COMMON STOCK OF FOAMEX INTERNATIONAL, INC., AT ANY TIME FROM MAY 7, 1998 THROUGH AND INCLUD- ING APRIL 16, 1999 (THE CLASS ) PLEASE READ THIS NOTICE CAREFULLY. YOUR RIGHTS MAY BE AFFECTED BY LEGAL PRO- CEEDINGS IN THIS LITIGATION. IF YOU ARE A MEMBER OF THE CLASS DESCRIBED IN THIS NOTICE, YOU MAY BE ENTITLED TO RECEIVE PAYMENTS PURSUANT TO THE PROPOSED SETTLEMENT IN THIS ACTION. SUMMARY DISCLOSURE OF SETTLEMENT TERMS Class Recovery: The cash to be deposited by the Settling Defendants in the Class Settlement Fund, before any award of attorneys fees and expenses and before the costs of Class notice and claims administration, is two and one half million dollars ($2,500,000). Plaintiffs Lead Counsel estimates, based on their investigation and consultation with an expert witness, that if all Class members who purchased Foamex common stock between May 7, 1998 and April 16, 1999 and held those shares through April 16, 1999 (hereinafter referred to as Holder Claimants ) were to file valid Proofs of Claim against the Settlement Fund, the average per share recovery for the Holder Claimants, before deductions for fees and expenses, would be approximately $0.46 per share. Please note that this is only an estimate and depends, as indicated, on whether all Holder Claimants file valid Proofs of Claim. Plaintiffs Lead Counsel further estimates that if all Class members who purchased Foamex common stock between May 7, 1998 and March 17, 1999, and who sold those shares between March 18, 1999 and April 16, 1999 (hereinafter referred to as Group One Trading Claimants ) were to file valid Proofs of Claim against the Settlement Fund, the average per share recovery for the Group One Trading Claimants, before deductions for fees and expenses, would be approximately $0.29 per share. Please note that this is only an estimate and depends, as indicated, on whether all Group One Trading Claimants file valid Proofs of Claim. Plaintiffs Lead Counsel further estimates that if all Class members, other than Group One Trading Claimants defined above, who purchased Foamex common stock between May 7, 1998 and April 16, 1999, and who sold those shares between May 7, 1998 and April 16, 1999 (hereinafter referred to as Group Two Trading Claimants ) were to file valid Proofs of Claim against the Settlement Fund, the average per share recovery for the Group Two Trading Claimants, before deductions for fees and expenses, would be approximately $0.08 per share. Please note that this is only an estimate and depends, as indicated, on whether all Group Two Trading Claimants file valid Proofs of Claim. The Settling Parties do not agree on the average per share recovery if Plaintiffs prevailed on each of the claims alleged in the Complaint. The issues on which the parties disagree include: (1) whether Foamex common stock was artificially inflated at all during the Class Period; (2) the amount(s), if any, by which Foamex common stock was artificially inflated throughout the Class Period or during different time periods within the Class Period; (3) the extent, if any, by which the market price of Foamex stock was affected by the publicized efforts of Foamex s largest shareholder, Trace International Holdings, Inc., to acquire all shares of Foamex common stock which it did not already own and/or takeover rumors involving possible other suitors for Foamex; (4) the effect of various market forces influencing the trading price of Foamex stock during the Class Period; (5) the extent, if any, by which external factors, such as general market conditions, influenced the trading price of Foamex common stock during

2 the Class Period; (6) the extent, if any, to which the various matters that Plaintiffs have alleged were false or misleading influenced the trading price of Foamex common stock; and (7) whether the statements made by the Settling Defendants were false, material or otherwise actionable under law. Statement of Attorneys Fees and Cost Sought: Attorneys for the Lead Plaintiffs intend to apply to the Court for an award of attorneys fees in the aggregate amount of $750,000, or 30% of the Gross Settlement Fund, and for reimbursement of expenses, including expert witness and consultant fees, costs of notice and claims administration expenses, in the aggregate approximate amount of $150,000 from the Class Settlement Fund, which amounts together would represent approximately $0.29 on an average per share basis. Identification of Lawyers Representatives: Persons with questions may contact: Edwin J. Mills, Esq. STULL, STULL & BRODY 6 East 45th Street New York, NY (212) or (800) Fax: (212) ssbny@aol.com Reasons For Settlement: As explained in greater detail hereinafter (see Reasons for Settlement ), Plaintiffs have agreed to this $2.5 million settlement because it represents a substantial recovery in light of the risks of litigation on the merits (including Motions to Dismiss the Complaint which were awaiting a ruling by the Court when the Settlement in principle was reached); the risks of establishing substantial damages resulting from public statements made by Defendants which may or would be found to be materially false and misleading; the expense of further proceedings, including trial and appeal; and the resulting delay in compensation to Class members if the case had to be tried to obtain a recovery for the Class. The Settling Defendants have agreed to this settlement due to the uncertainty of litigation in general, uncertainties relating to whether the Court would grant the pending Motions to Dismiss, uncertainties concerning whether the jury or the Court would find liability on the part of any of the Defendants, the expense of proceeding to trial and possible appeals, and the distraction to Foamex and Foamex s management of continuing litigation, including management time that would necessarily be expended in responding to discovery requests and depositions and in formulating defense strategy. The Plaintiffs and Plaintiffs Lead Counsel believe that the proposed Settlement is fair, reasonable and adequate to the members of the Class. The Plaintiffs and Plaintiffs Lead Counsel have reached this conclusion after investigating and considering, among other things, the strengths and weaknesses of Plaintiffs claims against Defendants, including the Defendants contentions, among others, that the complaint is deficient in failing to allege particularized facts giving rise to the necessary inference of fraudulent intent as required by federal law; that Defendants did not make any materially false and misleading statements, or that any materially false and misleading statements made during the Class Period were not made with any intent to defraud and did not cause the losses suffered by Plaintiffs and the other members of the Class. Defendants, moreover, have asserted defenses to Plaintiffs claims on the merits and Plaintiffs right to recover damages. In addition, the Plaintiffs considered the uncertainties inherent in this complex litigation, the limited financial resources of Foamex and the financial inability of the Defendants to withstand a jury verdict for Plaintiffs, and the substantial benefits provided by the Settlement to the members of the Class. Without admitting any wrongdoing or liability on their part whatsoever, the Settling Defendants are nevertheless willing to agree to make the payments provided for by the Stipulation, provided that all claims of the Class are settled and compromised, in order to avoid the continuing burden, expense, inconvenience and distraction to Defendants of this litigation. Settlement Hearing: You are hereby notified that a hearing (the Final Settlement Hearing ) shall be held before the Honorable Denny Chin, United States District Judge, on January 11, 2001, at 9:15 a.m. in Courtroom 11A of the United States District Court for the Southern District of New York, 500 Pearl Street, New York, New York 10007, to determine whether an Order should be entered (1) finally approving the proposed settlement of the claims asserted by Plaintiffs in this Action against Defendants Foamex International, Inc. ( Foamex ), Andrea 2

3 Farace, Marshall S. Cogan, and John A. Feenan (collectively, the Settling Defendants ) and Trace International Holdings, Inc. ( Trace ) (collectively, the Defendants ) on the terms set forth in the Stipulation of Settlement (the Stipulation ) dated August 23, 2000 (the Settlement ); (2) dismissing the Action with prejudice; and (3) awarding counsel fees and reimbursement of expenses to counsel for Plaintiffs and the Class. 1. THE CLASS INVOLVED IN THE PROPOSED SETTLEMENT The proposed Settlement affects the rights of members of the Class as defined by the Stipulation and as provisionally certified by the Court on September 22, 2000 ( The Preliminary Approval Order ). The Class consist of: All persons and entities who purchased the common stock of Foamex during the period from May 7, 1998 through and including April 16, 1999, and who were damaged thereby. Excluded from the Class are Defendants, officers and directors of Foamex, members of the immediate families of such officers and directors, and the sub-divisions and/or affiliates of Foamex or Trace. In addition, excluded from the Class is any person or entity who or which requests exclusion from the Class in writing in accordance with the procedures established by the Court as set forth below. Neither the Preliminary Approval Order provisionally certifying the Class, nor the sending of this Notice should be construed as any indication of the Court s view as to the merits of any claims, defenses or positions asserted by any party to the Action. 2. BACKGROUND AND TERMS OF THE PROPOSED SETTLEMENT In April, 1999, James A. Molitor filed a complaint in this Court alleging that certain public statements by Foamex had caused the market price of Foamex common stock to be artificially and unlawfully inflated. Pursuant to the Private Securities Litigation Reform Act of 1995, plaintiff Molitor provided notice to other purchasers of Foamex common stock of their right to apply to the Court to be appointed as one of the Lead Plaintiffs in this proposed class action case. A number of purchasers of Foamex common stock thereupon filed with the Court Certifications attesting to their willingness to serve as Lead Plaintiffs on behalf of a class of purchasers of common stock of Foamex. By Order dated October 7, 1999 the Court appointed the following persons Lead Plaintiffs: James A. Molitor, Thomas W. Riley, Verne K. Bryant, Jr., William Forest, Frank Grosskreuz, Gloria V. and Kenneth R. Mitchell, Thomas C. Poquette, Nancy Rupa and Douglas Satterfield. By the same Order the Court appointed Stull, Stull & Brody to serve as Lead Counsel for the Lead Plaintiffs and the proposed Class. On December 6, 1999 the above-named Lead Plaintiffs, by their Lead Counsel, filed a Consolidated Amended Class Action Complaint for Violation of the Federal Securities Laws ( the Complaint ). The Complaint alleged that the above-named Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder in connection with the issuance of certain false and misleading public reports concerning Foamex during the Class Period. The Complaint alleged that Foamex s public reports during the Class Period deceived the market for Foamex stock by failing to disclose Foamex s true quarterly earnings during fiscal 1998; in failing to disclose that Foamex was not in compliance with its bank covenants during the Class Period; and in failing to disclose that defendant Cogan was, directly or indirectly, causing Foamex funds to be improperly diverted to himself or his holding company, Trace. During the pendency of the Action Trace filed a petition under Chapter 11 of the Bankruptcy Code. Trace s bankruptcy proceeding has since been converted into a liquidation proceeding under Chapter 7 of the Bankruptcy Code. Trace is not contributing to the Settlement herein and, due to the impending liquidation of Trace, it is not expected that Class members will receive any compensation from Trace respecting the claims asserted in the Complaint. As described further below, the entire $2.5 million Settlement herein is being funded by Foamex s insurance carrier and that $2.5 million Settlement Fund will be the entire amount available to compensate Class members for their claims as asserted in the Complaint. All Defendants other than Trace (as to whom this Action was automatically stayed as a result of its bankruptcy proceeding) have filed Motions to Dismiss the Complaint in its entirety. Defendants contend in their motions that the Complaint failed to plead facts giving rise to a strong inference of fraudulent intent by the Defendants, as 3

4 required by the PSLRA. Plaintiffs have opposed the Motions to Dismiss in their entirety. This Settlement was reached while the Motions to Dismiss were pending before the Court. If the Motions to Dismiss had been decided in favor of Defendants (or, if this Settlement should not become effective for any reason, the Motions to Dismiss are then decided in favor of Defendants) there would have been, or would be, no recovery for Plaintiffs or the Class. While Plaintiffs were and are confident that they would prevail on the Motions to Dismiss, the unresolved nature of these dispositive motions was taken into account in negotiating for and ultimately agreeing to Settlement. Before finalizing this Settlement, Plaintiffs, by their counsel, undertook extensive investigation of the facts, including a review of thousands of pages of documents produced by Foamex, as well as frequent, in-depth consultations with experts in the area of securities markets and damages and accounting matters. 3. REASONS FOR ENTERING INTO THE SETTLEMENT Plaintiffs, through their Counsel, have conducted a thorough investigation of the claims asserted in the Complaint and the underlying events and transactions described therein. In light of the foregoing risks of litigating the Action to conclusion, and the expense and length of continued proceedings necessary to prosecute through trial and appeal, Plaintiffs Lead Counsel engaged in intensive arms length negotiation with Counsel for the Settling Defendants with a view to achieving the substantial benefits for the Class which are provided by the Settlement. Plaintiffs and their Counsel believe the Settlement to be fair, reasonable and adequate and in the best interest of Plaintiffs and the Class. Defendants have denied, and continue to deny, each and every allegation of liability and wrongdoing on their part, and assert that they have strong factual and legal defenses to all claims alleged in the Complaint and that such claims are entirely without merit. Without admitting any wrongdoing or liability on their part whatsoever, the Settling Defendants nevertheless agreed to cause the payment provided for by the Stipulation of Settlement to be made, provided that all claims of the Class are settled and compromised, in order to minimize, if not entirely to avoid, the continuing burden, expense, inconvenience and distraction to Defendants of this litigation. Having duly considered all of the foregoing and after having engaged in extensive arm s-length negotiations, Plaintiffs have entered into the proposed Settlement with the Settling Defendants, subject to Court approval, as fully set forth in the Stipulation of Settlement. 4. CLASS RECOVERY The proposed Settlement is $2.5 million, plus interest. Based on consultations with damages experts, Plaintiffs Lead Counsel believes that if all Holder Claimants file valid claims, their average per share recovery will be approximately $0.46 per share prior to fees and expenses; that the average per share recovery of Group One Trading Claimants, based on the same assumptions, would be approximately $0.29 per share and that the average per share recovery for Group Two Trading Claimants would be approximately $0.08 per share. Please be advised that this is only an estimate. A Class member s actual per share recovery may be more or less. 5. POTENTIAL OUTCOME OF THE ACTION Plaintiffs and Defendants disagree as to the average amount of damages per share that would be recoverable if Plaintiffs prevail at trial on each and every claim alleged. 6. CLAIMS ADMINISTRATION AND RECOGNIZED LOSS FORMULA Class members must submit a valid and timely Proof of Claim and Release Form to share in the Settlement Fund. The Proof of Claim and Release Form is part of this Notice. Please follow the instructions in the Proof of Claim and Release Form carefully and note the requirement for documentation of your transactions in Foamex common stock. The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund (the Gross Settlement Amount, including interest net of Taxes and less all approved costs, fees and expenses) based upon each Authorized Claimant s Recognized Loss utilizing the formulae and procedures set forth in this paragraph. Each Authorized Claimant will receive a pro rata share of the Net Settlement Fund determined by the ratio that such Authorized Claimant s Recognized Loss bears to the Recognized Losses of all such Authorized 4

5 Claimants. The Recognized Loss formula and computation is not intended to be an estimate of what an Authorized Claimant member might have been able to recover at trial, and it is not an estimate of the amount that will be paid pursuant to the Settlement. An Authorized Claimant s Recognized Loss, for which it shall receive a pro rata recovery, shall be computed as follows: a. Holder Claimants: With respect to each Class member who purchased Foamex common stock during the Class Period and who held those shares through the end of the Class Period, the Recognized Loss shall mean the lesser of $2.25 per share and the difference between the price paid for the common stock and $6.00 per share. b. Trading Claimants: With respect to each Class member who purchased Foamex common stock during the Class Period and sold those shares before the end of the Class Period (that is, prior to April 16, 1999), the Recognized Loss shall be computed as follows: i. For Class members who purchased Foamex common stock between May 7, 1998 and March 16, 1999 and who sold those shares on or after March 17, 1999 and before April 16, 1999 ( Group One Trading Claimants ) the Recognized Loss shall mean the lesser of $1.12 per share and the price paid for the common stock (the purchase price not to exceed $12 per share) and the sale price. ii. For Class members who purchased Foamex common stock on or after May 7, 1998 and who sold those shares before April 16, 1999, other than Group One Trading Claimants defined above ( Group Two Trading Claimants ), the Recognized Loss shall mean twenty five percent (25%) of the difference between the amount paid for the Foamex common stock (the purchase price not to exceed $12 per share) and the sum for which said shares were sold at a loss. c. In determining the Recognized Loss of Trading Claimants, the following rules shall apply: i. FIFO: In processing claims, the first-in, first-out basis ( FIFO ) will be applied to both purchases and sales. Sales will be matched in chronological order, by trade date, first against the securities held as of close of trading on May 6, 1998 and then against the purchases during the Class Period. ii Gains and Losses: All profits will be subtracted form all losses to determine the net Recognized Loss of each Class member. iii. Short Sales: The date of covering a short sale is deemed to be the date of purchase of Foamex common stock. The date of a short sale is deemed to be the date of sale of Foamex common stock. iv. Options: Where common stock was purchased/sold by reason of having exercised an option, the option premium should be incorporated into the price accordingly. v. De Minimis: No payment will be made on any claims where the payable loss is $5.00 or less, but the Authorized Claimant will otherwise be bound by the final judgment entered by the Court. The Proof of Claim and Release Form must be submitted by mail, postmarked on or before April 11, 2001, addressed as follows: Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY REQUESTING EXCLUSION FROM THE CLASS IF YOU A MEMBER OF THE CLASS, YOU MAY BE ELIGIBLE TO SHARE IN THE BEN- EFITS OF THIS SETTLEMENT AND WILL BE BOUND BY ITS TERMS UNLESS YOU EXCLUDE YOURSELF FROM THE CLASS. Each member of the Class shall be bound by all determinations and judgments of the Court in connection with the Settlement, whether favorable or unfavorable, unless such Class member shall mail, by first class mail, postage 5

6 prepaid, a written request for exclusion from the Class, postmarked no later than December 28, 2000, addressed to: Claims Administrator, In re Foamex Securities Litigation, c/o David Berdon & Co. LLP, P.O. Box 3218, Grand Central Station, New York, NY Such request for exclusion shall be in a form that sufficiently identifies (a) the name and address of the person(s) or entity seeking exclusion, and (b) a description of all transaction(s) involving Foamex common stock during the Class Period, including all of the purchase and/or sale information requested in the Proof of Claim and Release Form. A request for exclusion shall not be effective unless submitted within the time and in the form provided for herein. If a person or entity who is a member of the Class duly requests to be excluded from the Class, such person or entity will not be bound by any orders or judgments entered in respect of the Settlement and shall not be entitled to receive any benefits provided by the Settlement in the event it is finally approved by the Court. By Order of the Court, if a judgment approving the proposed Settlement provided for in the Stipulation is finally entered, all members of the Class who have not requested exclusion from the Class shall conclusively be deemed to have released, and shall thereafter be barred from asserting any of the Settled Claims against, the Defendants and the other Released Parties. 8. STATEMENT OF ATTORNEYS FEES AND COSTS SOUGHT If the proposed Settlement is finally approved, Plaintiffs Counsel intend to apply to the Court for an award of attorneys fees from the Settlement Fund not to exceed thirty percent (30%) of the Settlement ($0.23 on an average per share basis), plus an additional amount not to exceed $150,000 as reimbursement for the expenses and costs actually incurred in prosecuting the action, plus the cost of Class notice and claims administration ($0.06 on an average per share basis). If the fee request of Plaintiffs Counsel is granted by the Court, and if $150,000 in the aggregate is ultimately deducted from the Settlement Fund for reimbursement of litigation expenses (including expert witness and consultant fees), notice cost and claims administration expenses, Plaintiffs Lead Counsel estimates that the net recovery for Holder Claimants will be approximately $0.30 per share. If the fee request of Plaintiffs Counsel is granted by the Court, and if the aggregate sum of $150,000 in the aggregate is ultimately deducted from the Settlement Fund for reimbursement of litigation expenses (including expert witness and consultant fees), notice cost and claims administration expenses, Plaintiffs Lead Counsel estimates that the net recovery for Trading Claimants will be approximately $0.19 per share. If the fee request of Plaintiffs Counsel is granted by the Court, and if the aggregate sum of $150,000 in the aggregate is ultimately deducted from the Settlement Fund for reimbursement of litigation expenses (including expert witness and consultant fees), notice cost and claims administration expenses, Plaintiffs Lead Counsel estimates that the net recovery for Trading Claimants will be approximately $0.05 per share. 9. THE FINAL SETTLEMENT HEARING [JANUARY 11, 2001]; CLASS MEMBERS RIGHTS TO OBJECT TO SETTLEMENT AND/OR FEE REQUEST [DECEMBER 28, 2000] The Final Settlement Hearing shall be held before the Honorable Denny Chin, on January 11, 2001, at 9:15 a.m. in Courtroom 11A of the United States District Court for the Southern District of New York, 500 Pearl Street, New York, New York The Final Settlement Hearing may be adjourned or continued from time to time by the Court without further notice to the Class other than an announcement at such Final Settlement Hearing or at any adjournment or continuance thereof. Any member of the Class who does not timely and validly request exclusion from the Class, who objects to the Settlement, Plaintiffs proposed Plan of Allocation of the Net Settlement Fund, the Final Judgment of Dismissal With Prejudice contemplated by the Stipulation of Settlement, and/or the application for Plaintiffs attorneys fees and reimbursement of expenses, or who otherwise wishes to be heard with respect to any of the foregoing, may appear in person or by attorney at the Final Settlement Hearing, at their own expense, and present any evidence or argument that may be proper and relevant. However, no person shall be heard, and no papers, briefs, pleadings or other documents submitted by any such person shall be considered by the Court unless, no later than December 6

7 28, 2000, (a) a notice of the person s intention to appear, (b) a statement of such person s objections to any matter before the Court, and (c) the grounds for such objections or the reason for such person s request to appear and to be heard, as well as all other documents and writings which such person desires the Court to consider, shall be filed by such person with the Clerk of the Court, and, on or before such filing, shall be delivered by hand or mailed, by overnight mail or certified mail, return-receipt requested, postage prepaid, upon the following counsel of record: Edwin J. Mills, Esq. Aaron L. Brody, Esq. STULL, STULL & BRODY 6 East 45 th Street New York, NY (212) Lead Counsel for Plaintiffs Moses Silverman, Esq. Jeanne M. Luboja, Esq. Ronald P. Replogle, Esq. James F. Doyle, Esq. PAUL, WEISS, RIFKIND, WILLKIE FARR & WHARTON & GARRISON GALLAGHER 1285 Avenue of the Americas 787 Seventh Avenue New York, NY New York, NY (212) (212) Attorneys for Defendants Foamex International, Inc., Attorneys for Defendant Andrea Farace and John A. Feenan Marshall S. Cogan Any person or entity who fails to object in the manner prescribed in the paragraph immediately above shall be deemed to have waived any objections that person may have and shall be barred from raising such objections in this or any other action or proceeding relating to the Settled Claims. Objections directed solely to Plaintiffs proposed Plan of Allocation will not affect the finality of the Settlement, if approved by the Court. All members of the Class who do not request exclusion therefrom, in the manner provided herein, will be represented by Plaintiffs counsel in connection with the Settlement, but may, if they so desire, also enter an appearance through counsel of their own choice and at their own expense. 10. PROOF OF CLAIM AND RELEASE FORM To participate in the Settlement Fund you must timely complete, execute and file a Proof of Claim and Release Form ( Proof of Claim ). A Proof of Claim accompanies this Notice. You may receive more than one copy of this Notice and Proof of Claim, but you should submit only one Proof of Claim. The Proof of Claim must be completed in accordance with the Instructions on the Proof of Claim, and must enclose all documentation required by the Instructions. The Proof of Claim must be filed with the Court-appointed Claims Administrator at the following address on or before April 11, Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY Telephone: (800) Fax: (212) Website: 7

8 A Proof of Claim will be deemed filed when mailed, via first-class mail postage prepaid. Members of the Class who do not exclude themselves from the Class and who fail to submit a valid and timely Proof of Claim will nevertheless be bound by the Settlement if finally approved, and all Orders and judgments entered by the Court in connection therewith. Each person or entity submitting a Proof of Claim thereby submits to the jurisdiction of the Court for purposes of the Action, the Settlement and any proceedings relating to such Proof of Claim, and agrees that such a filed Proof of Claim will be subject to review and further inquiry as to such person s or entity s status as a member of the Class and the allowable amount of the claim. 11. SPECIAL NOTICE TO BROKERS AND OTHER NOMINEES If you were a nominee for any beneficial owner of Foamex common stock during the Class Period, then, within ten (10) days after you receive this Notice and Proof of Claim ( the Notice ), you must either (1) provide the Claims Administrator with the names and addresses of such beneficial owners, preferably on computer-generated mailing labels or, if there are more than 2,000, on a 3-1/2 diskette, CD-ROM or ZIP media; or in the alternative, (2) send a copy of the Notice to all beneficial owners by first-class mail and provide the Claims Administrator with written confirmation of having done so. Additional copies of the Notice may be requested in writing from the Claims Administrator. All correspondence should be addressed, as follows: Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY Fax: (212) Website: You are entitled to reimbursement of any reasonable expenses you actually incurred in connection with the foregoing upon submission of a request and the appropriate supporting documentation to the Claims Administrator. 12. ADDITIONAL INFORMATION This Notice merely provides a brief summary of the litigation and the proposed Settlement. For a more detailed statement of the matters involved in the litigation, you may refer to the pleadings, the Stipulation, and the Orders entered by the Court and to certain other papers filed in the litigation. These papers may be inspected at the Office of the Clerk of the United States Dis trict Court for the Southern District of New York. In addition, if you have any questions regarding the information contained in this Notice, you may contact the Claims Administrator by phone at (800) , or in writing, as set forth above; or you may contact Plaintiffs Lead Counsel at: Edwin J. Mills, Esq. STULL, STULL & BRODY 6 East 45th Street New York, NY (212) or (800) Fax: (212) ssbny@aol.com Dated: October 18, 2000 Clerk of the Court United States District Court Southern District of New York 8

9 MUST BE POSTMARKED NO LATER THAN APRIL 11, 2001 In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY Telephone: (800) Fax: (212) Website: PROOF OF CLAIM AND RELEASE FORM NOTE: You are urged to read carefully the accompanying Notice of Class Action, Proposed Settlement Terms and Hearing Thereon (the Notice ). In order to be eligible to participate in the Net Settlement Fund, Class members or their authorized representatives must complete this Proof of Claim & Release Form ( Proof of Claim ), sign it and mail it, sufficient postage prepaid, to the above address postmarked no later than April 11, 2001, together with the required supporting documents indicated on the instructions. If you need assistance filling out this Proof of Claim, please call the above toll-free number. DETACH HERE SECTION 1A: CLAIMANT IDENTIFICATION: (You must file a separate Proof of Claim for each differently named account or ownership, such as an individual account, an IRA account, a joint account, etc. Joint tenants, co-owners, trustees or custodians under a UGMA should file a single claim.) PLEASE USE UPPER CASE BLOCK LETTERS IN COMPLETING THIS FORM. Claimant is: Individual Two or More Persons as Joint Owners Estate Trust (Including a UGMA) Partnership Corporation Other (Describe on Separate Sheet) Last Name OR Legal Name of Trust/Estate First Name Street Address City State Zip Code Social Security Number OR Employer Identification Number Day Phone: Area Code and Telephone Number - - SECTION 1B: REPRESENTATIVE: (Complete this section only if the Claimant is an estate, trust, corporation or partnership, and you are filing this claim on the Claimant s behalf.) If the Claimant s representative is an institution such as a bank or trust company, please provide the FULL NAME of the institution when filling out this section. Do not use street name or nominee name. Last Name(s) of Representative First Name Title of Representative Officer (e.g., Trustee, Executor, Guardian) Street Address City State Zip Code Day Phone: Area Code and Telephone Number - - 9

10 INSTRUCTIONS FOR FILLING OUT THE PROOF OF CLAIM 1. In order to be eligible to participate in the distribution of the Net Settlement Fund, a claimant ( Claimant ) must have purchased the common stock of Foamex International, Inc. ( Foamex ), at any time from May 7, 1998 through and including April 16, 1999 (the Class Period ). 2. The submission of a Proof of Claim does not ensure that your claim will be upheld or that you will share in any recovery. All claims are subject to verification and investigation. You may be requested to provide further information. 3. All claims must be made by persons or entities who were beneficial owners (as opposed to record holders or nominees) of shares of Foamex common stock. (Brokerage firms, banks and other nominees are requested to transmit copies of the Notice and Proof of Claim to their present or former customers who were such beneficial owners). In addition, a Claimant must certify his social security number or other taxpayer identification number by signing this form on page 12 under CERTIFICATION. 4. Executors, administrators, guardians, conservators and trustees may complete and sign the Proof of Claim on behalf of persons or entities represented by them, but they must identify such persons or entities and provide proof of their authority (e.g., powers of attorney or currently effective letters testamentary or letters of administration) to do so. 5. FIFO: In processing claims, the first-in, first-out basis ( FIFO ) will be applied to both purchases and sales. Sales will be matched in chronological order, by trade date, first against the securities held as of close of trading on May 6, 1998 and then against the purchases during the Class Period. 6. Gains and Losses: All profits will be subtracted form all losses to determine the net Recognized Loss of each Class member. 7. Short Sales: The date of covering a short sale is deemed to be the date of purchase of Foamex common stock. The date of a short sale is deemed to be the date of sale of Foamex common stock. 8. Options: Where stock was purchased/sold by reason of having exercised an option, the option premium should be incorporated into the price accordingly. 9. Electronic Filing: Any claim submitted by an individual, or a legally authorized representative, that contains more than 100 transactions must be filed electronically on (a) a 3-1/2 diskette; (b) a CD-ROM; or (c) in ZIP media. Data must be submitted in a spreadsheet, or in ASCII or EBCDIC fixed length or text files. Claims submitted in a Microsoft Windows format must be saved in a CSV (Comma Delimited) format. The data fields to be included are: (a) ticker symbol or CUSIP Number; (b) security name; (c) transaction type ( P for purchase, S for sale); (d) trade date; (e) number of shares traded; and (f) price per share. Copies of appropriate documentation must be mailed to the Claims Administrator together with the electronic file. 10. De Minimis: No payment will be made on any claims where the payable loss is $5.00 or less, but the Authorized Claimant will otherwise be bound by the final judgment entered by the Court. 11. The date of purchase and/or sale of shares of Foamex common stock is the trade date and not the settlement date. 12. Claimants must comply with the documentation requirements described below. Copies, not originals, of documents should be submitted. Your submitted documents will not be returned to you. You are urged to make a copy for your files of the Proof of Claim and all documentation. 13. If you have any questions or need additional Proofs of Claim, write to the Claims Administrator at the above address. You may make photocopies of this form. HERE DOCUMENTATION REQUIREMENTS You must attach proof of your ownership and purchase of shares of Foamex common stock during the Class Period, in the form of brokerage confirmation slips, brokers monthly statements, or similar documents. If such documents are not available, you may submit a written statement on the letterhead of, and certified under oath by, the broker through whom the purchase of said shares was effectuated, indicating the day of purchase. If any shares of Foamex common stock were sold by you during the Class Period (including shares sold short), you must provide documentation similar to that just described. This documentation must confirm the date of sale, the number of shares sold, and the sale price per share. 10 DETACH

11 PURCHASE AND/OR SALE INFORMATION 1. If you owned any Foamex common stock on May 6, 1998, state the total number of shares you owned on that date: (must be documented). None owned (check if applicable). 2. Separately list each and every purchase of Foamex common stock during the period May 7, 1998 through April 16, 1999, and provide the following information: DETACH HERE Number of Shares of Purchase Price Per Documentation Date of Purchase Foamex Common Stock Share (excluding Enclosed Month/Day/Year Purchased commissions, taxes, fees) Yes/No 3. If you sold shares of Foamex common stock during the period May 7, 1998 through April 16, 1999, including shares sold short, you must provide the following information for each and every such sale: Number of Shares of Sale Price Per Share Documentation Date Of Sale Foamex Common Stock (excluding commis- Enclosed Month/Day/Year Sold sions, taxes, fees) Yes/No 4. State the total number of shares of Foamex common stock owned on April 17, 1999: (must be documented). If additional space is necessary, attach the required information on separate sheets with your Social Security Number on top. 11

12 SUBMISSION TO JURISDICTION OF THE COURT By submitting this Proof of Claim, I (we) submit to the jurisdiction of the United States District Court for the Southern District of New York for purposes of the Action and the Settlement of the Action (the Settlement ). I (We) further agree to be bound by the Orders of the Court, agree that this Proof of Claim, my (our) status as a Claimant, and the allowable amount of this claim will be subject to review and further inquiry, and that I (we) will furnish such additional documentation with respect to this Proof of Claim as may be required. RELEASE By signing this Proof of Claim, and in consideration of the establishment of the Settlement Fund, as of the Effective Date thereof, the undersigned claimant(s) ( Claimant ), on behalf of Claimant and Claimant s heirs, executors, administrators, successors, custodians, representatives, assigns and all other persons who may claim by or through Claimant, does hereby release Defendants and any of Defendants present and former partners, members, principals, officers, directors, employees, agents, attorneys, shareholders, insurers, reinsurers, auditors, accountants, underwriters, investment bankers, advisors, affiliates, associates, past, present or future parents, subsidiaries, joint venturers or affiliates, and each of their successors, assigns, representatives, heirs, executors and administrators (collectively, the Released Parties ) from all claims, demands, rights, liabilities and causes of action of every nature and description whatsoever, known or unknown, asserted or that might have been asserted, including, without limitation, claims for negligence, gross negligence, fraud, negligent misrepresentation, or violations of any state or federal statutes, rules or regulations, by any member of the Class against Defendants or the Released Parties arising out of, relating to, or in connection with purchases or sales of Foamex publicly traded common stock during the Class Period, or arising out of or related to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in any of the complaints filed in this Action or otherwise alleged, asserted or contended in this Action, or that could have been alleged, asserted or contended in this Action, based upon the facts alleged in the Complaint (the Settled Claims ). Plaintiffs, and each of them, on their own behalf and on behalf of the Class, to the extent permitted by law, voluntarily and expressly waive the provisions of Section 1542 of the California Civil Code (and all other like provisions of law in any other jurisdiction) which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. HERE REPRESENTATIONS I (We) acknowledge that I (we) have read the Notice of Class Action, Disclosure of Proposed Settlement Terms, and Hearing Thereon, and that pursuant thereto I (we) file this claim to participate in the Settlement. I (We) hereby warrant and represent that neither I (we), nor any person I (we) represent, is excluded from the Class (as defined in the Notice) or a person or entity who has requested exclusion from the Class. I (We) hereby warrant and represent that I am (we are) authorized to execute and deliver this Proof of Claim. CERTIFICATION I (We) certify that I am (we are) not subject to backup withholding. (If you have been notified by the IRS that you are subject to backup withholding, strike out the previous sentence.) I (We) declare and affirm under penalties of perjury that the foregoing statements and the documents attached hereto, including the Social Security or Employer Identification Number shown on this Proof of Claim Form, are true, correct and complete. Date: / / SIGNATURE of Claimant (Type or print name) Date: / / SIGNATURE of Joint Claimant (Type or print name) 12 DETACH

13 If the Claimant is other than an individual, or if the Claimant is not the person completing this form, the following must also be provided: Capacity of Person Signing (Executor, President, Trustee, etc.) Name of Person Signing (Type or print legibly) If the Claimant is a brokerage firm, bank, financial institution, corporation, partnership or limited partnership, the certification must be signed by an officer, partner or general partner of the Claimant. Date: / / SIGNATURE of Officer, Partner or General Partner (Type or print name) TITLE SUBSTITUTE FORM W-8 DETACH HERE IF YOU ARE NOT A RESIDENT OR CITIZEN OF THE UNITED STATES, COMPLETE THE FOLLOWING: Permanent residence (principal office if a corporation): If your claim is connected with a trade or business conducted in the U.S., please provide the name and address of your U.S. business, the type of business, and the Federal Tax Identification Number of the U.S. business. Name of Business: Address of Business: Tax Identification Number: W-8 Certification: Under the penalties of perjury, I certify that the information provided above is true, correct and complete. SIGNATURE(S): Date: / / Date: / / 13

14 SPECIAL NOTICE TO BANKS, BROKERS AND OTHER NOMINEES If you were a nominee for any beneficial owner of Foamex common stock during the Class Period, then, within ten (10) days after you receive this Notice and Proof of Claim ( the Notice ), you must either (1) provide the Claims Administrator with the names and addresses of such beneficial owners, preferably on computer-generated mailing labels or, if there are more than 2,000, on a 3-1/2 diskette, CD-ROM or ZIP media; or in the alternative, (2) send a copy of the Notice to all beneficial owners by first-class mail and provide the Claims Administrator with written confirmation of having done so. Additional copies of the Notice may be requested in writing from the Claims Administrator. All correspondence should be addressed, as follows: Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY Fax: (212) Website: You are entitled to reimbursement of any reasonable expenses you actually incurred in connection with the foregoing upon submission of a request and the appropriate supporting documentation to the Claims Administrator. ACCURATE CLAIMS PROCESSING TAKES A SIGNIFICANT AMOUNT OF TIME. THANK YOU FOR YOUR PATIENCE. Reminder Checklist: 1. Please sign the above release and certification. 2. Remember to attach supporting documentation. 3. Do not send original stock certificates. 4. Keep a copy of the completed claim form for your records. 5. If you desire an acknowledgment of receipt of your claim form, please send it Certified Mail, Return Receipt Requested, or utilize the website listed below. 6. If you move, please send us your new address. 7. If you have any questions concerning this claim form, contact: Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY Telephone: (800) Fax: (212) Website: 14

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16 Claims Administrator In re Foamex Securities Litigation c/o David Berdon & Co. LLP P.O. Box 3218 Grand Central Station New York, NY FIRST-CLASS MAIL U.S. POSTAGE PAID PEARL PRESSMAN LIBERTY COMMUNICATIONS GROUP FIRST CLASS MAIL PLEASE FORWARD IMPORTANT LEGAL INFORMATION