-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PopsfweOhcNpJ3L5vDkBjKZmfdqcmOKZIYafHYQ1XvxqoN4mOPdxn69ge0FduSYr RL5ECN9rHrYrqAHB4YOjIA== 0000899140-98-000527.txt : 19981216 0000899140-98-000527.hdr.sgml : 19981216 ACCESSION NUMBER: 0000899140-98-000527 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19981215 GROUP MEMBERS: MARSHALL S. COGAN GROUP MEMBERS: TRACE FOAM SUB, INC. GROUP MEMBERS: TRACE INTERNATIONAL HOLDINGS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FOAMEX INTERNATIONAL INC CENTRAL INDEX KEY: 0000912908 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS FOAM PRODUCTS [3086] IRS NUMBER: 050473908 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-48793 FILM NUMBER: 98770249 BUSINESS ADDRESS: STREET 1: 1000 COLUMBIA AVENUE CITY: LINWOOD STATE: PA ZIP: 19061 BUSINESS PHONE: 6108593000 MAIL ADDRESS: STREET 1: 1000 COLUMBIA AVE CITY: LINWOOD STATE: PA ZIP: 19061 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TRACE INTERNATIONAL HOLDINGS INC CENTRAL INDEX KEY: 0001033338 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 375 PARK AVENUE 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10152 SC 13D/A 1 AMENDMENT NO. 12 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 12) FOAMEX INTERNATIONAL INC. (Name of Issuer) Common Stock, $0.01 Par Value (Title of Class of Securities) 344123-10-4 (CUSIP Number) Philip N. Smith, Jr., Esq. Trace International Holdings, Inc. 375 Park Avenue 11th Floor New York, New York 10152 (212) 230-0400 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 6, 1998 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. SCHEDULE 13D CUSIP No. 344123-10-4 1 Name of Reporting Person I.R.S. Identification Nos. of Above Persons (entities only) Trace International Holdings, Inc. 58-1080969 2 Check the Appropriate Box If a Member of a Group a. |_| b. |X| 3 SEC Use Only 4 Source of Funds (See Instructions) BK, 00 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) |_| 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 4,474,753 Shares Beneficially 8 Shared Voting Power Owned By 7,050,247 Each Reporting 9 Sole Dispositive Power Person 4,474,753 With 10 Shared Dispositive Power 7,050,247 11 Aggregate Amount Beneficially Owned by Each Reporting Person 11,525,000 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |_| 13 Percent of Class Represented By Amount in Row (11) 46.1% 14 Type of Reporting Person (See Instructions) CO SCHEDULE 13D CUSIP No. 344123-10-4 1 Name of Reporting Person I.R.S. Identification Nos. of Above Persons (entities only) Trace Foam Sub, Inc. 13-3808758 2 Check the Appropriate Box If a Member of a Group a. |_| b. |X| 3 SEC Use Only 4 Source of Funds (See Instructions) 00 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) |_| 6 Citizenship or Place of Organization Delaware 7 Sole Voting Power Number of 0 Shares Beneficially 8 Shared Voting Power Owned By 7,000,247 Each Reporting 9 Sole Dispositive Power Person 0 With 10 Shared Dispositive Power 7,000,247 11 Aggregate Amount Beneficially Owned by Each Reporting Person 7,000,247 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |_| 13 Percent of Class Represented By Amount in Row (11) 28.0% 14 Type of Reporting Person (See Instructions) CO SCHEDULE 13D CUSIP No. 344123-10-4 1 Name of Reporting Person I.R.S. Identification Nos. of Above Persons (entities only) Marshall S. Cogan 2 Check the Appropriate Box If a Member of a Group* a. |_| b. |X| 3 SEC Use Only 4 Source of Funds (See Instructions) PF 5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) |_| 6 Citizenship or Place of Organization United States of America 7 Sole Voting Power Number of 703,334 Shares Beneficially 8 Shared Voting Power Owned By 0 Each Reporting 9 Sole Dispositive Power Person 703,334 With 10 Shared Dispositive Power 0 11 Aggregate Amount Beneficially Owned by Each Reporting Person 703,334 12 Check Box If the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) 13 Percent of Class Represented By Amount in Row (11) 2.8% 14 Type of Reporting Person (See Instructions) IN This Amendment No. 12 to Schedule 13D is filed on behalf of Trace International Holdings, Inc. ("Trace Holdings"), Trace Foam Sub, Inc. ("Trace Foam Sub"), and Marshall S. Cogan, and amends and supplements the Schedule 13D, dated December 14, 1993 (as amended, the "Schedule 13D"), as amended by Amendment No. 1 thereto filed on December 23, 1994, Amendment No. 2 thereto filed on March 6, 1995, Amendment No. 3 thereto filed on April 28, 1995, Amendment No. 4 thereto filed on August 28, 1997, Amendment No. 5 thereto filed on December 24, 1997, Amendment No. 6 thereto filed on March 16, 1998, Amendment No. 7 thereto filed on June 26, 1998, Amendment No. 8 thereto filed on July 21, 1998, Amendment No. 9 thereto filed on October 19, 1998, Amendment No. 10 thereto filed on November 6, 1998, and Amendment No. 11 thereto filed on November 23, 1998 and is being filed pursuant to Rule 13d-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This Amendment No. 12 is being filed to report the extension of the exercise period for a put option whereby Trace Holdings may be obligated to purchase 308,813 shares of Common Stock of the Issuer. The Schedule 13D is hereby amended as follows: ITEM 3. Sources and Amounts of Funds or Other Consideration. The second paragraph of Item 3 is hereby deleted in its entirety. ITEM 5. Interests in Securities of the Issuer. The fourth paragraph of Subclause (iii) of Item 5 (a and b) of Schedule 13D is hereby amended and restated in its entirety as follows: As a result of the foregoing, Trace Holdings may be deemed to own beneficially (as such term is defined in Rule 13d-3) a total of 11,525,000 shares of Common Stock, which represents 46.1% of the outstanding Common Stock. The penultimate sentence of the second paragraph of Subclause (iv) of Item 5 (a and b) of Schedule 13D is hereby amended and restated as follows: Mr. Cogan, by virtue of his control positions at Trace Foam Sub and Trace Holdings, may be deemed to own beneficially (as the term is defined in Rule 13d-3) the 11,525,000 shares of Common Stock beneficially owned, directly and indirectly, by Trace Foam Sub and Trace Holdings. ITEM 6. Contracts, Arrangements, Understandings or Relationships with respect to Securities of the Issuer. The following is added to Item 6: In connection with the Issuer's acquisition of Great Western, Trace Holdings entered into a put option agreement (the "Put Option") with John Rallis, a former President of the Issuer and the former owner of Great Western Foam Products Corporation. Pursuant to the Put Option, Mr. Rallis has the right and option to sell to Trace Holdings 308,813 shares of Common Stock for approximately $7.5 million, or $24.29 per share, at any time during the period commencing May 6, 1998, which expiration date was initially extended to November 6, 1998. On November 6, 1998, Mr. Rallis exercised the Put Option, which Trace Holdings was unable to satisfy; subsequently, Mr. Rallis agreed to rescind the exercise of the Put Option in exchange for the extension of the expiration date of the Put Option to March 31, 1999. A copy of the letter agreement between Trace Holdings and Mr. Rallis, dated November 6, 1998, extending the exercise date of the Put Option is filed as Exhibit T to this Schedule 13D. It is anticipated that in connection with the consummation of the Merger, Trace Holdings will pay to Mr. Rallis the difference between the amount payable to Mr. Rallis upon exercise of the Put Option and the Merger Consideration with respect to the underlying shares of Common Stock. ITEM 7. Exhibits to be Filed. The following is added to Item 7: EXHIBIT T Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated November 6, 1998. EXHIBIT U Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated September 30, 1998. EXHIBIT V Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated July 21, 1998. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. TRACE INTERNATIONAL HOLDINGS, INC. By: /s/ Marshall S. Cogan ----------------------- Name: Marshall S. Cogan Title: Chairman of the Board and Chief Executive Officer Date: December 15, 1998 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. TRACE FOAM SUB, INC. By: /s/ Marshall S. Cogan ----------------------- Name: Marshall S. Cogan Title: Chairman of the Board and President Date: December 15, 1998 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. /s/ Marshall S. Cogan --------------------- Marshall S. Cogan Date: December 15, 1998 EXHIBIT INDEX Exhibit Number Title - -------------- ----- 99.1 Exhibit T - Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated November 6, 1998. 99.2 Exhibit U - Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated September 30, 1998. 99.3 Exhibit V - Letter Agreement between Trace International Holdings, Inc. and John Rallis, dated July 21, 1998. EX-99.1 2 LETTER AGREEMENT DATED NOVEMBER 6, 1998 Exhibit T --------- November 6, 1998 Mr. John Rallis 3501 Jamboree Road, Suite 4000 Newport Beach, CA 92660 Dear Mr. Rallis: As you know, you, John Rallis ("Rallis"), and I, Philip N. Smith, Jr., Senior Vice President and Secretary of Trace International Holdings, Inc. (formerly known as '21' International Holdings, Inc.) ("Trace"), have had discussions and reached an understanding and agreement concerning the amendment and modification of the letter agreements between Rallis and Trace dated July 21, 1998 (the "July 1998 Letter Agreement") and September 30, 1998 (the September 1998 Letter Agreement"), which amended and modified certain provisions of the Amended and Restated Put Option Agreement by and between Rallis and Trace dated as of December 14, 1993 (the "Put Option Agreement"), to (a) extend the Exercise Period under the Put Option Agreement (to March 31, 1999) and (b) extend the last date for (i) the consummation of the Merger Transaction and (ii) the Trace purchase from Rallis, and the Rallis sale to Trace, of all of the Rallis right, title and interest in the Put Option Agreement under certain circumstances (to March 24, 1999). This letter is intended to set forth the understanding and agreement between Rallis and Trace respecting the foregoing, viz: Rallis and Trace agree: 1. The Exercise Period under the Put Option Agreement shall be extended through March 31, 1999. That is paragraph 1 of the July 1998 Letter Agreement shall be amended to read in its entirety as follows: "1. Effective as of November 6, 1998, the Put Option Agreement shall be amended and modified (and the Exercise Period shall be extended) so that the Exercise Period (provided for in subsection [b] of Section 1) shall be "at any time during the period commencing on May 6, 1998 and ending March 31, 1999." That is, the Put Option may be exercised, in whole or in part, by Rallis (and/or any permitted assignee) at any time during the period commencing on May 6, 1998 and ending March 31, 1999." Mr. John Rallis November 6, 1998 Page 2 2. Paragraph 2 of the July 1998 Letter Agreement shall be amended to read in its entirety as follows: "2. Recently, (a) Trace advised Rallis of the execution and delivery by Trace and Foamex International Inc. ("Foamex") of a new definitive merger agreement whereby (i) Foamex shall be merged into a wholly-owned subsidiary of Trace (the "Trace Merger Subsidiary"), (ii) all shareholders of Foamex (other than Trace and its subsidiaries) shall receive twelve dollars ($12) per share for their shares of Foamex, and (iii) Foamex shall become a wholly-owned subsidiary of Trace ("the Merger Transaction"), (b) Trace requested that Rallis (and The Rallis Foundation) vote in favor of the Merger Transaction and agree to accept twelve dollars ($12) per share for their shares of Foamex in accordance with the terms of the Merger Transaction, and (c) Trace requested that Rallis not exercise to Put Option." 3. The last date for (a) the consummation of the Merger Transaction and (b) the Trace purchase from Rallis, and the Rallis sale to Trace, of all of the right, title and interest of Rallis in the Put Option Agreement under certain circumstances shall be extended through March 24, 1999. That is, paragraph 3 of the July 1998 Letter Agreement shall be amended to read in its entirety as follows: "3. Therefore, in the event during the Exercise Period (a) Rallis does not exercise the Put Option, (b) Rallis (and The Rallis Foundation) tender the Rallis (and The Rallis Foundation) shares of Foamex to the Trace Merger Subsidiary (in consideration for a payment by the Trace Merger Subsidiary to Rallis [and The Rallis Foundation] of twelve dollars [$12] per share for the Rallis [and The Rallis Foundation] shares of Foamex), and (c) the Merger Transaction is consummated on or before March 24, 1999, concurrently with the consummation of the Merger Transaction, Rallis shall sell to Trace, and Trace shall purchase from Rallis, all right, title and interest of Rallis in the Put Option Agreement (and all rights of Rallis as to the Put Option) for the payment by Trace to Rallis of the sum of three million seven hundred ninety-five thousand three hundred eleven dollars and seventy cents ($3,795,311.70). The Trace payment to Rallis in this regard shall be made within two (2) business days of the consummation of the Merger Transaction or on March 24, 1999, whichever shall first occur." Mr. John Rallis November 6, 1998 Page 3 4. Paragraph 4 of the July 1998 Letter Agreement shall be amended to read in its entirety as follows: "4. In the event (a) the payment by the Trace Merger Subsidiary to Rallis (and The Rallis Foundation) is less than twelve dollars ($12) per share for the Rallis (and The Rallis Foundation) shares of Foamex (the "Shortfall"), the amount of the Shortfall shall be added to the amount of the payment by Trace to Rallis for all right, title and interest of Rallis in the Put Option provided for in paragraph 3, above (viz, $3,795,311.70) and (b) the payment by the Trace Merger Subsidiary to Rallis (and The Rallis Foundation) is more than twelve dollars ($12) per share for the Rallis (and The Rallis Foundation) shares of Foamex (the "Excess"), the amount of the Excess shall be subtracted from the amount of the payment by Trace to Rallis for all right, title and interest of Rallis in the Put Option provided for in paragraph 3, above (viz, $3,795,311.70)." 5. In all other respects, the terms and provisions of the July 1998 Letter Agreement and the September 1998 Letter Agreement remain as is, unamended and unmodified. If the foregoing correctly sets forth the understanding and agreement between Rallis and Trace in this regard, kindly sign the enclosed copy of this letter and return the enclosed copy of this letter to the undersigned, whereupon this letter shall evidence and constitute our agreement. Very truly yours, Trace International Holdings, Inc. By: /s/ Philip N. Smith, Jr. ------------------------------- Philip N. Smith, Jr. Senior Vice President and Secretary Agreed and Accepted: November 6, 1998 /s/ John Rallis - -------------------- John Rallis EX-99.2 3 LETTER AGREEMENT DATED SEPTEMBER 30, 1998 Exhibit U --------- September 30, 1998 Mr. John Rallis 3501 Jamboree Road, Suite 4000 Newport Beach, CA 92660 Dear Mr. Rallis: As you know, you, John Rallis ("Rallis"), and I Philip N. Smith, Jr., Senior Vice President and Secretary of Trace International Holdings, Inc. (formerly known as '21' International Holdings, Inc.) ("Trace"), have had discussions and reached an understanding and agreement concerning the amendment and modification of the letter agreement between Rallis and Trace dated July 21, 1998 (the "July 1998 Letter Agreement"), which amended and modified certain provisions of the Amended and Restated Put Option Agreement by and between Rallis and Trace dated as of December 14, 1993 ("the Put Option Agreement"), to (a) extend the Exercise Period under the Put Option Agreement (to November 6, 1998) and (b) extend the last date for (i) the consummation of the Merger Transaction and (ii) the Trace purchase from Rallis, and the Rallis sale to Trace, of all of the Rallis right, title and interest in the Put Option Agreement under certain circumstances (to October 30, 1998). This letter is intended to set forth the understanding and agreement between Rallis and Trace respecting the foregoing, vis: Rallis and Trace agree: 1. The Exercise Period under the Put Option Agreement shall be extended through November 6, 1998. That is, paragraph 1 of the July 1988 Letter Agreement shall be amended to read in its entirety as follows: "1. Effective as of September 30, 1998, the Put Option Agreement shall be amended and modified (and the Exercise Period shall be extended) so that the Exercise Period (provided for in subsection [b] of Section 1) shall be "at any time during the period commencing on May 6, 1998 and ending November 6, 1998." That is, the Put Option may be exercised, in whole or in part, by Rallis (and/or any permitted assignee) at any time during the period commencing on May 6, 1998 and ending November 6, 1998." 2. The last date for (a) the consummation of the Merger Transaction and (b) the Trace purchase from Rallis, Mr. John Rallis September 30, 1998 Page 2 and the Rallis sale to Trace, of all of the right, title and interest of Rallis in the Put Option Agreement under certain circumstances shall be extended through October 30, 1998. That is, paragraph 3 of the July 1998 Letter Agreement shall be amended to read in its entirety as follows: "3. Therefore, in the event during the Exercise Period (a) Rallis does not exercise the Put Option, (b) Rallis (and The Rallis Foundation) tender the Rallis (and The Rallis Foundation) shares of Foamex to the Trace Merger Subsidiary (in consideration for a payment by the Trace Merger Subsidiary to Rallis [and The Rallis Foundation] of eighteen dollars and seventy-five cents [$18.75] per share for the Rallis [and The Rallis Foundation] shares of Foamex), and (c) the Merger Transaction is consummated on or before October 30, 1998, concurrently with the consummation of the Merger Transaction. Rallis shall sell to Trace, and Trace shall purchase from Rallis, all right, title and interest of Rallis in the Put Option Agreement (and all rights of Rallis as to the Put Option) for the payment by Trace to Rallis of the sum of one million seven hundred ten thousand eight hundred twenty-four dollars ($1,710,824). The Trace payment to Rallis in this regard shall be made within two (2) business days of the consummation of the Merger Transaction or on October 30, 1998, whichever shall first occur." 3. In all other respects, the terms and provisions of the July 1998 Letter Agreement remain as is, unamended and unmodified. If the foregoing currently sets forth the understanding and agreement between Rallis and Trace in this regard, kindly sign the enclosed copy of this letter and return the enclosed Mr. John Rallis September 30, 1998 Page 3 copy of this letter to the undersigned, whereupon this letter shall evidence and constitute our agreement. Very truly yours, Trace International Holdings, Inc. By:/s/Philip N. Smith, Jr. ------------------------------ Philip N. Smith, Jr. Senior Vice President and Secretary Agreed and Accepted: September 30, 1998 /s/John Rallis - ------------------------- John Rallis EX-99.3 4 LETTER AGREEMENT DATED JULY 21, 1998 Exhibit V --------- [LETTERHEAD OF UNITED AUTO GROUP, INC.] VIA FEDERAL EXPRESS - ------------------- July 21, 1998 Mr. John Rallis 3501 Jamboree Road Suite 4000 Newport Beach, CA 92660 Dear Mr. Rallis: As you know, you, John Rallis ("Rallis"), and I, Philip N. Smith, Jr., Senior Vice President and General Counsel of Trace International Holdings, Inc. (formerly known as '21' International Holdings, Inc.) ("Trace"), have had discussions and reached an understanding and agreement concerning (a) the amendment and modification of the Amended and Restated Put Option Agreement by and between Rallis and Trace dated as of December 14, 1993 (the "Put Option Agreement") to extend the Exercise Period under the Put Option Agreement and (b) the obligation of Trace to purchase from Rallis, and the obligation of Rallis to sell to Trace, all of the Rallis right, title and interest in the Put Option Agreement under certain circumstances. This letter is intended to set forth the understanding and agreement between Rallis and Trace respecting the foregoing, viz: Rallis and Trace agree: 1. Effective as of July 21, 1998, the Put Option Agreement shall be amended and modified (and the Exercise Period shall be extended) so that the Exercise Period (provided for in subsection [b] of Section 1) shall be "at any time during the period commencing on May 6, 1998 and ending October 7, 1998." That is, the Put Option may be exercised, in whole or in part, by Rallis (and/or any permitted assignee) at any time during the period commencing on May 6, 1998 and ending October 7, 1998. 2. Recently, (a) Trace advised Rallis of the execution and delivery by Trace and Foamex International Inc. ("Foamex") of a definitive merger agreement whereby (i) Foamex shall be merged into a wholly-owned subsidiary of Trace (the "Trace Merger Subsidiary"), (ii) all shareholders of Foamex (other than Trace and its subsidiaries) shall receive eighteen dollars and seventy-five cents ($18.75) per share for their shares of Foamex, and (iii) Foamex shall become a wholly-owned subsidiary of Trace (the "Merger Transaction"), (b) Trace requested that Rallis (and The Rallis Foundation) Mr. John Rallis July 21, 1998 Page 2 vote in favor of the Merger Transaction and agreed to accept eighteen dollars and seventy five cents ($18.75) per share for their shares of Foamex in accordance with the terms of the Merger Transaction, and (c) Trace requested that Rallis not exercise the Put Option. 3. Therefore, in the event during the Exercise Period (a) Rallis does not exercise the Put Option, (b) Rallis (and The Rallis Foundation) tender the Rallis (and The Rallis Foundation) shares of Foamex to the Trace Merger Subsidiary in consideration of a payment by the Trace Merger Subsidiary to Rallis (and The Rallis Foundation) of eighteen dollars and seventy-five cents ($18.75) per share for the Rallis (and The Rallis Foundation) shares of Foamex, and (c) the Merger Transaction is consummated on or before September 30, 1998, concurrently with the consummation of the Merger Transaction, Rallis shall sell to Trace, and Trace shall purchase from Rallis, all right, title and interest of Rallis in the Put Option Agreement (and all rights of Rallis as to the Put Option) for the payment by Trace to Rallis of the sum of one million seven hundred ten thousand eight hundred twenty-four dollars ($1,710,824). The Trace payment to Rallis in this regard shall be made within two (2) business days of the consummation of the Merger Transaction or on September 30, 1998, whichever shall first occur. 4. In the event (a) the payment by the Trace Merger Subsidiary to Rallis (and The Rallis Foundation) is less than eighteen dollars and seventy-five cents ($18.75) per share for the Rallis (and The Rallis Foundation) shares of Foamex (the "Shortfall"), the amount of the Shortfall shall be added to the amount of the payment by Trace to Rallis for all right, title and interest of Rallis in the Put Option provided for in paragraph 3, above (viz, $1,710,824) and (b) the payment by the Trace Merger Subsidiary to Rallis (and The Rallis Foundation) is more than eighteen dollars and seventy-five cents ($18.75) per share for the Rallis (and The Rallis Foundation) shares of Foamex (the "Excess"), the amount of the Excess shall be subtracted from the amount of the payment by Trace to Rallis for all right, title and interest of Rallis in the Put Option provided for in paragraph 3, above (viz, $1,710,824). 5. Rallis and Trace agree to execute and deliver any other documents, and to perform any further acts, that may be reasonably necessary to give effect to, and to carry out the terms and provisions of, this letter agreement. Mr. John Rallis July 21, 1998 Page 3 6. This letter agreement shall inure to the benefit of and shall be binding upon the heirs, successors and permitted assigns of Rallis and the successors and assigns of Trace. 7. Any notice under this letter agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally or on the second day after mailing if mailed by first class mail, registered or certified, postage pre-paid, and addressed to Rallis at his business address and to Trace at its business address (which are presently the addresses which appear below). 8. If any legal action is necessary to enforce the terms of this letter agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which it may be entitled. 9. This letter agreement shall be subject to the laws of the State of California. 10. This letter agreement (when read together with the Put Option Agreement) (a) contains the entire understanding and (b) supersedes and takes the place of all prior understandings and agreements between Rallis and Trace in this regard, whether written, oral, express or implied, and (c) is a complete statement of the agreement between Rallis and Trace in this regard and the terms hereof. If the foregoing correctly sets forth the understanding and agreement between Rallis and Trace in this regard, kindly sign the enclosed copy of this letter and return the enclosed copy of this letter to the undersigned, whereupon this letter shall evidence and constitute our agreement. Sincerely yours, /s/ Philip N. Smith, Jr. -------------------------- Philip N. Smith, Jr. PNS:ssc cc: Ralph Cassady AGREED AND ACCEPTED: JULY 23, 1998 /s/ John Rallis - ---------------------- John Rallis -----END PRIVACY-ENHANCED MESSAGE-----