SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

            [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: 1-11432: 1-11436
                                            ----------------

                                   FOAMEX L.P.
                           FOAMEX CAPITAL CORPORATION
             (Exact Name of registrant as Specified in its Charter)

           Delaware                                    05-0475617
           Delaware                                    22-3182164
(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:  None
                                                             ----

       Indicate  by check mark  whether  Foamex  L.P.  (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 Foamex
L.P. 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 whether Foamex Capital  Corporation  (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 Foamex Capital  Corporation  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  registrants'  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]

       None  of  the  voting   securities  of  Foamex  L.P.  or  Foamex  Capital
Corporation are held by non-affiliates.

       As of  March  14,  2000,  there  were  1,000  shares  of  Foamex  Capital
Corporation's common stock outstanding.

       Foamex L.P. and Foamex  Capital  Corporation  meet the conditions set for
the in General Instruction  (I)(1)(a) and (b) of this Annual Report on Form 10-K
and are therefore filing this form with reduced disclosure format.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>
                                   FOAMEX L.P.
                           FOAMEX CAPITAL CORPORATION

                                      INDEX
<TABLE>
<CAPTION>
                                                                                                               Page
Part I
<S>                  <C>                                                                                      <C>
         Item  1.     Business                                                                                    3
         Item  2.     Properties                                                                                 10
         Item  3.     Legal Proceedings                                                                          10
         Item  4.     Submission of Matters to a Vote
                            of Security Holders                                                                  14

Part II
         Item  5.     Market for Registrant's Common Equity and
                            Related Stockholder Matters                                                          15
         Item  6.     Selected Consolidated Financial Data                                                       15
         Item  7.     Management's Discussion and Analysis of
                            Financial Condition and Results of Operations                                        17
         Item  7a.    Quantitative and Qualitative Disclosures about Market Risk                                 26
         Item  8.     Financial Statements and Supplementary Data                                                26
         Item  9.     Changes in and Disagreements with Accountants
                            on Accounting and Financial Disclosure                                               26

Part III
         Item 10.     Directors and Executive Officers of the Registrant                                         26
         Item 11.     Executive Compensation                                                                     26
         Item 12.     Security Ownership of Certain Beneficial Owners
                            and Management                                                                       26
         Item 13.     Certain Relationships and Related Transactions                                             26

Part IV
         Item 14.     Exhibits, Financial Statement Schedules
                            and Reports on Form 8-K                                                              27

         Signatures                                                                                              35
</TABLE>


The Registrant  will furnish a copy of any exhibit to this Annual Report on Form
10-K upon the payment of a fee equal to the Registrants'  reasonable  expense in
furnishing such exhibit.

                                       2
<PAGE>
PART I
ITEM l.  BUSINESS

General

       Foamex L.P.,  a wholly  owned  subsidiary  of Foamex  International  Inc.
("Foamex  International"),   is  engaged  primarily  in  the  manufacturing  and
distribution of flexible  polyurethane and advanced polymer foam products. As of
December 31, 1999, Foamex L.P.'s  operations are conducted  directly and through
its wholly owned  subsidiaries,  Foamex Canada Inc.  ("Foamex  Canada"),  Foamex
Latin America, Inc. ("Foamex Mexico"), and Foamex Asia, Inc. ("Foamex Asia"). As
of December 31, 1999,  Foamex L.P.'s partners were FMXI, Inc. ("FXMI") with a 2%
managing  general  partnership  interest  and  Foamex  International  with a 98%
limited  partnership  interest.  FMXI is a wholly  owned  subsidiary  of  Foamex
International.

       References  in this  Annual  Report on Form 10-K to  "Foamex  L.P."  mean
Foamex L.P. and, where relevant or applicable, its subsidiaries.

Segments

       General

       Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
foam products  industry and is one of the largest  manufacturers and distributor
of flexible  polyurethane  and advanced  polymer foam products in North America.
Foamex L.P. has numerous  manufacturing  facilities dedicated to certain product
lines as well as  facilities  with the  capability to support  multiple  product
lines.  Each  business  segment has a diverse  customer  base and is headed by a
senior  executive  who is  responsible  for  developing  plans and directing the
operations of the segment.

       Business segments are listed below.

          o    Foam Products - manufactures and markets foam used by the bedding
               industry, the furniture industry and the retail industry.
          o    Carpet Cushion  Products - manufactures  and  distributes  prime,
               rebond,  sponge  rubber and felt carpet  cushion to Foamex Carpet
               Cushion, Inc. ("Foamex Carpet"), a sister company wholly owned by
               Foamex International.
          o    Automotive  Products - supplies  foam  primarily  for  automotive
               interior  applications to automotive  manufacturers  and tier one
               suppliers.
          o    Technical  Products - manufactures and markets  reticulated foams
               and other custom  polyester and polyether  foams for  industrial,
               specialty and consumer and safety applications.
          o    Other -  primarily  consists  of  certain  foreign  manufacturing
               operations,   corporate  expenses  not  allocated  to  the  other
               business segments and restructuring and other charges (credits).

       Segment financial  information is included in Note 15 to the consolidated
financial statements included in this Annual Report on Form 10-K.

       Foam Products

       Products are  distributed  directly  from  manufacturing  facilities  and
indirectly through independent fabricator distributors.  These foams are used by
the bedding industry in quilts,  toppers, cores and border rolls for mattresses.
In the furniture  industry,  they are  generally  used for  upholstered  seating
products  and in the retail  industry,  for a broad  range of  products  such as
mattress overlay pads, leisure furniture, futons, and pillows. Foam Products are
generally  sold in large  volumes on a regional  basis  because of high shipping
costs.

       Foamex L.P.'s bedding products are sold to mattress manufacturers. Foamex
L.P. also supplies cut-to-size seat cushions,  back cushions and other pieces to
the furniture  industry.  Furniture foams are sold directly to  manufacturers as
well as through  distributors.  The consumer  products  group sells  therapeutic
sleep  products  such as

                                       3
<PAGE>

mattress  pads and bed pillows for the health  care and  consumer  markets and a
broad  line of home  furnishing  products  to  retailers  throughout  the United
States.

       The development and introduction of value added products  continues to be
a priority  including  viscoelastic or "memory" foams for the bedding  industry,
which  maintain  their  resiliency  better than other foams and  materials,  and
products incorporating Reflex(R).  Reflex(R) materials include cushion wraps and
cushion cores and are advanced polymer  cushioning  products designed to improve
comfort,  quality and durability in upholstered  furniture and bedding products.
Reflex(R) was created using the variable pressure foaming  manufacturing process
("VPFSM").  High efficiency thermal management foam products for applications in
work gloves and outerwear have also been introduced.

       Carpet Cushion Products

       Foamex L.P.  manufactures and distributes Carpet Cushion Products,  which
include prime, rebond,  sponge rubber and felt carpet cushion, to Foamex Carpet.
Prime carpet cushion is made from  polyurethane foam buns. Rebond carpet cushion
is made from various  types of scrap foam which are shredded  into small pieces,
processed and then bonded using a chemical adhesive. In accordance with a supply
agreement  with Foamex  Carpet,  if requested by Foamex  Carpet,  Foamex L.P. is
required  to supply  all of Foamex  Carpet's  requirements  for  Carpet  Cushion
Products.  Rebond  manufacturing  requires  the  management  of a  comprehensive
recycling  business  that  includes  an  extensive  collection  network  for the
automotive and foam industries worldwide.

       Automotive Products

       Foamex L.P. is one of the largest  suppliers of automotive  foam products
for the North American operations of original equipment  manufacturers ("OEMs").
Depending on the automotive manufacturer and/or the application, automotive foam
products are supplied by Foamex L.P.  either  directly to the  manufacturers  or
indirectly through tier one suppliers. Automotive Products include foam for trim
pads, door panel parts, headliners and acoustical purposes, as well as flame and
adhesive laminates and rolls for  tri-lamination.  Tri-laminated foam is applied
to  automotive  fabrics to form a  foam/fabric  composite  that  results in cost
savings and aesthetic value for the automotive manufacturer.

       Domestic automotive  manufacturers have narrowed their supply base during
recent years and increased the percentage  and dollar amount of components  that
they purchase from outside suppliers. As a result, a smaller number of companies
are supplying an increasing  percentage of automotive foam products.  Automotive
suppliers are increasingly  offering  integrated systems which lower the overall
cost  and  improve  quality  relative  to  previous  sourcing  methods  in which
individually  sourced  components  were  assembled  and installed by the OEMs. A
continuing  focus  on  new  product   development  and  flexible   manufacturing
capabilities are essential to satisfy changing specifications.

       Examples  of  Foamex  L.P.'s  ability  to  react  to  changing   industry
requirements    include   its   development   of   thermoformable    headliners,
tri-laminates,  advanced  cutting  technology and energy  absorbing  foams.  For
example,  Foamex L.P. has introduced surface modification  technology ("SMT(R)")
and continuous  platform cutting  ("CPCSM") used for vehicle  flooring  systems.
Also, the use of tri-laminates has increased due to the manufacturers'  need for
significant  cost savings and consumer  demand for improved  aesthetics.  Foamex
L.P.  intends to increase its  production  and  distribution  of foam and fabric
components, such as tri-laminated material for automotive seating.

       Automotive   manufacturers  are  increasingly  requiring  the  production
facilities  of their  suppliers to meet certain high quality  standards.  Foamex
L.P. has achieved and expects to maintain the highest quality ratings awarded to
foam suppliers by automotive  manufacturers.  In addition, all tier one and tier
two automotive supplier facilities worldwide will eventually be required to meet
the QS-9000 quality manufacturing  standards set by the United States automotive
manufacturers. In 1996, Foamex L.P. completed QS-9000 and ISO-9001 certification
for its eight domestic facilities which supply the automotive  industry.  Foamex
L.P. was one of the first  polyurethane  manufacturers  to be QS-9000  certified
which  demonstrates its commitment to producing the highest quality products and
meeting the needs of its customers.

                                       4
<PAGE>

       Technical Products

       Foamex  L.P.  believes  that  it is  one  of the  foam  industry's  prime
innovators  and producers of  industrial,  specialty,  consumer and safety foams
(collectively,  "Technical Products"). Technical Products consist of reticulated
foams and other  custom  polyester  and  polyether  foams,  which are  sometimes
combined with other materials to yield specific properties.  Reticulation is the
thermal  or   chemical   process   used  to  remove  the   membranes   from  the
interconnecting  cells within  foam.  This leaves a porous,  skeletal  structure
allowing for the free flow of gases and/or liquids.  Felting and lamination with
other foams or materials give these composites specific properties.

       Reticulated  foams are well suited for  filtration,  reservoiring,  sound
absorption and sound transmission.  Industrial applications include carburetors,
computer  cabinets,  inkpad  reservoirs,  high-speed inkjet printers and speaker
grills.  Medical applications  include oxygenators for cardiopulmonary  surgery,
instrument  holders  for  sterilization,   pre-op  scrubbers   impregnated  with
anti-microbial  agents and EKG pads containing  conductive gels. Other Technical
Products  have  unique  characteristics  such  as  flame  retardancy  and  fluid
absorption.  Additional  products  sold  within  this  group  include  foams for
refrigerated  supermarket  produce  counters,  mop  heads,  paint  brushes,  and
cosmetic applications.

       Foamex L.P. uses advertising in trade journals and related media in order
to attract  customers  and,  more  generally,  to increase an  awareness  of its
capabilities for Technical Products. In addition,  due to the highly specialized
nature of most  Technical  Products,  Foamex  L.P.'s  research  staff works with
customers to design, develop and manufacture each product to specification.

       Other

       Other consists  primarily of certain  foreign  manufacturing  operations,
corporate   expenses  not   allocated  to  the  other   business   segments  and
restructuring  and  other  charges  (credits).  See Note 15 to the  consolidated
financial statements.

Marketing and Sales

       Foam  Products  are sold  directly by Foamex  L.P.  to major  bedding and
furniture  manufacturers  such as Sealy,  Simmons and  Berkline and also through
third party independent fabricators.  In addition,  Foamex L.P. manufactures and
distributes foam-based consumer products such as futons, pillows,  mattress pads
and  juvenile  furniture to  retailers  such as  Wal-Mart,  Kmart and JC Penney.
Foamex  L.P.'s   foam-based   consumer  products  sales  efforts  are  primarily
regionally based with salespersons selling to local accounts.  The key strategic
elements  supporting  growth in these areas are a focus on  marketing  and sales
efforts, high quality,  cost-competitive  products and low freight costs through
optimal plant location.  Plant locations are critical in this  regionalized line
of business  where the  transportation  cost  typically  comprises a significant
portion of product cost.

       Carpet Cushion Products are sold to Foamex Carpet, which in turn sells to
distributors and to major floor covering retailers such as Sears,  CarpetMax and
Home Depot.

       Foamex L.P. has been a leading  supplier of Automotive  Products to OEMs,
including  Ford,  General  Motors  and  DaimlerChrysler  for more than 30 years.
Foamex L.P. is also the primary supplier of Automotive  Products to certain tier
one suppliers,  including Lear  Corporation  and Johnson  Controls.  Foamex L.P.
competes for new business both at the beginning of development of new models and
upon the redesign of existing  models.  Once a foam producer has been designated
to supply parts for a new model  program,  the foam  producer  usually  produces
parts for the life of the  program.  Competitive  factors in the market  include
product quality and reliability,  cost and timely service,  technical  expertise
and development capability, new product innovation and customer service.

       Foamex L.P.'s Technical Products are used for filtration and reservoiring
in a wide variety of  applications  by  companies  such as  Hewlett-Packard  and
Briggs & Stratton.  Foamex L.P. markets most of its Technical Products through a
network of independent  fabrication and distribution companies in North America,
the United  Kingdom and South Korea.  Such  fabricators  or  distributors  often
further process or finish  Technical  Products to meet the specific needs of end
users.  Foamex  L.P.'s  specialty and  technical  foams service  unique end user
requirements  and are

                                       5
<PAGE>

generally   sold  at  relatively   high  margins.   This  line  of  business  is
characterized by a diversity and complexity of both customers and applications.

International Operations and Export Sales

       Foamex  L.P.'s  geographical  information  is  included in Note 15 to the
consolidated financial statements.

Major Customers

       Sales to Foamex Carpet,  reported under Carpet Cushion Products,  totaled
$187.7 million in 1999 and $185.5 million in 1998. During 1999, sales to Johnson
Controls, which are included in Automotive Products, accounted for approximately
12.5% of Foamex  L.P.'s net sales.  During  1998 and 1997,  no one  unaffiliated
customer  accounted for more than 10.0% of Foamex  L.P.'s net sales.  During the
year  ended  December  31,  1999,  net  sales to the five  largest  unaffiliated
customers comprised  approximately  $360.6 million or 30.3% of Foamex L.P.'s net
sales.  The loss of any one of these  customers  could have a  material  adverse
effect on Foamex L.P.

Manufacturing and Raw Materials

       As  of  December  31,  1999,  Foamex  L.P.  conducted  operations  at  59
manufacturing  and  distribution  facilities with a total of  approximately  8.1
million square feet of floor space.  Foamex L.P. believes that its manufacturing
and distribution  facilities are well suited for their intended purposes and are
in  good  condition.   The   manufacturing   and  distribution   facilities  are
strategically  located to service Foamex L.P.'s major customers because the high
freight  cost in relation to the cost of the foam product  generally  results in
distribution being most cost effective within a 200 to 300 mile radius.

       Foamex L.P.'s fabrication process involves cutting foam buns into various
shapes and sizes to meet  customer  specifications.  Fabricated  foam is sold to
customers  and is utilized by Foamex  L.P.  to produce its  foam-based  consumer
products.  Scrap foam,  generated in  connection  with the  fabrication  of foam
products, is used by Foamex L.P. to produce rebond carpet cushion.

       Raw  materials  account for a  significant  portion of the  manufacturing
costs of Foamex L.P.  and,  historically,  the price of raw  materials  has been
cyclical and volatile.  Foamex L.P. generally has alternative suppliers for each
major raw  material  and Foamex  L.P.  believes  that it could find  alternative
sources  of supply  should  it cease  doing  business  with any one of its major
suppliers.  Foamex L.P.  attempts to offset raw material cost increases  through
selling price  increases;  however,  there can be no assurance  that Foamex L.P.
will be successful in implementing  selling price increases or that  competitive
pricing pressure will not require Foamex L.P. to adjust selling prices.  Results
of  operations  have  been  and  could  be  adversely   affected  by  delays  in
implementing,  or the  inability  of Foamex L.P.  to  implement,  selling  price
increases to offset raw material cost increases.

       The  two  principal   chemicals  used  in  the  manufacture  of  flexible
polyurethane foam are toluene diisocyanate ("TDI") and polyol. Lyondell Chemical
Company (formerly,  ARCO Chemical Company), BASF Corporation,  Bayer Corporation
and The Dow  Chemical  Company are Foamex  L.P.'s  largest  suppliers of TDI and
polyol.  The price of TDI and  polyol is  influenced  by  demand,  manufacturing
capacity and oil prices.  Significant  increases  in these raw  material  prices
could have a material  adverse  effect on the financial  condition or results of
operations of Foamex L.P.

       A key raw material  used in the  manufacture  of carpet  cushion is scrap
foam. Foamex L.P.  internally  generates a substantial portion of the scrap foam
used in the  production  of rebond  carpet  cushion  from its other  operations.
Historically,  the market price of rebond carpet cushion has fluctuated with the
market price of scrap foam.

Employees

       As of  December  31,  1999,  Foamex  L.P.  employed  approximately  5,600
persons.  Approximately  1,500 of these employees are located outside the United
States and  approximately  1,000 of these  employees  are covered by

                                       6
<PAGE>

collective  bargaining  agreements with labor unions, which agreements expire on
various dates through 2002. Foamex L.P.  considers  relations with its employees
to be good.

Competition

       The flexible polyurethane foam industry is highly competitive with price,
quality  and  service  being  significant  competitive  factors.  Foamex  L.P.'s
competitors in the polyurethane  foam industry include E. R. Carpenter  Company,
Hickory Springs Manufacturing Company, Vitafoam, Inc., General Foam Corporation,
Flexible Foam Products,  Inc., and Future Foam,  Inc. None of these  competitors
individually  competes in all of the business segments in which Foamex L.P. does
business.

Patents and Trademarks

       Foamex L.P. owns various patents and trademarks  registered in the United
States and in numerous foreign countries.  The registered processes and products
were developed  through ongoing  research and development  activities to improve
quality, reduce costs and expand markets through development of new applications
for flexible polyurethane foam products. While Foamex L.P. considers its patents
and trademarks to be a valuable  asset, it does not believe that its competitive
position is dependent on patent  protection or that its operations are dependent
upon any individual patent, trademark or tradename.

Research and Development

       Foamex L.P. believes it has a leading research and development capability
in the flexible  polyurethane foam industry.  Foamex L.P.'s primary research and
development  facility is located in Eddystone,  Pennsylvania.  Expenditures  for
research  and  development  amounted to $3.3  million,  $3.3  million,  and $2.4
million for 1999,  1998,  and 1997,  respectively,  excluding  expenditures  for
research  and  development  by Crain  Industries,  Inc.  ("Crain")  prior to its
acquisition in December 1997 (the "Crain Acquisition").

       Foamex L.P., Recticel,  s.a.  ("Recticel"),  a European polyurethane foam
manufacturer,  whose  subsidiary  was a former  partner of Foamex L.P.  and is a
current  shareholder  of Foamex  International,  and Beamech Group  Limited,  an
unaffiliated  third party, have an interest in a Swiss corporation that develops
new  manufacturing  technology for the production of polyurethane foam including
the VPFSM manufacturing process. Foamex L.P., Recticel and their affiliates have
a  royalty-free  license to use technology  developed by the Swiss  corporation.
Foamex L.P. and Recticel have exchanged know-how, trade secrets, engineering and
other  data,   designs,   specifications,   chemical   formulations,   technical
information,  market  information and drawings which are necessary or useful for
the  manufacture,  use or sale of foam products and it is anticipated  that they
will continue to do so in the future.

Buyout Proposals

       On August  5,  1999,  Foamex  International  announced  that its Board of
Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
International's outstanding common stock (the "Sorgenti Transaction"). Under the
terms of the letter of intent, if Foamex  International  entered into a business
combination  with another party,  the Purchasers would be entitled to a break-up
fee of $6.0 million plus  reimbursement of certain expenses,  subject to certain
conditions,  including  the  willingness  of  the  Purchasers  to  enter  into a
definitive  merger agreement  providing for a price of at least $11.50 per share
prior to the expiration of the letter of intent.  The proposed  transaction  was
subject to a number of  conditions,  including  the  negotiation  of  definitive
documents  regarding certain  conditions  relating to the bank credit facilities
and the public debt of Foamex  International's  subsidiaries.  Additional issues
considered included, minimum shareholder acceptance, change of board membership,
and  other   provisions   providing  for  a  higher  break-up  fee  and  expense
reimbursement  if  Foamex  International  entered  into a  business  combination
providing  a  more  favorable   transaction.   On  December  15,  1999,   Foamex
International announced that the letter of intent with the Purchasers, which had
been extended,  expired by its terms. The Purchasers had submitted a revised bid
at a price and on terms that were less  favorable  than those  contained  in the
letter of intent and the Negotiating  Committee of Foamex  International's Board
of Directors rejected the revised bid.


                                       7
<PAGE>

       On  February  9,  2000,  Foamex  International  announced  that  it is in
discussions  with  respect to a proposal  involving  the  acquisition  of all of
Foamex  International's  outstanding common stock for cash. Foamex International
stated that the  proposal is subject to a number of  conditions,  including  the
buyer's ongoing due diligence and the execution of definitive agreements. If the
proposal from the new group leads to a transaction,  it is anticipated that John
G. Johnson, Jr., Foamex  International's  President and Chief Executive Officer,
as well as  other  members  of  current  management,  would  participate  in the
management  of  Foamex  International  following  such  a  transaction.   Foamex
International  agreed to an exclusive  negotiating  period  ending five business
days after  delivery  of its  audited  financial  statements  included in Foamex
International's  Annual  Report on Form 10-K to the  prospective  buyer.  Foamex
International  expects  such  delivery  to be the same day as the  filing of its
Annual Report on Form 10-K with the Securities and Exchange Commission.

       In 1998,  Foamex  International  received an unsolicited  buyout proposal
from  Trace  International  Holdings,  Inc.  ("Trace"),  Foamex  International's
principal stockholder.  Foamex International entered into two merger agreements,
which were subsequently terminated by Trace.

Change in Control

       Trace is a  privately  held  company,  which owned  approximately  29% of
Foamex  International's  outstanding  voting common stock at March 10, 2000, and
whose former  Chairman also serves as Foamex  International's  Chairman.  Foamex
International's  common  stock owned by Trace is pledged as  collateral  against
certain  of  Trace's  obligations.  The  Foamex  L.P.  credit  facility  and the
Foamex/GFI  Note,  as  defined,  (see  Note  12 to  the  consolidated  financial
statements),  pursuant  to  which  approximately  $411.8  million  of  debt  was
outstanding as of December 31, 1999, provide that a "change of control" would be
an event of default and could result in the  acceleration of such  indebtedness.
"Change of control" means, for this purpose, that (i) a person or related group,
other  than  Trace,  beneficially  owns more than 25% of Foamex  International's
outstanding  voting  stock  and (ii) such  voting  stock  constitutes  a greater
percentage  of such voting  stock than the amount  beneficially  owned by Trace.
Additionally, certain indentures relating to senior subordinated notes of $248.0
million  contain  similar  "change of  control"  provisions,  which  require the
issuers  to  tender  for  such  notes  at a price  in cash  equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
there is such a "change of control".

       On July 21,  1999,  Foamex  L.P.  was  informed  by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy  Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace  bankruptcy  from  Chapter 11 to Chapter 7 of the  Bankruptcy  Code. A
trustee was  appointed to oversee the  liquidation  of Trace's  assets.  Neither
Trace's  bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control"  under the  provisions of the debt  agreements  described  above.  A
"change of control"  could take place however,  if the  bankruptcy  court allows
Trace's  creditors to foreclose on and take ownership of Foamex  International's
common stock owned by Trace, or otherwise authorizes a sale or transfer of these
shares,  under  circumstances  in which a person or  related  group,  other than
Trace, acquired more than 25% of Foamex International's outstanding voting stock
and owned a greater percentage of such voting stock than the amount beneficially
owned by Trace. On November 22, 1999, the bankruptcy court allowed two creditors
to take ownership of 11% and 6%, respectively,  of Foamex International's common
stock.  Such an event  did not  constitute  a  "change  of  control"  under  the
provisions of the debt agreements.

       Management  believes  that it is unlikely that a "change of control" will
occur as a result of Trace's bankruptcy proceedings.  However, Foamex L.P. would
seek to  resolve  the issues  that may arise  should  the  "change  of  control"
provisions  be  triggered,  by  requesting  waivers  of such  provisions  and/or
refinancing  certain debt, if necessary.  There can be no assurance  that Foamex
L.P. will be able to do so, or that Foamex L.P.  will be able to obtain  waivers
of such provisions.  Such  circumstances  raise  substantial  doubt about Foamex
L.P.'s  ability to  continue  as a going  concern.  The  accompanying  financial
statements  were  prepared  on a  going-concern  basis  and do not  include  any
adjustments that might result from the outcome of the Trace bankruptcy filing.

GFI Transaction

       On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
their affiliates completed a series of transactions which changed Foamex L.P.'s
structure  (collectively,  the "GFI Transaction").  Prior to the

                                       8
<PAGE>

consummation  of these  transactions,  Foamex  L.P.  defeased  the $4.5  million
outstanding principal amount of its 9 1/2% senior secured notes due 2000. Foamex
L.P.  settled  its  intercompany  payables  to  General  Felt  Industries,  Inc.
("General  Felt")  with  $4.8  million  in  cash  and a  promissory  note in the
aggregate  principal amount of $34.0 million supported by a $34.5 million letter
of credit under the Foamex L.P. credit  facility (the  "Foamex/GFI  Note").  The
initial  transaction  resulted in the transfer  from Foamex L.P. to Foam Funding
LLC, an indirect  wholly owned  subsidiary of Trace,  of all of the  outstanding
common stock of General Felt, in exchange for (i) the assumption by Foam Funding
LLC of $129.0  million of Foamex  L.P.'s  indebtedness  and (ii) the transfer by
Foam  Funding  LLC to  Foamex  L.P.  of a 1%  non-managing  general  partnership
interest in Foamex L.P. As a result,  General Felt ceased being a subsidiary  of
Foamex L.P. and was relieved  from all  obligations  under Foamex  L.P.'s 9 7/8%
senior  subordinated  notes due 2007 and 13 1/2% senior  subordinated  notes due
2005.  Upon  consummation  of the initial  transaction,  Foamex Carpet,  a newly
formed wholly owned subsidiary of Foamex  International,  Foamex  International,
Foam Funding LLC,  and General  Felt  entered into an Asset  Purchase  Agreement
dated  February 27, 1998,  in which General Felt sold  substantially  all of its
assets (other than cash, the Foamex/GFI Note and its operating  facility in Pico
Rivera,  California)  to Foamex Carpet in exchange for (i) $20.0 million in cash
and (ii) a  promissory  note issued by Foamex  Carpet to Foam Funding LLC in the
aggregate principal amount of $70.2 million.  The $20.0 million cash payment was
funded with a distribution by Foamex L.P.

       No gain has been recognized on the GFI Transaction. The net impact of the
GFI transaction was an increase in Foamex L.P.'s partners'  capital (deficit) of
approximately   $10.1  million,  a  distribution  of  $20.0  million  to  Foamex
International  and approximately  $1.5 million of fees charged to earnings.  The
$129.0  million of debt assumed by Foam Funding LLC in the GFI  Transaction  was
used to repay  approximately  $125.1  million of term loan  borrowings  that was
accounted for as an  extinguishment  of debt which resulted in an  extraordinary
loss of  approximately  $3.2 million.  The 1% non-managing  general  partnership
interest  acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

Forward-Looking Information

       The Private  Securities  Litigation  Reform Act of 1995  provides a "safe
harbor"  for  forward-looking   statements  so  long  as  those  statements  are
identified as  forward-looking  and are  accompanied  by  meaningful  cautionary
statements  identifying  important  factors that could cause  actual  results to
differ  materially from those projected in such  statements.  In connection with
certain forward-looking  statements contained in this Annual Report on Form 10-K
and those  that may be made in the future by or on behalf of Foamex  L.P.  which
are  identified  as  forward-looking,  Foamex L.P.  notes that there are various
factors  that could cause  actual  results to differ  materially  from those set
forth  in any  such  forward-looking  statements,  such  as raw  material  price
increases,  general  economic  conditions,  the level of automotive  production,
carpet  cushion  production  and  housing  starts,  the  completion  of  various
restructuring/consolidation  plans,  Foamex L.P.'s  capital and debt  structure,
litigation  and  changes  in   environmental   legislation   and   environmental
conditions.  The forward-looking  statements  contained in this Annual Report on
Form 10-K were  prepared by  management  and are  qualified  by, and subject to,
significant business, economic, competitive,  regulatory and other uncertainties
and contingencies,  all of which are difficult or impossible to predict and many
of which are beyond the control of Foamex L.P.

       Accordingly,   there  can  be  no  assurance  that  the   forward-looking
statements contained in this Annual Report on Form 10-K will be realized or that
actual results will not be significantly  higher or lower.  The  forward-looking
statements  have not been audited by,  examined by,  compiled by or subjected to
agreed-upon  procedures  by  independent  accountants,  and no third  party  has
independently  verified  or  reviewed  such  statements.  Readers of this Annual
Report on Form 10-K should  consider these facts in evaluating  the  information
contained  herein.  In addition,  the business and operations of Foamex L.P. are
subject to substantial  risks,  which increase the  uncertainty  inherent in the
forward-looking  statements  contained in this Annual  Report on Form 10-K.  The
inclusion of the forward-looking  statements  contained in this Annual Report on
Form 10-K should not be regarded as a representation by Foamex L.P. or any other
person  that any of the  forward-looking  statements  contained  in this  Annual
Report on Form 10-K will be achieved. In light of the foregoing, readers of this
Annual  Report on Form 10-K are  cautioned  not to place  undue  reliance on the
forward-looking statements contained herein.


                                       9
<PAGE>


ITEM 2.  PROPERTIES

       As of December 31,  1999,  Foamex L.P.  conducted  its  operations  at 59
manufacturing and distribution facilities. Total floor space in use at the owned
manufacturing  and distribution  facilities is approximately  3.2 million square
feet and total floor space in use at the leased  manufacturing  and distribution
facilities  is  approximately  4.9 million  square  feet.  Forty-eight  of these
facilities  are  located  throughout  33  cities  in  the  United  States,  four
facilities are located in Canada and seven facilities are located in Mexico. The
2000 annual base rental with respect to such leased  facilities is approximately
$10.6  million  under leases  expiring  from 2000 to 2025.  Foamex L.P. does not
anticipate  any problem in renewing or replacing any of such leases  expiring in
2000. In addition, Foamex L.P. has approximately 1.5 million square feet of idle
space of which approximately 0.6 million is leased.

       Foamex L.P. maintains its administrative office in Linwood, Pennsylvania.

       Property  information by business segment is not reported because many of
Foamex L.P.'s facilities produce products for multiple business segments.

ITEM 3.  LEGAL PROCEEDINGS

Litigation - Foamex International Shareholders

       During  1999,  Foamex  International   received  several   communications
addressed  to its Board of  Directors  from  certain  of Foamex  International's
stockholders  regarding  aspects of the  relationship  between  Trace and Foamex
International.   Such   stockholders   questioned   the   propriety  of  certain
relationships and related transactions  between Trace and Foamex  International,
which previously had been disclosed in Foamex  International's and Foamex L.P.'s
periodic  filings.  On June 14,  1999,  Foamex  International  received  a draft
complaint from counsel of certain  stockholders naming Foamex  International and
certain  current and former  directors,  which included  allegations  similar to
those in the Second Amended Complaint,  as defined below.  Foamex  International
was advised by such  counsel that such  stockholders  intended to file an action
soon thereafter.  On August 13, 1999, two stockholders filed an action on behalf
of an alleged class of Foamex  International's  shareholders,  entitled Watchung
Road Associates,  L.P. et al v. Foamex  International Inc., et al., Civil Action
No. 17370 (the "Watchung  Complaint"),  in the Court of Chancery of the State of
Delaware,  New Castle County. The suit names Foamex International,  Mr. Marshall
S. Cogan, Mr. Etienne Davignon,  Mr. John Gutfreund,  Mr. Robert Hay, Dr. Stuart
Hershon,  Mr.  John G.  Johnson,  Jr. and Mr.  John  Tunney as  defendants.  The
Watchung  Complaint  alleges  that  the  individual  defendants  breached  their
fiduciary duties by agreeing to the potential buyout of Foamex  International by
Sorgenti Chemical Industries, LLC and Liberty Partners Holdings 20, LLC.

       The Watchung  Complaint alleges that the Sorgenti  Transaction's  buy-out
price of  $11.50  per  outstanding  share is  inadequate  and fails to take into
consideration  claims  Foamex  International  allegedly  has as a result  of the
supposed  wrongful  diversions  of  company  assets  in  Foamex  International's
dealings with Trace and its affiliates. The Watchung Complaint also alleges that
the  directors  breached  their  fiduciary  duties by agreeing  to the  proposed
Sorgenti  Transaction  without conducting an auction or active market check. The
suit alleges that the board placed Mr. Cogan's interest ahead of those of Foamex
International's  stockholders,  and  alleges  that a critical  condition  of the
Sorgenti  Transaction is a consulting agreement for Mr. Cogan. The Watchung suit
seeks to enjoin the Sorgenti  Transaction,  seeks  rescission  or damages if the
Sorgenti Transaction is consummated,  and seeks an accounting from the directors
for plaintiffs  alleged losses.  The Sorgenti  Transaction was not  consummated.
Defendants have moved to consolidate this action with In re Foamex International
Inc.  Shareholders  Litigation,  discussed  below, and to dismiss the complaint.
Plaintiffs have agreed to consolidate.

       On April 26, 1999, a putative securities class action entitled Molitor v.
Foamex  International Inc., et al., 99 Civ. 3004, was filed in the United States
District court for the Southern District of New York naming as defendants Foamex
International,  Trace and certain officers and directors of Foamex International
on behalf of  stockholders  who bought shares of Foamex  International's  common
stock during the period from May 7, 1998 through and  including  April 16, 1999.
The lawsuit alleges that the defendants violated Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 by misrepresenting  and/or omitting material
information  about Foamex  International's  financial  situation and operations,
with the result of  artificially  inflating the price of Foamex  International's
stock.

                                       10
<PAGE>

The lawsuit also alleges that Trace and Marshall S. Cogan violated Section 20(a)
of the  Securities  Exchange  Act of  1934  as  controlling  persons  of  Foamex
International.  The complaint  seeks class  certification,  a  declaration  that
defendants violated the federal securities laws, an award of money damages,  and
costs and attorneys', accountants' and experts' fees. On May 18, 1999, a similar
action  entitled Thomas W. Riley v. Foamex  International  Inc., et al., 99 Civ.
3653 was filed in the same court.  The two actions have been  consolidated,  and
the Consolidated  Amended Class Action Complaint,  setting forth the allegations
of the two earlier  complaints,  was filed on December 6, 1999.  The  defendants
filed  motions to dismiss the  consolidated  complaint  on February 4, 2000.  No
discovery has taken place to date.

       Beginning  on or about  March 17,  1998,  six actions  (collectively  the
"Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
International. The Shareholder Litigation,  purportedly brought as class actions
on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
International,  certain of its  directors,  certain of its  officers,  Trace and
Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
Foamex  International  unaffiliated  with Trace in connection  with the original
proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
Foamex  International for $17.00 per share under an Agreement and Plan of Merger
(the "First Merger Agreement"). The complaints sought, among other things, class
certification, a declaration that the defendants breached their fiduciary duties
to the class,  preliminary and permanent  injunctions barring  implementation of
the  proposed  transaction,   rescission  of  the  transaction  if  consummated,
unspecified  compensatory  damages, and costs and attorneys' fees. A stipulation
and  order  consolidating  these six  actions  under  the  caption  In re Foamex
International  Inc.  Shareholders  Litigation,  Consolidated  Civil  Action  No.
16259NC, was entered by the Court on May 28, 1998.

       The parties to the  Shareholder  Litigation  entered into a Memorandum of
Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
definitive  Stipulation  of  Settlement  between the parties and approval by the
Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
Understanding  provided that as a result of, among other things, the Shareholder
Litigation and  negotiations  among counsel for the parties to the Memorandum of
Understanding,  a special meeting of stockholders would be held to vote upon and
approve the First Merger Agreement which provided,  among other things,  for all
of Foamex  International's  outstanding  common stock not owned by Trace and its
subsidiaries  (the "Public  Shares") to be  converted  into the right to receive
$18.75 in cash, without interest.

       The  Memorandum of  Understanding  also provided for  certification  of a
class,  for settlement  purposes only,  consisting of the Public Shares owned by
stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
Litigation  with  prejudice and the release by the plaintiffs and all members of
the  class of all  claims  and  causes of  action  that were or could  have been
asserted against Trace,  Foamex  International and the individual  defendants in
the  Shareholder  Litigation  or  that  arise  out of  the  matters  alleged  by
plaintiffs.  Following the completion of the  confirmatory  discovery  which was
provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
parties entered into a definitive  Stipulation of Settlement and the Court set a
hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
approved (the "Settlement Hearing"). In connection with the proposed settlement,
the plaintiffs  intended to apply for an award of attorney's fees and litigation
expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
oppose this application.  Additionally,  Foamex  International agreed to pay the
cost, if any, of sending notice of the settlement to the Public Shareholders. On
September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
Class Action and Settlement  Hearing was mailed to the members of the settlement
class. On October 20, 1998, the parties to the Shareholder  Litigation requested
that the Court cancel the Settlement  Hearing in light of the announcement  made
by Trace on October 16,  1998,  that it had been unable to obtain the  necessary
financing for the  contemplated  acquisition by Trace of Foamex  International's
common stock at a price of $18.75 per share which was the subject  matter of the
proposed settlement. This request was approved by the Court on October 21, 1998,
and Foamex International issued a press release on October 21, 1998,  announcing
that the Court had cancelled the Settlement Hearing.

       On  November  10,  1998,  counsel for  certain of the  defendants  in the
Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
light of the  notice  given by Trace to  Foamex  International  and the  special
committee of the Board of Directors on

                                       11
<PAGE>

November 5, 1998 whereby  Trace  terminated  the First  Merger  Agreement on the
grounds that the financing condition in the First Merger Agreement was incapable
of being satisfied.

       On November 12, 1998, the plaintiffs in the Shareholder  Litigation filed
an Amended  Class  Action  Complaint  (the  "Amended  Complaint").  The  Amended
Complaint named Foamex International,  Trace, Merger Sub, Mr. Marshall S. Cogan,
Mr. Andrea Farace, Dr. Stuart Hershon, Mr. John Tunney, and Mr. Etienne Davignon
as defendants,  alleging that they breached their fiduciary duties to plaintiffs
and the other Public Shareholders in connection with a second Agreement and Plan
of Merger (the  "Second  Merger  Agreement"),  that the  proposal to acquire the
Public Shares for $12.00 per share lacked entire  fairness,  that the individual
defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
consummating or otherwise effecting the merger contemplated by the Second Merger
Agreement.  In January  1999,  Trace advised that it could not finance the offer
reflected  in  the  Second  Merger  Agreement.  As  a  result,  the  preliminary
injunction motion did not go forward.

       On June 9, 1999, the plaintiffs in the Shareholder  Litigation  moved for
leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
Mr. Etienne Davignon as defendants, alleging that the named individuals breached
their fiduciary  duties by causing Foamex  International  to waste assets in its
transactions with Trace and by failing to enforce Foamex  International's rights
under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
International,  and alleging that Trace and Merger Sub breached the  Stipulation
of Settlement.

       On August 26, 1999, the plaintiffs in the  Shareholder  Litigation  moved
for leave to file a Third Amended and  Supplemental  Class Action and Derivative
Complaint (the "Third Amended Complaint"). The Third Amended Complaint was filed
on October 27, 1999. The Third Amended  Complaint  alleges both class claims and
derivative  claims, and names Foamex  International,  Mr. Marshall S. Cogan, Mr.
Andrea Farace, Dr. Stuart Hershon,  Mr. John Tunney,  Mr. Etienne Davignon,  Mr.
John Gutfreund, Mr. Robert Hay and Mr. John G. Johnson, Jr. as defendants.

       The  Third  Amended  Complaint  alleges  that the  individual  defendants
breached their duties to Foamex  International's Public Shareholders by agreeing
to the  Sorgenti  Transaction  at an  inadequate  price  that fails to take into
consideration  Foamex  International's  allegedly valuable claims arising out of
purported diversions of money from Foamex International to Trace, and by failing
to  maximize  shareholder  value in a sale of Foamex  International  and instead
agreeing to a deal with a buyer who is willing to enter into a  consulting  deal
with Mr. Cogan to get his and the board's approval.  The Third Amended Complaint
purports to assert a  derivative  claim for waste and breach of  fiduciary  duty
against Mr. Cogan,  Mr. Farace,  Dr.  Hershon,  Mr. Tunney,  Mr.  Davignon,  Mr.
Gutfreund,  and Mr. Hay. The Third Amended  Complaint seeks the appointment of a
receiver for Foamex  International,  alleging that the directors have mismanaged
Foamex  International.  The Third Amended Complaint also alleges that Mr. Cogan,
Mr. Farace, Dr. Hershon,  Mr. Davignon,  Mr. Tunney, Mr. Gutfreund,  and Mr. Hay
breached their  fiduciary  duties by failing to enforce  Foamex  International's
rights under the First Merger Agreement.

       The Third Amended  Complaint  seeks:  a declaration  that the  individual
defendants have breached their fiduciary  duties;  damages;  the imposition of a
constructive  trust on profits and  benefits  Mr.  Cogan,  Trace,  and the other
individual  defendants allegedly received as a result of the alleged wrongdoing;
an  injunction  against  the  Sorgenti  Transaction  under  its  present  terms;
rescission  and damages if the deal is  consummated;  and the  appointment  of a
receiver for Foamex  International.  Defendants  have moved to consolidate  this
action with Watchung Road Associates, L.P., et ano v. Foamex International Inc.,
et al., discussed above, and to dismiss the complaint. Plaintiffs have agreed to
consolidate and opposed the motion to dismiss.

       The defendants  intend to vigorously defend these  litigations,  which if
adversely  determined,  could have a material  adverse  effect on the  financial
position,  results  of  operations  and cash flows of Foamex  International  and
Foamex L.P.
                                       12
<PAGE>

Litigation - Breast Implants

       As of  February  24,  2000,  Foamex  L.P.  and Trace were two of multiple
defendants  in actions  filed on behalf of  approximately  3,857  recipients  of
breast  implants  in various  United  States  federal  and state  courts and one
Canadian provincial court, some of which allege substantial damages, but most of
which allege  unspecified  damages for personal injuries of various types. Three
of these cases seek to allege claims on behalf of all breast implant  recipients
or other allegedly affected parties, but no class has been approved or certified
by the court. In addition, three cases have been filed alleging claims on behalf
of approximately 39 residents of Australia,  New Zealand,  England, and Ireland.
Foamex L.P. believes that the number of suits and claimants may increase. During
1995,  Foamex L.P. and Trace were granted  summary  judgments  and  dismissed as
defendants  from all cases in the  federal  courts of the United  States and the
state courts of California.  Appeals for these  decisions were withdrawn and the
decisions are final.

       Although  breast  implants  do not contain  foam,  certain  silicone  gel
implants  were  produced  using  a  polyurethane  foam  covering  fabricated  by
independent  distributors  or  fabricators  from bulk foam purchased from Foamex
L.P.  or Trace.  Neither  Foamex  L.P.  nor Trace  recommended,  authorized,  or
approved the use of its foam for these purposes. Foamex L.P. is also indemnified
by Trace for any such liabilities relating to foam manufactured prior to October
1990.  Trace's  insurance  carrier has continued to pay Foamex L.P.'s litigation
expenses  after Trace's  filing under the  Bankruptcy  Code.  Trace's  insurance
policies  continue to cover  certain  liabilities  of Trace but if the limits of
those policies are exhausted, it is unlikely that Trace will be able to continue
to provide  additional  indemnification.  While it is not feasible to predict or
determine the outcome of these actions, based on management's present assessment
of the merits of pending claims,  after consultation with the general counsel of
Foamex L.P.,  and without  taking into account the  indemnification  provided by
Trace, the coverage  provided by Trace's and Foamex L.P.'s  liability  insurance
and potential  indemnity from the  manufacturers of polyurethane  covered breast
implants,  management  believes  that the  disposition  of the matters  that are
pending or that may reasonably be  anticipated to be asserted  should not have a
material adverse effect on either Foamex L.P.'s consolidated  financial position
or results of operations.  If management's assessment of Foamex L.P.'s liability
with respect to these actions is  incorrect,  such actions could have a material
adverse effect on the financial  position,  results of operations and cash flows
of Foamex L.P.

Litigation - Other

       Foamex L.P. is party to various  other  lawsuits,  both as defendant  and
plaintiff,  arising  in the  normal  course of  business.  It is the  opinion of
management that the  disposition of these lawsuits will not,  individually or in
the  aggregate,  have a material  adverse  effect on the  financial  position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect,  such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position.

Environmental

       Foamex L.P. is subject to extensive and changing  federal,  state,  local
and foreign environmental laws and regulations,  including those relating to the
use, handling,  storage,  discharge and disposal of hazardous substances and the
remediation of  environmental  contamination,  and as a result,  is from time to
time involved in administrative and judicial  proceedings and inquiries relating
to environmental  matters.  As of December 31, 1999, Foamex L.P. had accruals of
approximately $3.5 million for environmental  matters.  During 1998, Foamex L.P.
established an allowance of $0.6 million  relating to receivables from Trace for
environmental indemnifications due to the financial difficulties of Trace.

       The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments")  provide
for the establishment of federal emission standards for hazardous air pollutants
including  methylene  chloride,  propylene oxide and TDI,  materials used in the
manufacturing  of foam. On December 27, 1996,  the United  States  Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that  will  require  manufacturers  of slab  stock  polyurethane  foam  and foam
fabrication plants to reduce emissions of methylene chloride. The final National
Emission  Standard for  Hazardous  Air  Pollutants  ("NESHAP")  was  promulgated
October 7,  1998.  NESHAP  requires  a  reduction  of  approximately  70% of the
emission of methylene chloride for the slab stock foam industry

                                       13
<PAGE>

effective  October 7, 2001.  Foamex L.P.  believes  that the use of  alternative
technologies,  including VPFSM,  which do not utilize methylene chloride and its
ability  to  shift  current   production  to  the  facilities  which  use  these
alternative technologies will minimize the impact of these regulations. The 1990
CAA  Amendments  also may  result  in the  imposition  of  additional  standards
regulating  air  emissions  from  polyurethane  foam  manufacturers,  but  these
standards have not yet been proposed or promulgated.

       Foamex L.P. has reported to  appropriate  state  authorities  that it has
found soil and  groundwater  contamination  in excess of state  standards at two
facilities and soil  contamination  in excess of state  standards at three other
facilities.  Foamex  L.P.  has  begun  remediation  and  is  conducting  further
investigations  into the extent of the  contamination  at these  facilities and,
accordingly,  the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such  remediation  cannot be predicted with
any degree of certainty  at this time.  Foamex L.P. has accruals of $2.5 million
for the estimated  cost of completing  remediation at these  facilities.  Foamex
L.P. is in the process of addressing potential  contamination at its Morristown,
Tennessee facility, and has submitted a sampling plan to the State of Tennessee.
The extent of the  contamination  and responsible  parties,  if any, has not yet
been determined.  A former owner may be liable for cleanup costs;  nevertheless,
the cost of remediation, if any, is not expected to be significant.

       Federal  regulations  require  that by the end of  1998  all  underground
storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
standards.  Foamex L.P. has upgraded all USTs at its  facilities  in  accordance
with  these  regulations.  Foamex  L.P.  believes  that  its  USTs do not pose a
significant risk of environmental liability. However, there can be no assurances
that such USTs will not result in  significant  environmental  liability  in the
future.

       On April 10,  1997,  the  Occupational  Health and Safety  Administration
promulgated new standards  governing  employee  exposure to methylene  chloride,
which  is used  as a  blowing  agent  in some  of  Foamex  L.P.'s  manufacturing
processes.  The phase-in of the  standards was completed in 1999 and Foamex L.P.
has  developed  and  implemented  a  compliance  program.  Capital  expenditures
required  and  changes  in  operating   procedures   are  not   anticipated   to
significantly impact Foamex L.P.'s competitive position.

       Foamex  L.P.  has been  designated  as a  Potentially  Responsible  Party
("PRP") by the EPA with respect to six sites.  Estimates of total  cleanup costs
and fractional allocations of liability are generally provided by the EPA or the
committee of PRP's with respect to the  specified  site. In each case and in the
aggregate, the liability of Foamex L.P. is not considered to be significant.

       In 2000 and  2001,  capital  expenditures  for  environmental  compliance
projects are anticipated to be approximately $2.0 million per year.  Although it
is possible that new  information  or future  developments  could require Foamex
L.P. to reassess its potential  exposure  relating to all pending  environmental
matters, including those described herein, Foamex L.P. believes that, based upon
all  currently  available  information,  the  resolution  of such  environmental
matters will not have a material  adverse  effect on Foamex  L.P.'s  operations,
financial  position,   capital   expenditures  or  competitive   position.   The
possibility  exists,   however,   that  new  environmental   legislation  and/or
environmental  regulations may be adopted, or other environmental conditions may
be found to exist, that may require  expenditures not currently  anticipated and
that may be significant.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       None


                                       14
<PAGE>
PART II
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS.

          (a)  Foamex L.P. is a privately held limited partnership.  There is no
               established public trading market for its securities.

          (b)  As of December 31, 1999,  there were two holders of Foamex L.P.'s
               equity securities.

          (c)  Listed  below  are  the  net  cash  distributions  (receipts)  in
               accordance  with tax sharing  agreements.  At December  31, 1999,
               Foamex L.P. has a receivable of  approximately  $0.9 million from
               its partners in accordance with the tax sharing agreement.

                                                  Tax Sharing Distributions
                                                     1999              1998
                                                  ----------        -------
                                                          (thousands)
       FMXI                                       $  (5)             $    6
       Foamex International                         (12)                287
                                                  -----               -----
                                                   $(17)               $293
                                                  =====                ====

1999 Distributions

       In 1999,  Foamex L.P.  distributed  $17.3 million in cash pro rata to its
partners.

1998 Distributions

       In 1998,  Foamex L.P.  distributed  $20.0 million in cash pro rata to its
partners.

Limitations on Distributions

       The Foamex L.P. credit agreement and the Indentures for the 9 7/8% senior
subordinated  notes due 2007 and the 13 1/2% senior  subordinated notes due 2005
restrict the ability of Foamex L.P. to make distributions to its partners.

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

       The following table presents selected historical  consolidated  financial
data of Foamex L.P. The financial  data should be read in  conjunction  with the
financial statements and related notes thereto of Foamex L.P. included elsewhere
in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                          Fiscal Year (1)
                                                     1999        1998 (4)    1997 (5)        1996        1995 (2)
                                                                           (thousands)
Statements of Operations Data
<S>                                              <C>           <C>            <C>          <C>          <C>
   Net sales                                     $1,190,679    $1,155,918     $931,095     $926,351     $862,834
   Income (loss) from continuing
   operations (3)                                    15,581        (5,869)      11,265       53,661      (48,126)

Balance Sheet Data (at period end)
   Total assets                                    $698,495      $768,528     $834,068     $586,157     $605,892
   Total long-term debt, classified as current (4)        -       715,817            -            -            -
   Total long-term debt                             680,544             -      726,649      392,617      433,956
   Partners' equity (deficit)                      (164,591)     (196,037)    (156,302)      12,832      (12,604)
</TABLE>


                                       15
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA (continued)

(1)  Foamex L.P. changed its fiscal year to the calendar year during 1998. Prior
     to the change,  Foamex  L.P.  had a 52 or 53 week fiscal year ending on the
     Sunday closest to the end of the calendar year.  Each fiscal year presented
     prior to 1998 was comprised of 52 weeks.

(2)  Fiscal 1995 was restated for discontinued operations.

(3)  Includes net  restructuring  and other charges  (credits),  as discussed in
     Note 4 to the  consolidated  financial  statements  included in this Annual
     Report on Form 10-K. Listed below are the pre-tax charges (credits).

         1999 - $10.8 million
         1998 - $(10.1) million
         1997 - $21.1 million
         1996 - $(6.4) million
         1995 - $39.2 million

(4)  As of December  31,  1998,  Foamex  L.P.  classified  approximately  $715.8
     million  of  long-term  debt as  current,  as  discussed  in Note 12 to the
     consolidated  financial  statements  included in this Annual Report on Form
     10-K.

(5)  The balance sheet data included the estimated  fair value of the net assets
     acquired in the Crain  Acquisition in December  1997. The income  statement
     data  excludes the results of Crain from the  acquisition  date of December
     23, 1997, since the effect is insignificant.



















                                       16

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

Overview

       Foamex L.P.  operates in the flexible  polyurethane  and advanced polymer
foam products  industry.  As of December 31, 1999,  Foamex L.P.'s operations are
conducted  directly and through its wholly owned  subsidiaries,  Foamex  Canada,
Foamex  Mexico and Foamex  Asia.  Business  segments are listed  below.  Segment
financial  information  is  included  in Note 15 to the  consolidated  financial
statements.

     o    Foam  Products -  manufactures  and  markets  foam used by the bedding
          industry, the furniture industry and the retail industry.
     o    Carpet Cushion Products - manufactures and distributes prime,  rebond,
          sponge  rubber  and felt  carpet  cushion to Foamex  Carpet,  a sister
          company wholly owned by Foamex International.
     o    Automotive  Products - supplies foam primarily for automotive interior
          applications to automotive manufacturers and tier one suppliers.
     o    Technical  Products - manufactures and markets  reticulated  foams and
          other custom  polyester and polyether foams for industrial,  specialty
          and consumer and safety applications.
     o    Other  -   primarily   consists  of  certain   foreign   manufacturing
          operations,  corporate  expenses not  allocated to the other  business
          segments and restructuring and other charges (credits).

       Foamex L.P.'s sales are impacted by the sales of new and existing  homes,
the  overall  level of  passenger  car and light  truck  production,  changes in
personal  disposable income and seasonality.  Foamex L.P. typically  experiences
two  seasonally  slow  periods  during  each  year,  in  early  July and in late
December, due to scheduled plant shutdowns and holidays.

       The  following   discussion  should  be  read  in  conjunction  with  the
consolidated  financial  statements  and related  notes  included in this Annual
Report on Form 10-K.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                 Carpet
                                   Foam         Cushion     Automotive      Technical
                                 Products       Products       Products      Products        Other       Total
1999                                                                (thousands)
<S>                              <C>          <C>            <C>              <C>          <C>        <C>
Net sales                        $521,377     $187,668       $361,806         $92,180      $27,648    $1,190,679
Income (loss) from operations      54,439          869         22,853          23,048      (16,962)       84,247
Depreciation and amortization      16,390        6,436          4,596           2,564        2,604        32,590
Income (loss) from operations
  as a percentage of net sales      10.4%         0.5%          6.3%            25.0%        n.m.*          7.1%

1998
Net sales                        $559,690     $210,313       $285,190         $79,140      $21,585    $1,155,918
Income (loss) from operations      36,253          (58)        17,319          14,919       (2,925)       65,508
Depreciation and amortization      17,418        5,092          4,582           2,615        1,972        31,679
Income (loss) from operations
  as a percentage of net sales       6.5%         0.0%          6.1%            18.9%        n.m.*          5.7%

1997
Net sales                        $334,900     $273,920       $225,892         $76,254      $20,129      $931,095
Income (loss) from operations      30,974        8,795         24,885          18,071      (26,393)       56,332
Depreciation and amortization      10,237        4,166          3,309           2,290          880        20,882
Income (loss) from operations
  as a percentage of net sales       9.2%         3.2%         11.0%            23.7%        n.m.*          6.1%
</TABLE>

*  not meaningful



                                       17
<PAGE>

Acquisitions and Dispositions

       On December 23, 1997, Foamex  International  acquired Crain pursuant to a
merger agreement with Crain Holdings Corp. for a purchase price of approximately
$213.7  million,  including  the  assumption  of  debt  with  a  face  value  of
approximately $98.6 million (and an estimated fair value of approximately $112.3
million)  and  contributed  all of the  assets  of  Crain,  subject  to all  the
liabilities of Crain, to Foamex L.P. In addition,  fees and expenses  associated
with  the  Crain  Acquisition  were  approximately  $13.2  million.   The  Crain
Acquisition  was  accounted  for as a  purchase  and the  results  of Crain were
included from the acquisition date, except the results from December 24, 1997 to
December 28, 1997 were not included in the consolidated statements of operations
or cash flows for 1997 since the effect would be insignificant.

       GFI Transaction

       On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
their affiliates  completed a series of transactions which changed Foamex L.P.'s
structure  (collectively,  the "GFI Transaction").  Prior to the consummation of
these transactions,  Foamex L.P. defeased the $4.5 million outstanding principal
amount of its 9 1/2% senior  secured  notes due 2000.  Foamex  L.P.  settled its
intercompany  payables to General Felt  Industries,  Inc.  ("General Felt") with
$4.8 million in cash and a promissory note in the aggregate  principal amount of
$34.0  million  supported by a $34.5  million  letter of credit under the Foamex
L.P. credit facility (the "Foamex/GFI Note"). The initial  transaction  resulted
in the transfer  from Foamex L.P. to Foam Funding LLC, an indirect  wholly owned
subsidiary of Trace, of all of the outstanding  common stock of General Felt, in
exchange for (i) the  assumption by Foam Funding LLC of $129.0 million of Foamex
L.P.'s  indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
a 1%  non-managing  general  partnership  interest  in Foamex  L.P. As a result,
General Felt ceased being a subsidiary  of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
1/2%  senior  subordinated  notes due 2005.  Upon  consummation  of the  initial
transaction,  Foamex  Carpet,  a newly formed wholly owned  subsidiary of Foamex
International,  Foamex International, Foam Funding LLC, and General Felt entered
into an Asset Purchase  Agreement dated February 27, 1998, in which General Felt
sold  substantially  all of its assets (other than cash, the Foamex/GFI Note and
its operating facility in Pico Rivera,  California) to Foamex Carpet in exchange
for (i) $20.0 million in cash and (ii) a promissory note issued by Foamex Carpet
to Foam Funding LLC in the  aggregate  principal  amount of $70.2  million.  The
$20.0 million cash payment was funded with a distribution by Foamex L.P.

       No gain has been recognized on the GFI Transaction. The net impact of the
GFI transaction was an increase in Foamex L.P.'s partners'  capital (deficit) of
approximately   $10.1  million,  a  distribution  of  $20.0  million  to  Foamex
International  and approximately  $1.5 million of fees charged to earnings.  The
$129.0  million of debt assumed by Foam Funding LLC in the GFI  Transaction  was
used to repay  approximately  $125.1  million of term loan  borrowings  that was
accounted for as an  extinguishment  of debt which resulted in an  extraordinary
loss of  approximately  $3.2 million.  The 1% non-managing  general  partnership
interest  acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

1999 Compared to 1998

       Total net sales for 1999 increased 3.0% to $1,190.7 million from $1,155.9
million in 1998. The increase was primarily the result of stronger volume growth
in the Automotive  Products and Technical  Products segments partially offset by
sales declines in the Foam Products and Carpet Cushion Products segments.

       Income  from  operations  increased  28.6% to $84.2  million in 1999 from
$65.5 million in 1998.  Results in 1999 included $10.8 million of  restructuring
and other charges. In 1998, a net restructuring credit of previously established
restructuring  accruals  increased  operating  income  by $10.1  million.  These
restructuring  and other charges  (credits) are discussed  further under "Other"
below.  Excluding the  restructuring and other charges  (credits)for  comparison
purposes,  income from operations  increased 71.7% to $95.1 million in 1999 from
$55.4 million in 1998. On this basis, income from operations represented 8.0% of
net  sales in 1999,  up from  4.8% of net  sales in 1998.  The  improvement  was
primarily  due to (i) the  increase in net sales,  (ii)  improved  gross  profit
margins and (iii) lower selling, general and administrative expenses at both the
business unit and  corporate  levels.  Improved  gross profit  margins  resulted
primarily  from  operating  efficiencies,  the  benefits  of the first  phase of
implementation of

                                       18
<PAGE>

improved  operating  practices  across a number  of  Foamex  L.P.'s  facilities,
enhanced  raw  material   utilization  and  the  full  year  benefits  from  the
consolidation   of  former  Crain   facilities.   Lower  selling,   general  and
administrative  expenses  primarily  reflected  the  integration  of  the  Crain
Acquisition,  staffing  reductions  in January  1999,  elimination  of the Trace
management fee and the closure of the New York office.

       Foam Products

       Foam Products net sales for 1999  decreased  6.8% to $521.4  million from
$559.7  million in 1998.  The decrease  was  primarily  due to  decreased  sales
volumes resulting from Foamex L.P.'s decision to exit certain business lines and
the closure of facilities related to the Crain Acquisition.  Despite the decline
in sales,  income from operations  increased 50.2% to $54.4 million in 1999 from
$36.3 million in 1998. Income from operations  represented 10.4% of net sales in
1999, up from 6.5% in 1998. The improvement was primarily driven by (i) enhanced
raw material utilization, (ii) the benefits of the first phase of implementation
of improved  operating  practices  across a number of Foamex L.P.'s  facilities,
(iii) the benefits of consolidation of facilities in the Southeast region of the
U.S.  and  in  Southern   California  and  (iv)  the  elimination  of  operating
inefficiencies  incurred in 1998.  Income from operations for 1998 was adversely
impacted by a number of  factors,  the most  significant  of which were (i) $4.0
million of costs  associated  with the Crain  Acquisition  transition  including
inventory   adjustments  for  facilities   affected  by  the   consolidation  of
manufacturing  facilities,  (ii) operating inefficiencies and logistics costs of
$2.5 million  associated with the sales of juvenile and other consumer  products
sold through mass  merchandisers  and discount stores and (iii) operating losses
and  inefficiencies  of $1.0  million  resulting  from  fires at  Foamex  L.P.'s
facilities in Orlando, Florida and Cornelius, North Carolina.

       Carpet Cushion Products

       Carpet  Cushion  Products  net sales for 1999  decreased  10.8% to $187.7
million  from  $210.3  million in 1998  primarily  due to lower  sales  volumes.
Competitive  pressures in the carpet  cushion  marketplace  contributed to lower
sales volumes.  Sales volumes were also reduced due to limited  production  from
Foamex L.P.'s  Orlando,  Florida  facility as a result of the 1998 fire.  Income
from  operations  for 1999 increased to $0.9 million from a loss of $0.1 million
in 1998. Income from operations  continued to be impacted by lower sales volumes
and the  Orlando  fire,  which  increased  product  transportation  costs as the
fulfillment process was shifted to less geographically  optimal facilities.  The
Orlando,  Florida carpet cushion line was brought back on stream and operational
in the fourth  quarter of 1999.  These  effects were  partially  offset by lower
expenses  associated  with  the   rationalization   associated  with  the  Crain
Acquisition.  Results in 1998 were impacted by a $1.0 million charge  associated
with the  Orlando,  Florida  fire and costs  related  to the  Crain  Acquisition
transition of $0.9 million.

       Automotive Products

       Automotive  Products net sales for 1999 increased 26.9% to $361.8 million
from $285.2  million in 1998,  primarily  as a result of higher  sales volume of
lamination products.  Income from operations increased 32.0% to $22.9 million in
1999 from $17.3 million in 1998. Income from operations  represented 6.3% of net
sales in 1999, up from 6.1% in 1998.  The  improvement  was primarily due to (i)
operating  efficiencies  at Foamex L.P.'s Mexican border  facilities that became
fully  operational  in the  fourth  quarter  of 1998  and (ii)  increased  sales
volumes.  Income from  operations  for 1998 was  reduced by (i) $3.0  million of
costs  incurred  during  the start up phase of new  lamination  business  at the
Mexican border, (ii) contract price reductions of approximately $1.1 million and
(iii) losses of $1.0 million  associated  with the production of  thermoformable
headliners.

       Technical Products

       Technical  Products net sales for 1999  increased  16.5% to $92.2 million
from $79.1  million in 1998.  Income from  operations  increased  54.5% to $23.0
million in 1999 from $14.9 million in 1998.  Income from operations  represented
25.0% of net sales in 1999, up from 18.9% in 1998. The improvement was primarily
driven  by  favorable  market  conditions,  strong  growth in sales  volumes,  a
higher-margin  product mix and  improved  manufacturing  efficiencies.  Plans to
expand capacity for Technical  Products were initiated during the second half of
1999.


                                       19
<PAGE>
       Other

       Other  primarily  consists of certain foreign  manufacturing  operations,
corporate  expenses not  allocated to business  segments and  restructuring  and
other charges (credits).  The increase in net sales associated with this segment
primarily  resulted from an increase in net sales from Foamex L.P.'s Mexico City
operation.  The loss from  operations in 1999 was primarily  associated with the
$10.8 million of restructuring  and other charges discussed below. The loss from
operations in 1998 included $10.1 million of net restructuring credits discussed
below. The loss from operations for 1998 was impacted by accounts receivable and
inventory  writedowns of approximately  $8.5 million at the Mexico City facility
and start up costs of $2.5 million for Foamex L.P.'s Asian joint venture.

       Restructuring  and other  charges for 1999  amounted to $10.8 million and
were comprised of restructuring  charges of approximately  $9.4 million for four
restructuring  plans,  approximately  $1.1 million of restructuring  adjustments
related to changes in estimates  primarily to the 1998  restructuring  plans and
$0.3 million of other charges for additional reserves for Trace receivables. The
$9.4  million  1999  restructuring  charge was  comprised  of $6.9  million  for
personnel reductions, $1.0 million for plant closure and lease costs relating to
the closure of one facility and certain product line rationalizations during the
year and $1.5 million for asset writedowns associated with the plant closure and
consolidations.  See Note 4 to the consolidated financial statements for further
discussion.

       In 1998,  net  restructuring  credits were  approximately  $10.1 million,
which  reflect a $14.8  million  reversal of prior year's  restructuring  plans,
offset by other  charges of $4.7  million.  The $4.7 million was  comprised of a
$2.4 million  reserve for net  receivables  due from Trace and a $2.3 million of
impaired cost in excess of assets acquired  associated with a foreign  facility.
However,  these  charges  were offset by a $14.8  million  restructuring  credit
associated with modifications to the 1997 restructuring  plan. The $14.8 million
credit reflected the reversal of $10.2 million of fixed asset  writedowns,  $3.5
million of plant closure and  operating  lease  obligations  and $1.1 million of
personnel reductions.

       As of December 31, 1999, all personnel affected by restructuring had been
terminated.  Cash spending during 1999 for implementation of restructuring plans
approximated  $8.6  million.  Future cash spending for the  restructuring  plans
approximates  $11.0 million.  Foamex L.P.  expects to spend  approximately  $3.9
million during 2000 and the remaining $7.1 million (related principally to lease
runout payments) is expected to be spent through 2006.

       Interest and Debt Issuance Expense

       Interest  and  debt  issuance  expense  totaled  $66.5  million  in 1999,
slightly  higher than the 1998  expense of $66.1  million.  The benefit of lower
average debt levels was offset by higher effective  interest rates and increased
amortization expense related to additional debt issuance costs paid during 1999.

       Other Income (Expense), Net

       Other income (expense), net totaled $0.9 million and was primarily due to
losses on the  disposal of fixed assets and letter of credit fees related to the
GFI Transaction. Interest income totaled $2.2 million in 1999.

       Other income (expense),  net for 1998 primarily consists of: $3.0 million
of foreign currency translation and transaction losses; $1.5 million of fees and
$1.0  million of  continuing  costs  related to the GFI  Transaction;  and other
expenses offset by approximately $3.4 million of interest income.

       Income Tax Expense

       Foamex  L.P.,  as a limited  partnership,  is not  subject to Federal and
certain state income  taxes.  However,  the  consolidated  financial  statements
include a provision  for income taxes which  primarily  relates to certain state
income  taxes of Foamex L.P.  and Federal and state  income  taxes of  corporate
subsidiaries  and  subsidiaries  located  in  foreign  jurisdictions  that  file
separate  income  tax  returns.  See  Note  8  to  the  consolidated   financial
statements.

                                       20
<PAGE>


       Income (Loss) from Continuing Operations

       Income (loss) from continuing  operations  increased to $15.6 million for
1999 as compared to a loss of $5.9  million in 1998.  The  increase is primarily
due to improved  operating results during 1999 as compared to 1998, as discussed
above.

       Extraordinary Loss

       The  extraordinary  loss on the early  extinguishment of debt in 1998 was
$3.2  million.  The charge  primarily  reflected  the write-off of debt issuance
costs in connection with the GFI Transaction.

1998 Compared to 1997

       Net sales for 1998 were $1,155.9 million as compared to $931.1 million in
1997, an increase of $224.8 million or 24.1%.  Income from operations  increased
$9.2 million or 16.3% to $65.5 million for 1998 from $56.3 million in 1997.  The
increase in net sales and income from operations were primarily  associated with
the Crain Acquisition in December 1997, reduced  restructuring and other charges
(credits) and the increase in automotive  lamination  products during the latter
part of 1998 which were offset by the impact of the GFI  Transaction in February
1998 by which General Felt ceased to be a consolidated subsidiary of Foamex L.P.
During 1998, selling, general and administrative expenses increased $7.4 million
primarily  due  to  costs   associated   with  the  integration  of  Crain  (the
"Transition").  Also during 1998,  Foamex L.P.  recorded income of $14.8 million
for the reversal of 1997 restructuring charges,  offset by $4.7 million of other
charges  associated  with the  impairment  of goodwill on the  Montreal,  Canada
operations ($2.3 million), and an allowance for receivables due from Trace ($2.4
million).

       Foam Products

       Foam Products net sales for 1998  increased  67.1% to $559.7 million from
$334.9  million  in 1997 and income  from  operations  increased  17.0% to $36.3
million  (6.5%  of net  sales)  from  $31.0  million  (9.2% of net  sales).  The
increases in net sales and income from operations were primarily associated with
the Crain  Acquisition in December 1997. The decrease in income from  operations
as a  percentage  of net sales  was  primarily  the  result of (i) costs of $4.0
million  associated with the  Transition,  including  inventory  adjustments for
facilities  affected by the  consolidation  of  manufacturing  facilities;  (ii)
operating  inefficiencies and logistic costs of $2.5 million associated with the
sales of juvenile and other  consumer  products sold through mass  merchandisers
and discount stores;  (iii) operating losses and  inefficiencies of $1.0 million
resulting from the fires at Orlando, Florida and Cornelius, North Carolina; (iv)
selling  price  decreases of $0.5 million  resulting  from  competitive  pricing
pressures due to market share challenges from competitors and (v) the inherently
lower  margins of Crain when compared to Foamex L.P.'s  historical  margins.  In
addition,  operating  margins  decreased in 1998 since  Foamex L.P.  carried the
operating costs of both companies during the Transition.

       Carpet Cushion Products

       Carpet  Cushion  Products  net sales for 1998  decreased  23.2% to $210.3
million from $273.9 million in 1997 primarily due to the GFI Transaction  offset
by an increase in net sales  associated  with the Crain  Acquisition in December
1997.  Income  (loss) from  operations  decreased to a loss of $0.1 million from
income  of $8.8  million  (3.2% of net  sales).  The  decreases  were  primarily
associated  with  the GFI  Transaction  and  increased  costs  of  $1.0  million
associated  with the Orlando fire and costs  related to the  Transition  of $0.9
million.

       Automotive Products

       Automotive  Products net sales for 1998 increased 26.3% to $285.2 million
from $225.9 million in 1997 and income from operations  decreased 30.4% to $17.3
million  (6.1% of net  sales)  from  $24.9  million  (11.0% of net  sales).  The
increase  in net  sales  was  primarily  associated  with  increased  volume  of
lamination products. Income from operations decreased principally as a result of
(i)  higher  costs of $3.0  million  incurred  during  the start up phase of new
lamination  business at the Mexican  border,  (ii) contract price  reductions of
approximately  $1.1 million and (iii) losses of $1.0 million associated with the
production of thermoformable headliners.

                                       21
<PAGE>

       Technical Products

       Technical  Products net sales for 1998  increased  3.8% to $79.1  million
from $76.3 million in 1997 and income from  operations  decreased 17.4% to $14.9
million  (18.9% of net  sales)  from $18.1  million  (23.7% of net  sales).  The
increased net sales were  primarily  associated  with Foamex  L.P.'s  industrial
gasketing  and sealing  products.  The  decrease in income from  operations  was
primarily  associated with a higher mix of lower margin industrial  products and
production inefficiencies on certain products.

       Other

       Other  primarily  consists of certain foreign  manufacturing  operations,
corporate   expenses  not  allocated  to  the  other   operating   segments  and
restructuring  and other charges.  The increase in net sales was associated with
the  facility in Mexico City that began  operations  in the second half of 1997.
The increase in income from operations was primarily  associated with a reversal
of $14.8  million of  restructuring  charges set up in 1997,  offset by accounts
receivable and inventory writedowns of $8.5 million at the Mexico City facility,
start up  costs of $2.5  million  for  Foamex  L.P.'s  Asian  joint venture  and
duplicate administrative costs incurred during the Transition.

       Interest and Debt Issuance Expense

       Interest and debt issuance expense totaled $66.1 million in 1998 compared
to $44.2 million in 1997. The increase was primarily due to the debt incurred in
connection with the Crain  Acquisition  partially offset by the favorable effect
of a debt refinancing in June 1997.

       Other Income (Expense), Net

       Other income (expense),  net for 1998 primarily consists of: $3.0 million
of foreign currency translation and transaction losses; $1.5 million of fees and
$1.0  million of  continuing  costs  related to the GFI  Transaction;  and other
expenses offset by approximately $3.4 million of interest income.

       Other  income  (expense),  net for 1997 was  comprised  primarily of $1.4
million of interest income and a gain on the sale of assets of $0.4 million.

       Income Tax Expense

       Foamex  L.P.,  as a limited  partnership,  is not  subject to Federal and
certain state income  taxes.  However,  the  consolidated  financial  statements
include a provision  for income taxes which  primarily  relates to certain state
income  taxes of Foamex L.P.  and Federal and state  income  taxes of  corporate
subsidiaries  and  subsidiaries  located  in  foreign  jurisdictions  that  file
separate  income tax  returns.  Foamex L.P. did not  recognize  the tax benefits
associated  with  losses  in  Mexico  because  it  appears  likely  that the net
operating loss carryforwards  would not be realized in the near future. See Note
8 to the consolidated financial statements.

       Income (Loss) from Continuing Operations

       Income  (loss) from  continuing  operations  decreased  to a loss of $5.9
million for 1998 as compared to income of $11.3 million in 1997. The decrease is
primarily due to an increase of approximately $21.9 million in interest and debt
issuance expense and a decrease in other income (expense) of approximately  $6.3
million, as previously discussed.

       Extraordinary Loss

       The  extraordinary  loss on early  extinguishment of debt in 1998 of $3.2
million was primarily  associated  with the write-off of debt issuance  costs in
connection  with  the  GFI  Transaction.   The   extraordinary   loss  on  early
extinguishment  of debt  in  1997 of  $48.6  million  primarily  relates  to the
write-off of debt issuance costs and  redemption  premiums  associated  with the
early  extinguishment  of long-term debt in connection  with a 1997  refinancing
plan.

                                       22
<PAGE>

Liquidity and Capital Resources

       Foamex L.P.'s operating cash requirements  consist principally of working
capital   requirements,   scheduled   payments  of  principal  and  interest  on
outstanding  indebtedness and capital  expenditures.  Foamex L.P.  believes that
cash flow from its operating  activities,  cash on hand and periodic  borrowings
under  its  credit  facility,  discussed  below,  will be  adequate  to meet its
liquidity  requirements.  All  principal  and  interest  payments  were  made as
scheduled in 1999.  The ability of Foamex L.P. to make  distributions  to Foamex
International is restricted by the terms of its financing agreements; therefore,
Foamex  International  is not expected to have access to the cash flow generated
by Foamex L.P. for the foreseeable future.

       Cash and cash equivalents  totaled $1.6 million at year-end 1999 compared
to $3.2  million  at the end of  1998.  Working  capital  at the end of 1999 was
$110.5  million and the current ratio was 1.7 to 1. Excluding the $715.8 million
of  long-term  debt that was  classified  as a  current  liability  at  year-end
December 31, 1998 for comparative  purposes,  working capital at the end of 1998
was  $113.5  million  and the  current  ratio  was 1.6 to 1.  Improved  accounts
receivable and inventory management  contributed to a $57.5 million reduction in
accounts  payable.  Total debt at year-end 1999 was $690.0  million,  down $36.4
million or 5.0% from the end of 1998.

       Cash Flow from Operating Activities

       Cash  provided  by  operating  activities  was $58.1  million for 1999 as
compared to cash used of $27.8 million in 1998.  The  improvement  was driven by
the increase in income from  operations  and improved  accounts  receivable  and
inventory management.

       Cash Flow from Investing Activities

       Cash used for investing activities was $15.8 million for 1999 compared to
$43.1 million in 1998. The decrease was primarily  driven by the sale of certain
assets and lower capital spending. Cash provided by the sale of assets primarily
represented the proceeds from the sale of Foamex L.P.'s packaging business ($1.5
million)  in  October  1999  which  was  part  of  a  1998  restructuring  plan.
Additionally, capital expenditures in 1999 of $19.4 million were down from prior
years. Foamex L.P. expects capital expenditures for 2000 to return to prior year
levels  and  be in  excess  of  $30.0  million  primarily  as a  result  of  the
construction  of two new VPFSM machines.  In addition,  Foamex L.P. is exploring
the possible implementation of a new ERP software system.

       Cash Flow from Financing Activities

       Cash  required  for  financing  activities  was  $43.8  million  for 1999
compared  to cash  provided  of  $64.6  million  in 1998.  Requirements  in 1999
primarily  reflected  net debt  repayments,  distributions  paid to partners and
costs  related to  amending  the debt  agreements.  Partially  offsetting  these
requirements  was  the  repayment  of a tax  distribution  advance  from  Foamex
International (see Note 17 to the consolidated financial statements).

       Financial Condition

       As of December 31, 1998,  Foamex L.P. was not in compliance  with various
debt covenants included in agreements  totaling $415.4 million.  Had the lenders
under these debt agreements  accelerated  the maturity of the  indebtedness as a
result of the noncompliance, the acceleration would have constituted an event of
default  and  given  the  holders  the  right  to  require  the   repurchase  of
substantially all of Foamex L.P.'s long-term debt. As a result of these factors,
approximately  $715.8  million  of  long-term  debt at  December  31,  1998  was
classified  as a current  liability in the  consolidated  balance  sheet,  which
produced a working capital deficit. As discussed below, amendments were executed
to modify certain financial covenants.  As of December 31, 1999, Foamex L.P. was
in compliance  with its financial  covenants and long-term  debt was  classified
based on its maturity schedule as of December 31, 1999.

                                       23
<PAGE>


       Foamex L.P. Credit Facility

       In response to financial conditions at year-end 1998,  amendments to debt
agreements  were executed  during the first half of 1999. As a result the Foamex
L.P.  credit  facility,  which was amended and  restated in February  1998,  was
further amended and restated in June 1999 (the "Foamex L.P. Credit Facility") to
modify  financial  covenants  for net worth,  interest  coverage,  fixed  charge
coverage and leverage  ratios  through  December  2006.  The  agreement was also
amended to no longer permit Foamex L.P. to make certain cash payments, including
the payment of an annual management fee of $3.0 million to a subsidiary of Trace
and distributions to Foamex  International,  and to limit future  investments in
foreign  subsidiaries  and joint  ventures.  The "change of control"  definition
under the agreement was also modified to conform to the definition  discussed in
"change of control" in Note 1 to the consolidated financial statements.  Changes
in the  interest  rate  structure,  effective  in 2000,  were  also made and are
discussed  below.  Foamex L.P. was in compliance with this agreement at year-end
1999.

       At year-end  1999,  interest was based on the  combination  of a variable
rate consisting of the higher of (i) the base rate of The Bank of Nova Scotia or
(ii) the Federal Funds rate plus 0.5% plus a margin.  The margins for revolving,
Term  B,  Term  C and  Term  D  loans  were  2.25%,  2.50%,  2.75%  and  2.875%,
respectively.  At the option of Foamex L.P.,  portions of the outstanding  loans
are  convertible  into  LIBOR  based  loans  plus  1.0%  added  to  the  margins
identified.  The effective interest rates for the Foamex L.P. Credit Facility at
the end of 1999 ranged between 9.69% and 10.06%.

       Available  borrowings  under the revolving  credit facility totaled $24.2
million at year-end  1999.  Letters of credit  outstanding  at December 31, 1999
totaled $47.1  million.  Borrowings  under the Foamex L.P.  Credit  Facility are
collateralized by substantially all of the assets of Foamex L.P. on a pari passu
basis with the IRBs (see Note 12 to the consolidated financial statements).

       As part of the Foamex L.P.  Credit  Facility,  excess cash flow generated
annually,  as defined,  is required to prepay portions of Term B, C and D loans.
The prepayment amount determined for 1999 was $13.3 million and will be financed
through revolving loans under the facility.  The required payment is expected to
be made during the second quarter of 2000. The repayment  schedules for the Term
B, C and D loans  have been  adjusted,  as of  year-end  1999,  to  reflect  the
prepayment required.

       Effective  January 1, 2000, the interest rate on  outstanding  borrowings
under the Foamex L.P.  Credit  Facility  will  increase by 25 basis  points each
quarter that Foamex L.P.'s  leverage  ratio,  as defined,  exceeds 5.00 to 1.00.
Once the leverage ratio is reduced below this level,  the  cumulative  amount of
any 25 basis point  adjustments  to the  interest  rate on  borrowings  would be
eliminated.  At December 31, 1999,  the  calculated  leverage  ratio was 5.48 to
1.00.  Consequently,  the basis  point  adjustment  will be  applicable  for the
calculation of interest in the first quarter of 2000.

Buyout Proposals

       On  February  9,  2000,  Foamex  International  announced  that  it is in
discussions  with  respect to a proposal  involving  the  acquisition  of all of
Foamex  International's  outstanding common stock for cash. Foamex International
stated that the  proposal is subject to a number of  conditions,  including  the
buyer's ongoing due diligence and the execution of definitive agreements. Foamex
International  agreed to an exclusive  negotiating  period  ending five business
days after  delivery  of its  audited  financial  statements  included in Foamex
International's  Annual  Report  on Form  10-K  to the  prospective  buyer.  See
"Business - Buyout Proposals".

       On August  5,  1999,  Foamex  International  announced  that its Board of
Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
business combination.  On December 15, 1999, Foamex International announced that
the letter of intent with the  Purchasers,  which had been extended,  expired by
its terms.

       In 1998,  Foamex  International  received an unsolicited  buyout proposal
from Trace, Foamex International's  principal stockholder.  Foamex International
entered into two merger agreements, which were subsequently terminated by Trace.


                                       24
<PAGE>


Change in Control

       Trace is a  privately  held  company,  which owned  approximately  29% of
Foamex  International's  outstanding  voting common stock at March 10, 2000, and
whose former  Chairman also serves as Foamex  International's  Chairman.  Foamex
International's  common  stock owned by Trace is pledged as  collateral  against
certain of Trace's  obligations.  Certain credit agreements and promissory notes
of Foamex L.P.  provide that a "change of control"  would be an event of default
and could  result in the  acceleration  of  substantially  all of Foamex  L.P.'s
long-term debt.

       Trace is  presently  in  bankruptcy  proceedings  under  Chapter 7 of the
Bankruptcy  Code in Federal Court in New York City.  Trace's  bankruptcy  filing
does not  constitute  a "change of  control"  under the  provisions  of the debt
agreements.  A "change of control" could take place  however,  if the bankruptcy
court allows  Trace's  creditors  to  foreclose on and take  ownership of Foamex
International's  common stock owned by Trace, or otherwise  authorizes a sale or
transfer  of these  shares,  under  circumstances  in which a person or  related
group,  other  than  Trace,  acquired  more than 25% of  Foamex  International's
outstanding  voting  stock and owned a greater  percentage  of such voting stock
than the amount beneficially owned by Trace.

       Management  believes  that it is unlikely that a "change of control" will
occur as a result of Trace's bankruptcy proceedings.  However, Foamex L.P. would
seek to  resolve  the issues  that may arise  should  the  "change  of  control"
provisions  be  triggered,  by  requesting  waivers  of such  provisions  and/or
refinancing  certain debt, if necessary.  There can be no assurance  that Foamex
L.P. or its subsidiaries will be able to do so, or that Foamex L.P. will be able
to obtain waivers of such provisions. Such circumstances raise substantial doubt
about Foamex L.P.'s  ability to continue as a going  concern.  The  accompanying
financial  statements were prepared on a going-concern  basis and do not include
any  adjustments  that might  result  from the  outcome of the Trace  bankruptcy
filing.

Environmental Matters

       Foamex L.P. is subject to extensive and changing  environmental  laws and
regulations.  Expenditures to date in connection  with Foamex L.P.'s  compliance
with  such  laws and  regulations  did not have a  material  adverse  effect  on
operations,  financial position,  capital expenditures or competitive  position.
Liabilities recorded by Foamex L.P. in connection with environmental  matters as
of December  31, 1999  totaled $3.5  million.  Although it is possible  that new
information  or future  developments  could require  Foamex L.P. to reassess its
potential  exposure  to  all  pending  environmental  matters,  including  those
described in the consolidated  financial statements,  Foamex L.P. believes that,
based upon all  currently  available  information,  the  resolution  of all such
pending  environmental  matters will not have a  significant  adverse  effect on
Foamex  L.P.'s  operations,   financial   position,   capital   expenditures  or
competitive position.

Inflation and Other Matters

       On  average,  inflation  rates for the  domestic  economy  continue to be
relatively  low.  Although  long-term  inflation rates are difficult to predict,
Foamex L.P.  believes it has the flexibility in operations and capital structure
to maintain a competitive  position. In recent years, results of operations were
adversely  affected  by raw  material  cost  increases.  The  price  of the  two
principal chemicals used, TDI and polyol, is influenced by demand, manufacturing
capacity and oil prices. The recent increase in oil prices did not significantly
impact raw material  costs in 1999.  Any  sustained  increase in oil prices will
likely  result  in  higher  raw  material  cost  and also  increase  the cost of
operations.  Results  for the  first  quarter  of  2000  are  anticipated  to be
negatively  impacted  by  higher  transportation  costs  related  to  oil  price
increases and higher costs for raw materials. Foamex L.P. attempts to offset raw
material cost increases through selling price increases;  however,  there can be
no assurance that Foamex L.P. will be successful in  implementing  selling price
increases or that  competitive  pricing pressure will not require Foamex L.P. to
adjust selling  prices.  Results of operations  have been and could be adversely
affected  by  delays  in  implementing,  or the  inability  of  Foamex  L.P.  to
implement, selling price increases to offset raw material cost increases.


                                       25
<PAGE>

Year 2000 Compliance

       Foamex L.P.'s program to address potential  disruptions to operations and
relationships  with our  business  partners  related  to the Year 2000  software
problem was successful  and there were no significant  disruptions to operations
or administration.

       The cost to prevent the Year 2000 problem was approximately $2.0 million.
The majority of this total project cost was incurred  during 1998 and 1999.  The
project cost primarily  represented the cost for various  consultants and system
upgrades.  Project  cost  included  internal  cost  for  information  technology
employees that worked directly on software programming modifications.

ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Foamex L.P.'s debt securities with variable interest rates are subject to
market risk for changes in interest  rates.  On December 31, 1999,  indebtedness
with variable interest rates totaled $426.9 million.  On an annualized basis, if
the interest rates on these debt  instruments  increased by 1%, interest expense
would increase by approximately $4.3 million.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

       An index to the financial statements and financial statement schedules is
included in Item 14(a).

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

       None.

PART III

       The  information  required  by this Part III (Items 10, 11, 12 and 13) is
not  applicable  since  Foamex  L.P.  is a wholly  owned  subsidiary  of  Foamex
International.













                                       26
<PAGE>


PART IV
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)    Financial Statements and Schedule
<TABLE>
<CAPTION>
<S>                                                                                            <C>
       Foamex L.P. and Subsidiaries
         Report of Independent  Accountants                                                      F-2
         Consolidated Balance Sheets as of December 31, 1999 and 1998                            F-3
         Consolidated Statements of Operations for the years 1999, 1998 and 1997                 F-5
         Consolidated Statements of Cash Flows for the years 1999, 1998 and 1997                 F-6
         Consolidated Statements of Partners' Equity (Deficit) for the years
           1999, 1998 and 1997                                                                   F-7
         Notes to Consolidated Financial Statements                                              F-8
       Foamex Capital Corporation
         Report of Independent Accountants                                                       F-38
         Balance Sheets as of December 31, 1999 and 1998                                         F-39
         Notes to Balance Sheets                                                                 F-40
       Foamex L.P. and Subsidiaries Financial Statement Schedule
         Schedule II - Valuation and Qualifying Accounts                                         S-2
</TABLE>

(b)    Reports on Form 8-K.

         A report,  dated December 15, 1999, was filed for Item 5. Other Events,
         concerning the termination of a letter of intent for the acquisition of
         Foamex International.

         A report,  dated  February 9, 2000, was filed for Item 5. Other Events,
         concerning preliminary merger discussions.

(c)      Exhibits.

2.1(x)      - Transfer Agreement,  dated as of February 27, 1998, by and between
            Foam Funding LLC and Foamex L.P.
2.2(x)      - Asset  Purchase  Agreement,  dated as of February 27, 1998, by and
            among  Foamex  Carpet  Cushion,   Inc.  ("Foamex  Carpet"),   Foamex
            International  Inc. ("Foamex  International"),  Foam Funding LLC and
            General Felt Industries, Inc. ("General Felt").
2.3(z)      - Agreement and Plan of Merger, dated as of November 5, 1998, by and
            among  Foamex  International,  Trace  International  Holdings,  Inc.
            ("Trace Holdings") and Trace Merger Sub, Inc. ("Trace Sub").
2.4(aa)     - Agreement  and Plan of Merger,  dated as of June 25, 1998,  by and
            among Trace Holdings, Trace Sub and Foamex International.
2.5(z)      - Notice of termination of Agreement and Plan of Merger, dated as of
            November 5, 1998, from Trace International  Holdings, Inc. to Foamex
            International Inc.
3.1(a)      - Certificate of Limited Partnership of Foamex L.P.
3.2.1(a)    - Fourth  Amended and Restated  Agreement of Limited  Partnership of
            Foamex L.P.,  dated as of December 14, 1993, by and among FMXI, Inc.
            ("FMXI") and Trace Foam Company,  Inc.  ("Trace  Foam"),  as general
            partners,  and  Foamex  International,  as a  limited  partner  (the
            "Partnership Agreement").
3.2.2(b)    - First Amendment to the Partnership Agreement, dated June 28, 1994.
3.2.3(c)    - Second  Amendment  to the  Partnership  Agreement,  dated June 12,
            1997.
3.2.4(v)    - Third Amendment to the Partnership  Agreement,  dated December 23,
            1997.
3.2.5(x)    - Fourth Amendment to the Partnership Agreement,  dated February 27,
            1998.
3.3(y)      - Certificate of Incorporation of FMXI.
3.4(y)      - By-laws of FMXI.
3.5(k)      -  Certificate  of  Incorporation  of  Foamex  Capital   Corporation
            ("FCC").


                                       27
<PAGE>

3.6(k)      - By-laws of FCC.
3.7.1(a)    - Certificate of Incorporation of Foamex International.
3.7.1(dd)   - Amendment to Certificate of Incorporation of Foamex International.
3.7.2(cc)   -  Certificate  of  Incorporation  of Foamex  Carpet  Cushion,  Inc.
            ("Foamex Carpet")
3.8(a)      - By-laws of Foamex International.
3.8.1(cc)   - By-laws of Foamex Carpet.
4.1.1(d)    - Indenture,  dated as of June 12,  1997,  by and among Foamex L.P.,
            FCC, the Subsidiary Guarantors and The Bank of New York, as trustee,
            relating  to  $150,000,000   principal   amount  of  9  7/8%  Senior
            Subordinated Notes due 2007 (the "9 7/8% Notes"), including the form
            of Senior Subordinated Note and Subsidiary Guarantee.
4.1.2(v)    - First  Supplemental  Indenture,  dated as of  December  23,  1997,
            between  Foamex LLC ("FLLC")  and The Bank of New York,  as trustee,
            relating to the 9 7/8% Notes.
4.1.3(x)    - Second  Supplemental  Indenture,  dated as of February  27,  1998,
            among  Foamex L.P. and FCC, as joint and several  obligors,  General
            Felt,  Foamex  Fibers,   Inc.  ("Foamex   Fibers"),   and  FLLC,  as
            withdrawing  guarantors,  and The  Bank  of New  York,  as  trustee,
            relating to the 9 7/8% Notes.
4.1.4(d)    - Registration  Rights Agreement,  dated as of June 12, 1997, by and
            among Foamex L.P., FCC, General Felt, Foamex Fibers,  and all future
            direct or indirect domestic  subsidiaries of Foamex L.P. or FCC, and
            Donaldson,   Lufkin  &  Jenrette  Securities  Corporation,   Salomon
            Brothers Inc. and Scotia Capital Markets, as Initial Purchasers.
4.2.1(v)    -  Indenture,  dated as of December  23,  1997,  by and among Foamex
            L.P.,  FCC, the  Subsidiary  Guarantors,  Crain Holdings  Corp.,  as
            Intermediate  Obligator,  and The  Bank  of New  York,  as  trustee,
            relating  to  $98,000,000   principal   amount  of  13  1/2%  Senior
            Subordinated  Notes due 2005 (the "13 1/2%  Notes"),  including  the
            form of Senior Subordinated Note and Subsidiary Guarantee.
4.2.2(x)    - First Supplemental Indenture, dated as of February 27, 1998, among
            Foamex L.P. and FCC, as joint and several  obligors,  General  Felt,
            Foamex Fibers and FLLC, as withdrawing guarantors, Crain Industries,
            Inc., as withdrawing Intermediate Obligor, and The Bank of New York,
            as trustee, relating to the 13 1/2% Notes.
4.3(x)      - Discharge of  Indenture,  dated as of February  27,  1998,  by and
            among Foamex L.P.,  General  Felt,  Foamex  International  and State
            Street Bank and Trust  Company,  as trustee,  relating to the 9 1/2%
            Senior Secured Notes due 2000.
4.4.2(x)    - Second Amended and Restated Foamex International  Guaranty,  dated
            as of February 27, 1998,  made by Foamex  International  in favor of
            Citicorp USA, Inc., as Collateral Agent.
4.4.3(x)    - Amended and Restated  Partnership  Guaranty,  dated as of February
            27, 1998, made by FMXI in favor of Citicorp USA, Inc., as Collateral
            Agent.
4.4.4(p)    - Foamex Guaranty, dated as of June 12, 1997, made by Foamex L.P. in
            favor of Citicorp USA, Inc., as Collateral Agent.
4.4.5(p)    - Subsidiary  Guaranty,  dated as of June 12,  1997,  made by Foamex
            Latin  America,  Inc. in favor of Citicorp USA,  Inc., as Collateral
            Agent.
4.4.6(p)    - Subsidiary  Guaranty,  dated as of June 12,  1997,  made by Foamex
            Mexico, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.7(p)    - Subsidiary  Guaranty,  dated as of June 12,  1997,  made by FCC in
            favor of Citicorp USA, Inc., as Collateral Agent.
4.4.8(p)    - Subsidiary  Guaranty,  dated as of June 12,  1997,  made by Foamex
            Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.9(p)    - Subsidiary  Guaranty,  dated as of June 12,  1997,  made by Foamex
            Asia, Inc. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.10(p)   - Subsidiary  Pledge  Agreement,  dated as of June 12, 1997, made by
            FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.11(p)   - Subsidiary  Pledge  Agreement,  dated as of June 12, 1997, made by
            Foamex  Latin  America,  Inc. in favor of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.4.12(p)   - Subsidiary  Pledge  Agreement,  dated as of June 12, 1997, made by
            Foamex Asia,  Inc. in favor of Citicorp  USA,  Inc.,  as  Collateral
            Agent.

                                       28
<PAGE>
4.4.13(p)   - Subsidiary  Pledge  Agreement,  dated as of June 12, 1997, made by
            Foamex  Mexico,  Inc. in favor of Citicorp USA,  Inc., as Collateral
            Agent.
4.4.14(p)   - Subsidiary  Pledge  Agreement,  dated as of June 12, 1997, made by
            Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
            Agent.
4.4.15(p)   - Foamex  Security  Agreement,  dated as of June 12,  1997,  made by
            Foamex L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.16(p)   - Subsidiary Security Agreement,  dated as of June 12, 1997, made by
            Foamex  Latin  America,  Inc. in favor of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.4.17(p)   - Subsidiary Security Agreement,  dated as of June 12, 1997, made by
            Foamex  Mexico,  Inc. in favor of Citicorp USA,  Inc., as Collateral
            Agent.
4.4.18(p)   - Subsidiary Security Agreement,  dated as of June 12, 1997, made by
            Foamex Mexico II, Inc. in favor of Citicorp USA, Inc., as Collateral
            Agent.
4.4.19(p)   - Subsidiary Security Agreement,  dated as of June 12, 1997, made by
            Foamex Asia,  Inc. in favor of Citicorp  USA,  Inc.,  as  Collateral
            Agent.
4.4.20(p)   - Subsidiary Security Agreement,  dated as of June 12, 1997, made by
            FCC in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.21(r)   - Foamex Pledge Agreement, dated as of June 12, 1997, made by Foamex
            L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.22(w)   - First Amendment to Foamex Pledge  Agreement,  dated as of December
            23,  1997,  by  Foamex  L.P.  in favor of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.4.23(w)   - First Amendment to Foamex Security Agreement, dated as of December
            23,  1997,  by  Foamex  L.P.  in favor of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.4.24(w)   - First Amendment to Foamex Patent  Agreement,  dated as of December
            23,  1997,  by  Foamex  L.P.  in favor of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.4.25(w)   - First  Amendment  to  Trademark  Security  Agreement,  dated as of
            December 23, 1997, by Foamex L.P. in favor of Citicorp USA, Inc., as
            Collateral Agent.
4.4.26(w)   - Acknowledgment of Guaranty by each of the guarantors to a Guaranty
            dated June 12, 1997 in favor of Citicorp USA, Inc.
4.4.27(w)   - First  Amendment  to Pledge  Agreement,  dated as of December  23,
            1997, by pledgors in favor of Citicorp USA, Inc.
4.4.28(w)   - Crain Industries,  Inc. ("Crain")  Guaranty,  dated as of December
            23, 1997, made by Crain in favor of Citicorp USA, Inc.
4.4.29(x)   - Partnership Pledge Agreement,  dated as of February 27, 1998, made
            by Foamex  International and FMXI in favor of Citicorp USA, Inc., as
            Collateral Agent.
4.4.30(bb)  -  Amendment   No.  1  to  Second   Amended  and   Restated   Foamex
            International Guaranty, dated March 11, 1999.
4.4.31(bb)  - Amendment No. 1 to Foamex International Guaranty,  dated March 12,
            1999.
4.4.32(dd)  - Foamex Patent Agreement, dated as of June 12, 1997, by Foamex L.P.
            in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.33(dd)  - Trademark Security Agreement, dated as of June 12, 1997, by Foamex
            L.P. in favor of Citicorp USA, Inc., as Collateral Agent.
4.4.34(ee)  - Amended and Restated Foamex Pledge Agreement, dated as of June 30,
            1999  made by  Foamex  L.P.  in favor of  Citicorp  U.S.A.  Inc.  as
            Collateral Agent.
4.4.35(ee)  - Amended and Restated  Partnership  Pledge  Agreement,  dated as of
            June 30, 1999 by FMXI and Foamex International in favor of Citicorp
            USA Inc. as FII Intercreditor Collateral Agent.
4.5(ff)     - Commitment  letter,  dated  August 9, 1999,  from The Bank of Nova
            Scotia to Foamex Canada Inc.
4.6(a)      -  Subordinated  Promissory  Note,  dated as of May 6, 1993,  in the
            original  principal amount of $7,014,864  executed by Foamex L.P. to
            John Rallis ("Rallis").
4.7(a)      - Marely Loan Commitment  Agreement,  dated as of December 14, 1993,
            by and between Foamex L.P. and Marely s.a. ("Marely").
4.8(a)      - DLJ Loan Commitment  Agreement,  dated as of December 14, 1993, by
            and between Foamex L.P. and DLJ Funding, Inc. ("DLJ Funding").

                                       29
<PAGE>
4.9.1(p)    - Promissory Note,  dated June 12, 1997, in the aggregate  principal
            amount of $5,000,000, executed by Trace Holdings to Foamex L.P.
4.9.2(p)    - Promissory Note,  dated June 12, 1997, in the aggregate  principal
            amount of $4,794,828, executed by Trace Holdings to Foamex L.P.
4.10.1(x)   - Credit  Agreement,  dated as of February  27,  1998,  by and among
            Foamex Carpet,  the institutions  from time to time party thereto as
            lenders, the institutions from time to time party thereto as issuing
            banks  and  Citicorp  USA,  Inc.  and The  Bank of Nova  Scotia,  as
            administrative agents.
4.10.2(x)   - Foamex International Guaranty, dated as of February 27, 1998, made
            by  Foamex   International  in  favor  of  Citicorp  USA,  Inc.,  as
            Collateral Agent.
4.10.3(x)   - Foamex  International  Pledge Agreement,  dated as of February 27,
            1998, made by Foamex  International  in favor of Citicorp USA, Inc.,
            as Collateral Agent.
4.10.4(x)   - New GFI Security Agreement, dated as of February 27, 1998, made by
            Foamex Carpet in favor of Citicorp USA, Inc., as Collateral Agent.
4.10.5(x)   - New GFI Intercreditor Agreement, dated as of February 27, 1998, by
            and among Foamex Carpet,  The Bank of Nova Scotia, as Administrative
            Agent,  and  Citicorp  USA,  Inc.,  as   Administrative   Agent  and
            Collateral Agent.
4.10.6(x)   - FII Intercreditor Agreement, dated as of February 27, 1998, by and
            between Foamex  International  and Citicorp USA, Inc., as Collateral
            Agent.
4.10.9(dd)  - Amendment No. 1 to Foamex Carpet Credit  Agreement,  dated October
            30, 1998.
4.10.10(bb) - Amendment No. 2 to Foamex Carpet Credit Agreement, dated March 12,
            1999.
4.10.11(ee) - Foamex L.P. Credit Agreement,  dated June 12, 1997, as amended and
            restated as of February 27, 1998 as further  amended and restated as
            of June 29, 1999 among Foamex L.P.,  FMXI,  the  institutions from
            time to time party thereto as lenders,  the  institutions  from
            time to time party  thereto as issuing  banks and Citicorp USA, Inc.
            and the Bank of Nova Scotia as Administrative Agents.
4.10.12(ee) - Amendment No. 3 to Foamex Carpet Credit Agreement,  dated June 30,
            1999.
4.10.13(ee) - Foamex International  Pledge Agreement,  dated June 30, 1999, made
            by Foamex  International  in favor of  Citicorp  U.S.A.  Inc. as FII
            Intercreditor Collateral Agent.
4.10.14(gg) -  Amendment  No.  1 to the  Foamex  L.P.  Credit  Agreement,  dated
            December 23,  1999,  as amended and restated as of February 27, 1998
            as further  amended and  restated  as of June 29, 1999 among  Foamex
            L.P.,  FMXI,  the  institutions  from time to time party  thereto as
            lenders, the institutions from time to time party thereto as issuing
            banks  and  Citicorp  USA,  Inc.  and the  Bank of  Nova  Scotia  as
            Administrative Agents.
4.11.1(x)   - Promissory Note of Foamex L.P. in favor of Foam Funding LLC in the
            principal amount of $34 million, dated February 27, 1998.
4.12.1(x)   - Promissory  Note of Foamex  Carpet in favor of Foam Funding LLC in
            the principal amount of $70.2 million, dated February 27, 1998.
4.12.2(bb)  - Amendment  to  Promissory  Note of Foamex  Carpet in favor of Foam
            Funding LLC dated March 15, 1999.
4.12.3(ee)  -  Amendment  to  Promissory  Note of Foamex  L.P.  in favor of Foam
            Funding LLC dated as of June 30, 1999.
4.12.4(ee)  - Amendment  to  Promissory  Note of Foamex  Carpet in favor of Foam
            Funding LLC dated as of June 30, 1999.
4.13(dd)    - Waiver, dated as of April 15, 1999 to the Credit Agreement,  dated
            as of February 27, 1998, among Foamex Carpet, the institutions party
            thereto as Lenders, the institutions party thereto as Issuing Banks,
            and Citicorp USA, Inc. and The Bank of Nova Scotia as Administrative
            Agents.
4.13.1(gg)  - Waiver,  dated as of April 15, 1999 to the Promissory  Note, dated
            as of February  27, 1998,  payable by Foamex  Carpet to Foam Funding
            LLC.
4.13.2(gg)  - Waiver,  dated as of May 6, 1999 to the Promissory  Note, dated as
            of February 27, 1998, payable by Foamex Carpet to Foam Funding LLC.
4.14.1      - Revolving Note of Foamex International in favor of Foamex L.P. in
            the principal  amount of $2,490,000, dated as of October 20, 1999.

                                       30
<PAGE>
10.1.1(p)   - Amendment to Master Agreement,  dated as of June 5, 1997,  between
            Citibank, N.A. and Foamex L.P.
10.1.2(p)   - Amended Confirmation, dated as of June 13, 1997, between Citibank,
            N.A. and Foamex L.P.
10.1.3(w)   -  Amended  Confirmation,  dated as of  February  2,  1998,  between
            Citibank, N.A. and Foamex L.P.
10.2(h)     - Reimbursement Agreement, dated as of March 23, 1993, between Trace
            Holdings and General Felt.
10.3(h)     - Shareholder  Agreement,  dated December 31, 1992, among,  Recticel
            s.a. ("Recticel"), Recticel Holding Noord B.V., Foamex L.P., Beamech
            Group Limited, LME-Beamech, Inc., James Brian Blackwell, and Prefoam
            AG relating to foam technology-sharing arrangement.
10.4.1(k)   - Asset  Transfer  Agreement,  dated as of October 2, 1990,  between
            Trace  Holdings and Foamex L.P. (the "Trace  Holdings Asset Transfer
            Agreement").
10.4.2(k)   - First  Amendment,  dated as of  December  19,  1991,  to the Trace
            Holdings Asset Transfer Agreement.
10.4.3(k)   - Amended and Restated Guaranty, dated as of December 19, 1991, made
            by Trace Foam in favor of Foamex L.P.
10.5.1(k)   - Asset  Transfer  Agreement,  dated as of October 2, 1990,  between
            Recticel  Foam  Corporation  ("RFC") and Foamex L.P. (the "RFC Asset
            Transfer Agreement").
10.5.2(k)   - First  Amendment,  dated as of December 19, 1991, to the RFC Asset
            Transfer Agreement.
10.5.3(k)   -  Schedule  5.03 to the RFC Asset  Transfer  Agreement  (the  "5.03
            Protocol").
10.5.4(h)   - The 5.03 Protocol  Assumption  Agreement,  dated as of October 13,
            1992, between RFC and Foamex L.P.
10.5.5(h)   - Letter Agreement between Trace Holdings and Recticel regarding the
            Recticel Guaranty, dated as of July 22, 1992.
10.6(l)     - Supply  Agreement,  dated June 28, 1994,  between  Foamex L.P. and
            Foamex International.
10.7.1(l)   - First  Amended and  Restated  Tax Sharing  Agreement,  dated as of
            December 14, 1993,  among Foamex L.P.,  Trace Foam,  FMXI and Foamex
            International.
10.7.2(d)   -  First  Amendment  to  First  Amended  and  Restated  Tax  Sharing
            Agreement,  dated as of June 12,  1997,  by and among  Foamex  L.P.,
            Foamex International, FMXI and Trace Foam.
10.7.3(w)   - Second  Amendment  to  First  Amended  and  Restated  Tax  Sharing
            Agreement,  dated as of December 23, 1997, by and among Foamex L.P.,
            Foamex International, FMXI, and Trace Foam.
10.7.4(y)   -  Third  Amendment  to  First  Amended  and  Restated  Tax  Sharing
            Agreement,  dated as of February  27,  1998,  by and between  Foamex
            L.P., Foamex International and FMXI.
10.8.1(m)   - Tax Distribution Advance Agreement, dated as of December 11, 1996,
            by and between Foamex L.P. and Foamex-JPS Automotive L.P.
10.8.2(d)   - Amendment No. 1 to Tax Distribution Advance Agreement, dated as of
            June 12, 1997, by and between Foamex L.P. and Foamex International.
10.9.1(h)   - Trace Foam  Management  Agreement  between  Foamex L.P.  and Trace
            Foam, dated as of October 13, 1992.
10.9.2(l)   -  Affirmation  Agreement  re:  Management  Agreement,  dated  as of
            December 14, 1993, between Foamex L.P. and Trace Foam.
10.9.3(d)   - First  Amendment  to  Management  Agreement,  dated as of June 12,
            1997, by and between Foamex L.P. and Trace Foam.
10.10.1(k)  - Salaried Incentive Plan of Foamex L.P. and Subsidiaries.
10.10.2(k)  - Trace Holdings 1987 Nonqualified Stock Option Plan.
10.10.3(k)  - Equity Growth Participation Program.
10.10.4(o)  - The Foamex L.P. Salaried Pension Plan (formerly. "The General Felt
            Industries, Inc. Retirement Plan for Salaried Employees"), effective
            as of January 1, 1995.
10.10.5(u)  - The Foamex L.P. Hourly Pension Plan (formerly "The Foamex Products
            Inc.  Hourly Employee  Retirement  Plan"),  as amended  December 31,
            1995.
10.10.6(u)  - Foamex L.P.'s  401(k) Savings Plan effective  October 1, 1997.
10.10.7(a)  - Foamex International's 1993 Stock Option Plan.
10.10.8(a)  - Foamex International's Non-Employee Director Compensation Plan.
10.11.1(o)  - Employment Agreement, dated as of February 1, 1994, by and between
            Foamex L.P. and William H. Bundy.

                                       31
<PAGE>
10.11.2(dd) - Employment  Agreement,  dated as of March 16, 1999, by and between
            Foamex International and John G. Johnson, Jr.
10.11.3(gg) - Employment  Agreement,  dated as of March 16, 1999, by and between
            Foamex International and John Televantos.
10.12.1(a)  - Warrant Exchange Agreement,  dated as of December 14, 1993, by and
            between Foamex L.P. and Marely.
10.12.2(a)  - Warrant Exchange Agreement,  dated as of December 14, 1993, by and
            between Foamex L.P. and DLJ Funding.
10.13(t)    -  Warrant  Agreement,  dated as of June 28,  1994,  by and  between
            Foamex International and Shawmut Bank.
10.14(o)    - Stock  Purchase  Agreement,  dated as of December 23, 1993, by and
            between Transformacion de Espumas u Fieltros, S.A., the stockholders
            which are parties thereto, and Foamex L.P.
10.15.1(r)  - Asset  Purchase  Agreement,  dated as of August 29,  1997,  by and
            among General Felt, Foamex L.P., Bretlin, Inc. and The Dixie Group.
10.15.2(s)  - Addendum to Asset Purchase Agreement, dated as of October 1, 1997,
            by and among General Felt, Foamex L.P., Bretlin,  Inc. and The Dixie
            Group.
10.16.1(x)  - Supply  Agreement,  dated as of February 27, 1998,  by and between
            Foamex L.P. and General Felt (as assigned to Foamex Carpet).
10.16.2(x)  - Administrative Services Agreement,  dated as of February 27, 1998,
            by and between  Foamex L.P.  and General Felt (as assigned to Foamex
            Carpet).
10.17(y)    - Tax Sharing  Agreement,  dated as of February  27,  1998,  between
            Foamex International and Foamex Carpet.
10.18.1(w)  - Joint Venture Agreement between Hua Kee Company Limited and Foamex
            Asia, Inc., dated as of July 8, 1997.
10.18.2(w)  - Loan  Agreement  between Hua Kee Company  Limited and Foamex Asia,
            Inc., dated as of July 8, 1997.
21          - Subsidiaries of registrant.
27          - Financial Data Schedule for the year ended December 31, 1999.
----------------------------

(a)    Incorporated  herein  by  reference  to  the  Exhibit  to  Foamex  L.P.'s
       Registration Statement on Form S-1, Registration No. 33-69606.

(b)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex International for the fiscal year ended January 1, 1995.

(c)    Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex International reporting an event that occurred May 28,
       1997.

(d)    Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex  International  reporting an event that  occurred June
       12, 1997.

(e)    Incorporated  herein by  reference  to the  Exhibit  to the  Registration
       Statement of Foamex L.P. and FCC on Form S-4, Registration No. 33-65158.

(f)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-Q of
       Foamex International for the quarterly period ended June 30, 1996.

(g)    Incorporated  herein by  reference  to the  Exhibit  to the  Registration
       Statement of Foamex L.P., FCC and General Felt on Form S-1,  Registration
       Nos. 33-60888, 33-60888-01, and 33-60888-02.

(h)    Incorporated  herein  by  reference  to  the  Exhibit  to the  Form  10-K
       Statement of Foamex L.P. and FCC for fiscal 1992.

                                       32
<PAGE>

(i)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex L.P. for fiscal 1994.

(j)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-Q of
       Foamex for the quarterly period ended September 30, 1996.

(k)    Incorporated  herein by  reference  to the  Exhibit  to the  Registration
       Statement of Foamex L.P. and FCC on Form S-1,  Registration Nos. 33-49976
       and 33-49976-01.

(l)    Incorporated  herein by  reference  to the  Exhibit  to the  Registration
       Statement  of FJPS,  FJCC and Foamex L.P. on Form S-4,  Registration  No.
       33-82028.

(m)    Incorporated  herein by reference to the Exhibit to the Annual  Report on
       Form 10-K of Foamex  International for the fiscal year ended December 29,
       1996.

(n)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-Q of
       Foamex International for the quarterly period ended July 2, 1995.

(o)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex L.P. for fiscal 1993.

(p)    Incorporated  herein by  reference  to the  Exhibit  in the  Registration
       Statement  of  Foamex   International  on  Form  S-4,   Registration  No.
       333-30291.

(q)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex L.P. for the fiscal year ended December 31, 1995.

(r)    Incorporated  herein by  reference  to the Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on August 29, 1997.

(s)    Incorporated  herein by  reference  to the Current  Report on Form 8-K of
       Foamex L.P. reporting an event that occurred on October 6, 1997.

(t)    Incorporated  by  reference  to the  Exhibit  to the Form  10-Q of Foamex
       International for the quarterly period ended July 3, 1994.

(u)    Incorporated  by reference to the Exhibit to the Form 10-Q of Foamex L.P.
       for the quarterly period ended September 28, 1997.

(v)    Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex L.P., FCC and Foamex International  reporting an event
       that occurred December 23, 1997.

(w)    Incorporated  herein by  reference  to the  Exhibit  in the  Registration
       Statement of Foamex L.P. and FCC on Form S-4, Registration No. 333-45733,
       filed February 6, 1998.

(x)    Incorporated  herein by  reference  to the Current  Report on Form 8-K of
       Foamex  International  reporting  an event that  occurred on February 27,
       1998.

(y)    Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex International for the fiscal year ended December 28, 1997.

(z)    Incorporated  herein by  reference  to the Current  Report on Form 8-K of
       Foamex  International  reporting  an event that  occurred  on November 5,
       1998.

(aa)   Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex International reporting an event that occurred on June
       25, 1998.

                                       33
<PAGE>

(bb)   Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex  International  reporting  an event that  occurred  on
       March 11, 1999.

(cc)   Incorporated  herein by  reference  to the  Exhibit  in the  Registration
       Statement  of  Foamex  L.P.  and  FCC on  Form  S-4/A,  Registration  No.
       333-45733, filed May 11, 1998.

(dd)   Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex International Inc. for the fiscal year ended December 31, 1998.

(ee)   Incorporated  herein by reference to the Exhibit to the Current Report on
       Form 8-K of Foamex International Inc. reporting an event that occurred on
       June 30, 1999.

(ff)   Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-Q of
       Foamex International for the quarterly period ended September 30, 1999.

(gg)   Incorporated  herein  by  reference  to the  Exhibit  to the Form 10-K of
       Foamex International for the fiscal year ended December 31, 1999.

       Certain  instruments  defining  the rights of security  holders have been
excluded herefrom in accordance with Item  601(b)(4)(iii) of Regulation S-K. The
registrant  hereby  agrees  to  furnish  a copy of any  such  instrument  to the
Commission upon request.


















                                       34
<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 30th day of March 2000.

                                             FOAMEX L.P.
                                             By: FMXI, Inc.
                                                 General Partner


                                             By: /s/ George L. Karpinski
                                                 -----------------------
                                             Name:  George L. Karpinski
                                             Title: Vice President


                                             FOAMEX CAPITAL CORPORATION


                                             By: /s/ George L. Karpinski
                                                 -----------------------
                                             Name:  George L. Karpinski
                                             Title: Vice President


       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 as of the dates indicated:

Signature                        Title                          Date


/s/ Marshall S. Cogan            Director of FMXI and FCC       March 30, 2000
------------------------
     Marshall S. Cogan



/s/ Philip N. Smith, Jr.         Director of FMXI               March 30, 2000
---------------------------
     Philip N. Smith, Jr.



/s/ Barry Zimmerman              Director of FCC                March 30, 2000
------------------------
     Barry Zimmerman










                                       35
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Financial Statements of Registrants
<S>                                                                                            <C>
Foamex L.P.
   Report of Independent Accountants                                                             F-2
   Consolidated Balance Sheets as of December 31, 1999 and 1998                                  F-3
   Consolidated Statements of Operations for the years 1999, 1998 and 1997                       F-5
   Consolidated Statements of Cash Flows for the years 1999, 1998 and 1997                       F-6
   Consolidated Statements of Partners' Equity (Deficit) for the years 1999, 1998 and 1997       F-7
   Notes to Consolidated Financial Statements                                                    F-8

Foamex Capital Corporation
   Report of Independent Accountants                                                            F-38
   Balance Sheets as of December 31, 1999 and 1998                                              F-39
   Notes to Balance Sheets                                                                      F-40

</TABLE>








                                      F-1
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of Foamex L.P.:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated statements of operations, partners' equity (deficit) and cash flows
present fairly, in all material respects,  the financial position of Foamex L.P.
and  its   subsidiaries,   an  indirect   wholly  owned   subsidiary  of  Foamex
International Inc. ("Foamex  International"),  at December 31, 1999 and 1998 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with  accounting  principles
generally  accepted in the United  States.  In  addition,  in our  opinion,  the
financial statement schedule as of and for each of the three years in the period
ended  December 31, 1999 when  considered in relation to the basic  consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.  These financial statements and
financial statement schedule are the responsibility of Foamex L.P.'s management;
our responsibility is to express an opinion on these financial  statements based
on our audits.  We conducted our audits of these  statements in accordance  with
auditing standards generally accepted in the United States which require that we
plan and  perform the audit to obtain  reasonable  assurance  about  whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for the opinion expressed above.

The accompanying  financial  statements have been prepared  assuming Foamex L.P.
will  continue as a going  concern.  As discussed in Note 1 to the  accompanying
financial  statements,  on July 21, 1999,  Trace  International  Holdings,  Inc.
("Trace"),  a major  stockholder of Foamex  International,  filed a petition for
relief under  Chapter 11 of the  Bankruptcy  Code. On January 24, 2000, an order
was  signed  converting  the Trace  case  from  Chapter  11 to  Chapter 7 of the
Bankruptcy  Code. A trustee was appointed to oversee the  liquidation of Trace's
assets.  The outcome of the Trace bankruptcy could result in the acceleration of
substantially  all of Foamex L.P.'s debt. This matter raises  substantial  doubt
about Foamex L.P.'s ability to continue as a going concern.  Management's  plans
in regard to this matter are described in Note 1 to the  accompanying  financial
statements.  The financial  statements do not include any adjustments that might
result from the outcome of this uncertainty.





PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 10, 2000





                                      F-2
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                           December 31,    December 31,
ASSETS                                                        1999            1998
                                                                  (thousands)
CURRENT ASSETS
<S>                                                        <C>            <C>
    Cash and cash equivalents                              $   1,573      $   3,192
    Accounts receivable, net of allowance for doubtful
      accounts and discounts of $5,310 and $7,278            128,929        143,301
    Accounts receivable from related parties                  16,717         17,533
    Inventories                                               93,812        127,636
    Other current assets                                      21,541         26,896
                                                           ---------      ---------

            Total current assets                             262,572        318,558
                                                           ---------      ---------

PROPERTY, PLANT AND EQUIPMENT
    Land and land improvements                                 6,947          7,142
    Buildings and leasehold improvements                      98,098         97,996
    Machinery, equipment and furnishings                     246,392        223,449
    Construction in progress                                  14,598         24,132
                                                           ---------      ---------

            Total                                            366,035        352,719

    Less accumulated depreciation and amortization          (154,720)      (133,082)
                                                           ---------      ---------

       Property, plant and equipment, net                    211,315        219,637

COST IN EXCESS OF ASSETS ACQUIRED, net of
accumulated amortization of $15,804 in 1999 and
$10,635 in 1998                                              183,481        188,205

DEBT ISSUANCE COSTS, net of
accumulated amortization of $5,787 in 1999 and
$2,894 in 1998                                                14,423         13,946

OTHER ASSETS                                                  26,704         28,182
                                                           ---------      ---------

TOTAL ASSETS                                               $ 698,495      $ 768,528
                                                           =========      =========
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.



                                      F-3
<PAGE>


                          FOAMEX L.P. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                               December 31,       December 31,
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)                         1999               1998
                                                                       (thousands)
CURRENT LIABILITIES
<S>                                                            <C>                 <C>
    Short-term borrowings                                      $   1,627           $   2,957
    Current portion of long-term debt                              7,866             689,478
    Current portion of long-term debt - related party                 --              34,000
    Accounts payable                                              82,229             139,726
    Accounts payable to related parties                               --                 791
    Accrued employee compensation and benefits                    16,341              12,406
    Accrued interest                                               9,457               7,396
    Accrued restructuring and plant consolidation                  3,915               2,552
    Deferred income taxes                                          2,080               1,098
    Accrued customer rebates                                       9,652               5,813
    Other accrued liabilities                                     18,864              24,699
                                                               ---------           ---------

      Total current liabilities                                  152,031             920,916

LONG-TERM DEBT                                                   646,544                  --

LONG-TERM DEBT - RELATED PARTY                                    34,000                  --

ACCRUED EMPLOYEE BENEFITS                                         14,131              26,559

ACCRUED RESTRUCTURING AND
    PLANT CONSOLIDATION                                            7,097               6,969

OTHER LIABILITIES                                                  9,283              10,121
                                                               ---------           ---------

    Total liabilities                                            863,086             964,565
                                                               ---------           ---------

COMMITMENTS AND CONTINGENCIES

PARTNERS' EQUITY (DEFICIT)
      General partners                                          (143,271)           (141,426)
      Limited partners                                                --                  --
      Accumulated comprehensive loss                              (8,923)            (26,208)
      Notes and advances receivable from partner                  (3,176)            (18,608)
      Notes receivable from related party                         (9,221)             (9,795)
                                                               ---------           ---------

         Total partners' equity (deficit)                       (164,591)           (196,037)
                                                               ---------           ---------

TOTAL LIABILITIES AND PARTNERS' EQUITY (DEFICIT)               $ 698,495           $ 768,528
                                                               =========           =========
</TABLE>


         The accompanying notes are an integral part of the consolidated
                             financial statements.


                                      F-4
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        For the Years 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                       1999                  1998                   1997
                                                   -----------           -----------           -----------
                                                                         (thousands)
<S>                                                <C>                   <C>                   <C>
NET SALES                                          $ 1,190,679           $ 1,155,918           $   931,095

COST OF GOODS SOLD                                   1,036,056             1,027,241               787,756
                                                   -----------           -----------           -----------

GROSS PROFIT                                           154,623               128,677               143,339

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                            59,555                73,315                65,907

RESTRUCTURING AND OTHER CHARGES (CREDITS)               10,821               (10,146)               21,100
                                                   -----------           -----------           -----------

INCOME FROM OPERATIONS                                  84,247                65,508                56,332

INTEREST AND DEBT ISSUANCE EXPENSE                      66,471                66,112                44,181

OTHER INCOME (EXPENSE), NET                               (882)               (4,325)                2,009
                                                   -----------           -----------           -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE PROVISION FOR INCOME TAXES                   16,894                (4,929)               14,160

PROVISION FOR INCOME TAXES                               1,313                   940                 2,895
                                                   -----------           -----------           -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS                15,581                (5,869)               11,265

EXTRAORDINARY LOSS ON EARLY
    EXTINGUISHMENT OF DEBT                                  --                (3,195)              (48,559)
                                                   -----------           -----------           -----------

NET INCOME (LOSS)                                  $    15,581           $    (9,064)          $   (37,294)
                                                   ===========           ===========           ===========

</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.


                                      F-5
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        For the Years 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                                                                  1999                1998               1997
                                                                               ---------           ---------           ---------
OPERATING ACTIVITIES                                                                               (thousands)
<S>                                                                            <C>                 <C>                 <C>
   Net income (loss)                                                           $  15,581           $  (9,064)          $ (37,294)
   Adjustments to reconcile net income (loss) to net
     cash provided by (used for) operating activities:
     Depreciation and amortization                                                32,590              31,679              20,882
     Amortization of debt issuance costs, debt premium, deferred
        swap adjustment and gain, and debt discount                                  457                (244)              2,307
     Asset writedowns and other charges (credits)                                    356              (5,507)             12,041
     Extraordinary loss on early extinguishment of debt                               --               2,857              24,182
     Provision for uncollectible accounts                                          2,493               2,000               2,295
     Deferred income taxes                                                            81                 267                (568)
     Other, net                                                                    1,075              (5,274)             (5,977)
   Changes in operating assets and liabilities, net of acquisitions:
     Accounts receivable and accounts receivable from related parties             12,695             (19,026)             (4,038)
     Inventories                                                                  33,824             (20,288)             12,882
     Accounts payable and accounts payable to related parties                    (58,288)             13,530              14,359
     Accrued restructuring and plant consolidation                                 1,491             (14,183)              5,701
     Other assets and liabilities                                                 15,706              (4,529)            (24,763)
                                                                               ---------           ---------           ---------

        Net cash provided by (used for) operating activities                      58,061             (27,782)             22,009
                                                                               ---------           ---------           ---------

INVESTING ACTIVITIES
   Capital expenditures                                                          (19,407)            (31,715)            (33,117)
   Acquisitions, net of cash acquired                                                 --                  --            (119,065)
   Proceeds from sale of assets                                                    1,510               2,230              40,169
   Purchase of note from related party                                                --                  --              (5,000)
   Repayment of (purchase of) notes from Foamex International                      2,490              (2,490)             (2,500)
   Redemption of General Felt                                                         --             (10,153)                 --
   Revolving loan with Foamex International                                         (676)                 --                  --
   Decrease in restricted cash                                                        --                  --              12,143
   Other investing activities                                                        249                (922)                112
                                                                               ---------           ---------           ---------

        Net cash used for investing activities                                   (15,834)            (43,050)           (107,258)
                                                                               ---------           ---------           ---------

FINANCING ACTIVITIES
   Net proceeds from (repayments of) short-term borrowings                        (1,330)             (3,641)              2,894
   Net proceeds from (repayments of) revolving loans                             (25,753)             84,511              54,928
   Proceeds from long-term debt                                                       --             138,810             594,499
   Repayments of long-term debt                                                   (8,271)           (142,212)           (430,593)
   Increase (decrease) in cash overdraft                                          (1,444)              7,300                  --
   Purchase of FJPS senior secured discount debentures                                --                  --            (105,829)
   Tax distribution repayments (advances)                                         13,618                  --             (13,618)
   Net distribution paid to partners                                             (17,296)            (20,293)            (10,283)
   Debt issuance costs                                                            (3,370)               (979)            (18,410)
   Other financing activities                                                         --               1,123                  98
                                                                               ---------           ---------           ---------

        Net cash provided by (used for) financing activities                     (43,846)             64,619              73,686
                                                                               ---------           ---------           ---------

Net decrease in cash and cash equivalents                                         (1,619)             (6,213)            (11,563)

Cash and cash equivalents at beginning of period                                   3,192               9,405              20,968
                                                                               ---------           ---------           ---------

Cash and cash equivalents at end of period                                     $   1,573           $   3,192           $   9,405
                                                                               =========           =========           =========
</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.

                                      F-6
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
                     For the Years Ended 1999, 1998 and 1997
<TABLE>
<CAPTION>
                                                                 Accumulated                   Notes
                                                                   Other         Notes       Receivable
                                           General    Limited   Comprehensive  Receivable     Related
                                          Partners    Partners  Income (Loss) from Partners    Party         Total
                                                                        (thousands)
<S>                                      <C>         <C>          <C>          <C>           <C>       <C>
Balances at December 29, 1996             $     632   $ 57,654     $(5,901)     $(35,180)     $(4,373)  $   12,832
Net loss                                       (746)   (36,548)                                            (37,294)
Minimum pension liability adjustment                                (1,311)                                 (1,311)
Foreign currency translation adjustment                               (873)                                   (873)
                                                                                                         ---------
   Comprehensive loss                                                                                      (39,478)
Distributions                                   (23)    (1,099)                                             (1,122)
Accretion of note receivable from partner        48      2,339                    (2,387)                        -
Distributions associated with the June 1997
   Refinancing Plan                          (2,896)  (141,947)                   37,567                  (107,276)
Increase in note receivable from Trace                                                         (5,422)      (5,422)
Purchase of note receivable from Foamex
   International                                                                  (2,500)                   (2,500)
Tax distribution advance                                                         (13,618)                  (13,618)
Other                                                      282                                                 282
Deficit balance of Limited Partners assumed
   by General Partners                     (119,319)   119,319                                                   -
                                          ---------    -------    --------      --------     --------    ---------
Balances at December 28, 1997              (122,304)         -      (8,085)      (16,118)      (9,795)    (156,302)

Net loss                                       (181)    (8,883)                                             (9,064)
Minimum pension liability adjustment                               (11,525)                                (11,525)
Foreign currency translation adjustment                             (6,598)                                 (6,598)
                                                                                                         ---------
   Comprehensive loss                                                                                      (27,187)
Distributions                                    (8)      (326)                                               (334)
Distribution associated with the
   GFI Transaction                             (400)   (19,600)                                            (20,000)
Equity adjustment associated with the
   GFI Transaction                              201      9,868                                              10,069
Purchase of note receivable from Foamex
   International                                                                  (2,490)                   (2,490)
Other                                                      207                                                 207
Deficit balance of Limited Partners assumed
   by General Partners                      (18,734)    18,734                                                     -
                                          ---------    -------    --------      --------     --------    ---------
Balances at December 31, 1998              (141,426)         -     (26,208)      (18,608)      (9,795)    (196,037)

Net income                                      312     15,269                                              15,581
Minimum pension liability adjustment                                12,331                                  12,331
Foreign currency translation adjustment                              4,954                                   4,954
                                                                                                         ---------
   Comprehensive income                                                                                     32,866
Distributions                                    (7)      (321)                                               (328)
Distribution associated with tax distribution
   advance                                     (346)   (16,967)                                            (17,313)
Repayment of note receivable from Foamex
   International                                                                   2,490                     2,490
Repayment of tax advance                                                          13,618                    13,618
Revolving loan with Foamex International                                            (676)                     (676)
Other                                                      215                                    574          789
Deficit balance of Limited Partners assumed
   by General Partners                       (1,804)     1,804                                                   -
                                          ---------    -------    --------      --------     --------    ---------
Balances at December 31, 1999             $(143,271)   $     -    $ (8,923)     $ (3,176)    $ (9,221)   $(164,591)
                                          ---------    -------    --------      --------     --------    ---------
</TABLE>

         The accompanying notes are an integral part of the consolidated
                             financial statements.

                                      F-7
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     ORGANIZATION AND BASIS OF PRESENTATION

       Organization

       Foamex L.P. is a manufacturer  and  distributor of flexible  polyurethane
foam and advanced polymer foam products.  As of December 31, 1999, Foamex L.P.'s
operations consists of the following operating segments: (i) foam products, (ii)
carpet cushion products,  (iii) automotive products, (iv) technical products and
(v) other, which primarily consists of certain foreign manufacturing operations,
corporate   expenses  not  allocated  to  the  other   operating   segments  and
restructuring and other charges. The net sales and income (loss) from operations
of these  operating  segments  for each of the last three years are  included in
Note 15. For periods  prior to February 27,  1998,  the  consolidated  financial
statements include the financial position,  results of operations and cash flows
of General Felt Industries,  Inc.  ("General  Felt"). In connection with the GFI
Transaction  (see Note 12) the net assets and  operations  of General  Felt were
transferred  from Foamex L.P. and were acquired by Foamex Carpet  Cushion,  Inc.
("Foamex  Carpet"),  a wholly  owned  subsidiary  of Foamex  International  Inc.
("Foamex International").

       Foamex  L.P.  is  a  Delaware  limited  partnership.  Effective  February
27,1998,  Foamex  L.P.  became an indirect  wholly  owned  subsidiary  of Foamex
International.  FMXI,  Inc.  ("FMXI")  has  a 2%  managing  general  partnership
interest  in Foamex L.P.  Foamex  International  has a 98%  limited  partnership
interest  in  Foamex  L.P.   FMXI  is  a  wholly  owned   subsidiary  of  Foamex
International.

       Change in Control

       Trace International Holdings, Inc. ("Trace") is a privately held company,
which  owned  approximately  29% of Foamex  International's  outstanding  voting
common stock at March 10, 2000, and whose former  Chairman also serves as Foamex
International's  Chairman. Foamex International's common stock owned by Trace is
pledged as collateral  against certain of Trace's  obligations.  The Foamex L.P.
Credit  Facility  and the  Foamex/GFI  Note  (see Note  12),  pursuant  to which
approximately  $411.8  million of debt was  outstanding as of December 31, 1999,
provide that a "change of control" would be an event of default and could result
in the  acceleration of such  indebtedness.  "Change of control" means, for this
purpose, that (i) a person or related group, other than Trace, beneficially owns
more than 25% of Foamex  International's  outstanding voting stock and (ii) such
voting common stock  constitutes a greater  percentage of such voting stock than
the  amount  beneficially  owned  by  Trace.  Additionally,  certain  indentures
relating to senior  subordinated notes of $248.0 million contain similar "change
of control" provisions,  which require the issuers to tender for such notes at a
price in cash equal to 101% of the  aggregate  principal  amount  thereof,  plus
accrued and unpaid interest thereon, if there is such a "change of control".

       On July 21,  1999,  Foamex  L.P.  was  informed  by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy  Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace  bankruptcy  from  Chapter 11 to Chapter 7 of the  Bankruptcy  Code. A
trustee was  appointed to oversee the  liquidation  of Trace's  assets.  Neither
Trace's  bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control"  under the  provisions of the debt  agreements  described  above.  A
"change of control"  could take place however,  if the  bankruptcy  court allows
Trace's  creditors to foreclose on and take ownership of Foamex  International's
common stock owned by Trace, or otherwise authorizes a sale or transfer of these
shares,  under  circumstances  in which a person or  related  group,  other than
Trace, acquired more than 25% of Foamex International's outstanding voting stock
and owned a greater percentage of such voting stock than the amount beneficially
owned by Trace. On November 22, 1999, the bankruptcy court allowed two creditors
to take ownership of 11% and 6%, respectively,  of Foamex International's common
stock.  Such an event  did not  constitute  a  "change  of  control"  under  the
provisions of the debt agreements.

       Management  believes  that it is unlikely that a "change of control" will
occur as a result of Trace's bankruptcy proceedings.  However, Foamex L.P. would
seek to  resolve  the issues  that may arise  should  the  "change  of  control"
provisions  be  triggered,  by  requesting  waivers  of such  provisions  and/or
refinancing  certain debt, if necessary.  There can be no assurance  that Foamex
L.P. or its subsidiaries will be able to do so, or that Foamex L.P. will be able
to

                                      F-8
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     ORGANIZATION AND BASIS OF PRESENTATION (continued)

obtain waivers of such provisions.  Such  circumstances  raise substantial doubt
about Foamex L.P.'s  ability to continue as a going  concern.  The  accompanying
financial  statements were prepared on a going-concern  basis and do not include
any  adjustments  that might  result  from the  outcome of the Trace  bankruptcy
filing.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

       The consolidated financial statements include the accounts of Foamex L.P.
and  all  majority-owned  subsidiaries  where  control  exists.  Investments  in
affiliates  with 20% or greater  ownership  are  accounted  for using the equity
method.  All  significant  intercompany  accounts  and  transactions  have  been
eliminated in consolidation.

Reporting Period

       Effective  September 1998, the annual reporting period was changed from a
52 or 53  week  fiscal  year  ending  on the  Sunday  closest  to the end of the
calendar  year to a  calendar  year  ending on  December  31.  This  change  was
effective  for the third fiscal  quarter of 1998,  which ended on September  30,
1998. Fiscal year 1997 was a 52 week period that ended on December 28, 1997.

Accounting Estimates

       The  preparation  of financial  statements in conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts and contingency disclosures. Actual
results could differ from those estimates.

Revenue Recognition, Discounts and Rebates

       Revenue from sales,  net of discounts and estimated  returns,  allowances
and rebates,  is recognized when products are shipped at which time title passes
to the customer.

Cash Equivalents

       Highly liquid  investments  with an original  maturity of three months or
less when purchased are recognized as cash equivalents.

Inventories

       Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis.

Property, Plant and Equipment

       Property,  plant and  equipment  are  stated at cost and are  depreciated
using the  straight-line  method over the estimated  useful lives of the assets.
The range of useful lives  estimated  for buildings is generally 20 to 35 years,
and the  range  for  machinery,  equipment  and  furnishings  is 5 to 12  years.
Leasehold  improvements  are  amortized  over the  shorter  of the  terms of the
respective  leases or the estimated useful lives of the leasehold  improvements.
Depreciation  expense for 1999,  1998 and 1997 was $25.9 million,  $24.6 million
and $17.6 million, respectively.

       Maintenance and repairs are charged to expense as incurred.  Renewals and
major  improvements  are  capitalized.  When  assets are  retired  or  otherwise
disposed of, the asset and related accumulated depreciation are removed from the
accounts and any gain or loss is recognized in operations.

                                      F-9
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Debt Issuance Costs

       Debt issuance  costs consist of amounts  incurred in obtaining  long-term
financing  and  are  disclosed  in  the  financing  activities  section  of  the
consolidated  statements of cash flows. These costs are being amortized over the
term of the related debt using the effective interest method.

Cost in Excess of Net Assets Acquired

       The  excess of the  acquisition  cost over the fair  value of net  assets
acquired in business combinations  accounted for as purchases is amortized using
the straight-line  method over 40 years. At each balance sheet date, Foamex L.P.
evaluates  the  recoverability  of cost in excess of net assets  acquired  using
certain  financial  indicators such as historical and future ability to generate
income and cash flows from  operations  based on a going  concern  basis.  If an
impairment  loss has  occurred,  based on expected  future  (undiscounted)  cash
flows,  the loss is  recognized  in the income  statement.  During  1998, a $2.3
million impairment charge was recorded associated with the cost in excess of net
assets acquired related with a foreign facility.

Environmental Remediation

       Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to an existing condition
caused by past  operations,  and which do not  contribute  to  current or future
revenue  generation,  are expensed.  Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated.

Comprehensive Income

       Other comprehensive  income or loss items are revenues,  expenses,  gains
and losses that under generally accepted accounting principles are excluded from
net income and reflected as a component of equity, such as currency  translation
and minimum pension liability adjustments.

Foreign Currency Translation

       The  financial  statements of foreign  subsidiaries,  except in countries
that are  considered  as  highly  inflationary  as  discussed  below,  have been
translated into U.S. dollars by using the year-end exchange rates for the assets
and liabilities and the average exchange rates for the statements of operations.
Currency  translation   adjustments  are  included  in  other  partners'  equity
(deficit).  In 1998 and  1997,  Mexico  was  considered  a  highly  inflationary
economy.  Accordingly,  certain  financial  statement  amounts  for the  Mexican
operations  were  translated at either current or historical  exchange rates, as
appropriate.  These  translation  adjustments  were  reflected in the results of
operations.  Transaction  gains  (losses) are  reflected in  operations  and are
insignificant.  The effect of foreign  currency  exchange rates on cash flows is
insignificant.

Start-Up Costs

       Costs  incurred in the  start-up of a facility,  including  training  and
production testing, are expensed as incurred.

Interest Rate Swap Agreement

       The  differential  to be paid or  received  under an  interest  rate swap
agreement is recognized  as an adjustment to interest and debt issuance  expense
in the current period as interest rates change.

                                      F-10
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

       Income  taxes are  accounted  for under the asset and  liability  method.
Under this method,  deferred income taxes are provided for temporary differences
between the financial  reporting and income tax basis of assets and  liabilities
using the income tax rates, under existing legislation, expected to be in effect
at the date such temporary differences are expected to reverse.  Deferred income
tax assets are  reduced by a  valuation  allowance  when it is  considered  more
likely  than not that a portion of the  deferred  income tax assets  will not be
realized  in a future  period.  The  estimates  utilized in the  recognition  of
deferred income tax assets are subject to revision in future periods.

       Foamex L.P., as a limited  partnership,  is not subject to Federal income
taxes;  therefore no current or deferred  provision  has been  provided for such
taxes. However,  Foamex L.P. has provided for the income taxes of certain states
in which it is subject to taxes and for certain subsidiaries,  which are subject
to  Federal  and state  income  taxes and for  subsidiaries  located  in foreign
jurisdictions  that file  separate  tax returns.  The partners  will provide for
their  respective  shares of income or loss in their Federal or applicable state
income tax returns.  Foamex L.P. has a tax sharing  agreement  that provides for
the payment of  distributions to the partners for amounts that would be required
to be paid if Foamex L.P. were a corporation  filing  separate tax returns.  The
ability of Foamex L.P. to make such distributions is limited by the terms of its
credit agreements and indentures. (See Notes 8 and 12).

Reclassifications

       Certain amounts have been reclassified to conform with the current year's
presentation.

Future Accounting Changes

       Statement of Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") will require the
fair value of  derivatives  be recognized in the  consolidated  balance  sheets.
Changes in the fair value of  derivatives  will be  recognized in earnings or in
other comprehensive  income,  essentially depending on the structure and purpose
of the derivatives. The statement will be effective (as amended by SFAS No. 137)
for all quarters of all fiscal years beginning after June 15, 2000.  Foamex L.P.
has not  determined  the impact,  if any, that the adoption of SFAS No. 133 will
have on results of operations or financial position.

3.     ACQUISITIONS, ASSET SALES AND DISCONTINUED OPERATIONS

Acquisitions

       On December 23, 1997,  Foamex  International  acquired Crain  Industries,
Inc.  ("Crain")  pursuant to a merger  agreement with Crain Holdings Corp.  (the
"Crain  Acquisition")  for a purchase price of approximately  $213.7 million and
contributed all of the assets of Crain, subject to all the liabilities of Crain,
to Foamex L.P. The Crain  Acquisition was primarily funded with borrowings under
a Foamex L.P.  credit  facility and the  assumption of debt with a face value of
approximately $98.6 million and an estimated fair value of approximately  $112.3
million.  In addition,  fees and expenses  associated with the Crain Acquisition
were approximately $13.2 million.

       The Crain  Acquisition was accounted for as a purchase and the results of
Crain were included from the acquisition  date, except the results from December
24, 1997 to December 28, 1997 were not included in the  consolidated  statements
of  operations  or cash flows for 1997 since the effect would be  insignificant.
The cost of the Crain  Acquisition  has been  allocated on the basis of the fair
value of the assets acquired and the liabilities  assumed.  During 1998,  Foamex
L.P.  increased the cost in excess of the net assets  acquired by  approximately
$11.2 million as a result of the  finalization  of the fixed asset appraisal and
updated estimates of closing certain former Crain facilities.  The excess of the
purchase  price over the  estimated  fair value of the net  assets  acquired  of
$164.2 million is being amortized using the straight-line method over 40 years.

                                      F-11
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.     ACQUISITIONS, ASSET SALES AND DISCONTINUED OPERATIONS (continued)

       In  connection  with  the  Crain  Acquisition,  Foamex  L.P.  approved  a
consolidation plan to integrate the acquired Crain facilities into Foamex L.P.'s
existing  facilities.   Foamex  L.P.  recorded,   after  changes  in  estimates,
approximately  $2.7 million of severance and related costs and $13.7 million for
costs  associated  with the shut  down of  certain  acquired  facilities.  These
liabilities were established in purchase accounting (see Note 4).

Asset Sales

       On March 31, 1999, Foamex  International  sold its corporate airplane for
$16.3  million.  The sale of the airplane  resulted in an obligation to Trace of
approximately  $0.6  million.  Under  the  terms  of  the  aircraft  acquisition
agreement  with  Trace,  Foamex  International  was  obligated  to share the net
proceeds  in  excess  of a  specified  amount  defined  in  the  agreement.  The
obligation  was offset against  Trace's two  promissory  notes payable to Foamex
L.P., discussed in Note 17, at Trace's request.

       On October 6, 1997, Foamex L.P. sold  substantially all of the net assets
of its needlepunch  carpeting,  tufted  carpeting and artificial  grass products
business  located at its facilities in Dalton,  Georgia to Bretlin,  Inc. for an
aggregate sale price of  approximately  $41.0 million.  Foamex L.P.  realized an
insignificant  gain on the sale in 1997.  Foamex L.P.  used $38.8 million of the
net sale  proceeds to repay term loan  borrowings  under a credit  facility.  In
connection  with  this  repayment,  an  extraordinary  loss  was  recognized  as
discussed in Note 9.

4.     RESTRUCTURING AND OTHER CHARGES (CREDITS)

1997

       During  1997,  net  restructuring  and other  charges  (credits) of $21.1
million were recorded.  In connection  with the Crain  Acquisition  discussed in
Note 3, a restructuring plan (the "1997 Restructuring Plan") to consolidate nine
foam production,  fabrication or branch locations was approved in December 1997.
The consolidation of foam production,  fabrication or branch locations  resulted
in a  restructuring  provision  that  totaled  $23.0  million.  Included  in the
provision was $12.1 million for fixed assets write downs (net of estimated  sale
proceeds),  $9.8 million for plant closure and operating  lease  obligations and
$1.1 million for personnel reductions.  A $1.9 million adjustment for changes in
estimates to prior year restructuring plans was also recorded in 1997.

1998

       Based on business  developments  during 1998,  Foamex L.P. decided not to
close two facilities originally identified for closure in the 1997 Restructuring
Plan. One facility remained open to fill lost capacity  resulting from a fire in
April 1998 at the Orlando,  Florida facility,  which returned to full operations
during 1999. The other facility remained open during 1998 due to improved demand
on the West Coast. The 1997  Restructuring Plan also included the closure of two
facilities associated with Foamex L.P.'s packaging business. During 1998, Foamex
L.P.  modified the plan, and decided to sell the packaging  business and did not
expect to incur the asset write-down and lease costs as originally planned. As a
result, Foamex L.P. recorded a $14.8 million restructuring adjustment associated
with  the  1997  Restructuring   Plan.  The  components  of  the  $14.8  million
restructuring adjustment include: $10.2 million for fixed asset writedowns, $3.5
million for plant closure and operating  lease  obligations and $1.1 million for
personnel reductions.

       In  addition,  Foamex  L.P.  recorded  restructuring  and  other  charges
(credits) of $4.7 million during 1998 to reserve for approximately  $2.4 million
of net receivables due from Trace and to writedown approximately $2.3 million of
impaired  cost in  excess  of net  assets  acquired  associated  with a  foreign
facility.  Also during 1998, Foamex L.P. incurred additional plant closure costs
of $5.2 million and personnel  reduction  costs of $1.2 million  associated with
the closure of the former Crain facilities. The additional costs associated with
the closure of the former  Crain  facilities  resulted in an increase to cost in
excess of net assets acquired.

                                      F-12
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.     RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

1999

       During 1999,  Foamex L.P.  approved and  implemented  four  restructuring
plans to  reduce  selling,  general  and  administrative  costs  and to  further
rationalize plant operations.

       Foamex L.P. recorded  restructuring charges of approximately $2.3 million
relating to severance  costs in connection  with the first  restructuring  plan.
This plan reduced Foamex L.P.'s salaried work force by 78 employees.

       Foamex L.P. recorded  restructuring charges of approximately $2.9 million
relating to severance costs in connection with the second restructuring plan for
replacing three of Foamex L.P.'s former  executives,  including its former Chief
Executive Officer.

       In connection with the third  restructuring  plan,  Foamex L.P.  recorded
restructuring  charges of approximately  $1.7 million relating to the closure of
one facility and certain product line rationalizations.  The $1.7 million charge
was  comprised of  approximately  $0.1 million of severance  costs in connection
with the work force  reductions of 115 employees,  $0.1 million of plant closure
and carrying costs and $1.5 million of asset write downs.

       In connection with the fourth  restructuring plan, Foamex L.P. closed its
New York office (see Note 17). Foamex L.P. recorded  approximately  $2.5 million
of restructuring  charges comprised of $1.6 million of severance costs for eight
employees  and  $0.9  million  of  costs  primarily  relating  to  future  lease
obligations, net of sublease proceeds.

       In addition,  Foamex L.P. recorded restructuring charges of approximately
$1.1 million  relating to changes in estimates to prior years' plans,  primarily
for the sale of the  packaging  business  in 1999.  The $1.1  million  charge is
comprised of $0.2 million of severance, $1.7 million of lease and closure costs,
offset by $0.8 million of  adjustments  for asset  writedowns.  Foamex L.P. also
recorded $0.3 million of other  charges  relating to rent due from Trace for the
New York office prior to its closure.

       The  following   table  sets  forth  the   components  of  Foamex  L.P.'s
restructuring and other charges (credits):
<TABLE>
<CAPTION>
                                                       Asset         Plant Closure      Personnel
                                           Total     Writedowns        and Leases       Reductions       Other
                                                                       (millions)
<S>                                        <C>        <C>               <C>              <C>            <C>
       Balances at December 29, 1996     $  8.5        $(1.8)           $  8.9            $ 1.4         $   -
       Cash spending                       (2.3)          -               (1.4)            (0.9)            -
       1997 restructuring charge           23.0         12.1               9.8              1.1             -
       Restructuring adjustments           (1.9)         0.1              (2.3)             0.3             -
       Asset write-off/writedowns         (16.1)       (16.1)               -                -              -
       Plant consolidation costs           10.0           -                8.5              1.5             -
                                          -----        -----             -----            -----          ----
       Balance at December 28, 1997        21.2         (5.7)             23.5              3.4             -

       Cash spending                      (15.3)          -              (11.8)            (3.5)            -
       Cash proceeds                        2.1          2.1                -                -              -
       1998 restructuring charge            4.7          4.7                -                -              -
       Restructuring adjustments          (14.8)       (10.2)             (3.5)            (1.1)            -
       Accruals transferred in connection
         with the GFI Transaction          (3.7)        (0.6)             (3.1)               -             -
       Asset write-off/writedowns          (5.6)        (4.8)             (0.8)               -             -
       Reclassified fixed asset basis
         for restructuring credit           8.8          8.8                -                 -             -
       Plant consolidation costs            6.4            -               5.2              1.2             -
                                          -----        -----             -----            -----          ----
       Balance at December 31, 1998         3.8         (5.7)              9.5                -             -


                                      F-13
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.       RESTRUCTURING AND OTHER CHARGES (CREDITS) (continued)

                                                       Asset        Plant Closure       Personnel
                                           Total   Writedowns         and Leases       Reductions        Other
                                        ---------------------       -------------      ----------     --------
                                                                       (millions)
       Cash spending                       (8.6)          -               (3.9)            (4.4)          (0.3)
       Cash proceeds                        1.5          1.5                -                -               -
       1999 restructuring charge            9.7          1.5               1.0              6.9            0.3
       Restructuring adjustments            1.1         (0.8)              1.7              0.2             -
       Asset write-off/writedowns          (0.3)        (0.3)               -                -              -
                                           ----        -----              ----             ----         -----
       Balance at December 31, 1999        $7.2        $(3.8)             $8.3             $2.7         $   -
                                           ====        =====              ====             ====         =====
</TABLE>

       As  indicated  in the table above,  the accrued  restructuring  and plant
consolidation balance at December 31, 1999 will be used for payments relating to
severance, plant closure and leases including runout costs at the facilities. As
of December 31, 1999, all employees  subject to the plans have been  terminated.
The $3.8  million of asset  writedowns  relates  to  estimated  proceeds  and is
included in noncurrent assets.  Foamex L.P. expects to spend  approximately $3.9
million  during 2000 with the  remaining  $7.1 million to be spent through 2006,
principally for lease runout costs.

5.     RETIREE BENEFIT PLANS

Pensions

       Foamex L.P.  provides  pension and  survivor  benefits  for  salaried and
certain hourly  employees of Foamex L.P. and Foamex Carpet in the United States.
Salaried  employees  are provided  benefits  that are based  principally  on the
combination of years of credited service and compensation.  Hourly employees are
provided  benefits that are based principally on stated amounts for each year of
credited service.

       Effective  at the end of 1999,  the two  defined  benefit  plans  for the
salaried and hourly employees were merged in to a single plan. Benefits provided
to salary and hourly employees did not change as a result of the plan merger.

       The components of pension expense,  including  Foamex Carpet's  allocated
net  periodic  costs of $0.5  million  and  $0.4  million  for  1999  and  1998,
respectively, are listed below.

                                              1999        1998          1997
                                             ------      ------       -------
                                                      (thousands)
       Service cost                          $3,469      $2,833        $2,229
       Interest cost                          4,887       4,517         4,273
       Expected return on plan assets        (5,484)     (5,758)       (5,357)
       Amortization
         Transition asset                       (75)        (75)          (75)
         Prior service cost                    (240)       (245)         (245)
         (Gains) losses and other               819         104            72
                                             ------      ------       -------
           Total                             $3,376      $1,376       $   897
                                             ======      ======       =======





                                      F-14
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.     RETIREE BENEFIT PLANS (continued)

       The following table sets forth the changes in obligations and assets, and
outlines the  development  of the funded  status and amounts  recognized  in the
accompanying consolidated balance sheets.

<TABLE>
<CAPTION>
                                                                December 31,     December 31,
                                                                    1999              1998
                                                                         (thousands)
       Change in Benefit Obligation
<S>                                                                <C>                <C>
         Benefit obligations at beginning of year                  $ 74,589           $ 65,948
         Service cost                                                 3,469              2,833
         Interest cost                                                4,887              4,517
         Amendments                                                      85                 --
         Benefits paid                                               (3,809)            (4,043)
         Actuarial loss (gain)                                       (7,249)             5,334
                                                                   --------           --------
           Projected benefit obligation at end of year             $ 71,972           $ 74,589
                                                                   ========           ========

       Change in Plan Assets
         Fair value of plan assets at beginning of year            $ 55,546           $ 58,952
         Actual return on plan assets                                 9,011                439
         Company contributions                                        1,440                200
         Benefits paid                                               (3,809)            (4,043)
         Other                                                         (690)                (2)
                                                                   --------           --------
           Fair value of plan assets at end of year                $ 61,498           $ 55,546
                                                                   ========           ========

       Funded Status
         Plan assets in excess of (less than) benefit obligation   $(10,474)          $(19,043)
         Unamortized transition (asset) obligation                     (665)              (740)
         Unamortized prior service cost                              (2,072)            (2,397)
         Unamortized net (gains) losses                               7,807             18,712
                                                                   --------           --------
           Net prepaid assets (accrued liabilities)                $ (5,404)          $ (3,468)
                                                                   ========           ========

       Amounts Recognized in the Consolidated Balance Sheets
         Prepaid benefit costs                                     $     --           $  1,200
         Accrued benefit liability                                   (8,613)           (20,150)
         Intangible assets                                              296
                                                                                           239
         Accumulated other comprehensive income                       2,913             15,243
                                                                   --------           --------
           Net amount recognized                                   $ (5,404)          $ (3,468)
                                                                   ========           ========
</TABLE>

       Significant  assumptions  used in the  calculation of pension expense and
obligations are listed below.

<TABLE>
<CAPTION>
                                                                        1999           1998           1997
                                                                     ----------     ----------     -------
<S>                                                                     <C>            <C>             <C>
       Expected long-term rates of return on plan assets                10.0%          10.0%           10.0%
       Discount rates on projected benefit obligations                   7.5%           6.5%            7.0%
       Rate of compensation increase                                     4.0%           4.0%            4.0%
</TABLE>

       Foamex L.P.'s  funding  policy is to  contribute  annually an amount that
both  satisfies  the minimum  funding  requirements  of the Employee  Retirement
Income Security Act of 1974 and does not exceed the full funding  limitations of
the Internal  Revenue Code of 1986,  as amended (the  "Code").  Foamex  Carpet's
allocated  net periodic  costs was  approximately  $0.5 million and $0.4 million
during 1999 and 1998, respectively.

                                      F-15
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.     RETIREE BENEFIT PLANS (continued)

       In addition,  Foamex L.P. also provides for  retirement  benefits for its
Canadian  employees.  Net periodic pension expense for these plans  approximated
$0.2  million,   $0.2  million  and  $0.3  million  for  1999,  1998  and  1997,
respectively.  Plan assets for these plans  approximated  $3.6  million and $2.8
million;  and plan  liabilities  approximated  $3.4  million and $2.8 million at
December 31, 1999 and 1998, respectively.

       At  December  31, 1999 and 1998,  included  in plan  assets were  420,000
shares  of  Foamex  International's  stock.  In 1994,  250,000  shares of Foamex
International's  stock were  purchased  for $2.5 million,  and in 1995,  170,000
shares of Foamex  International's  stock were  purchased for $1.6  million.  The
value of the plan's investment in Foamex International's stock was approximately
$3.5 million and $5.2 million at December 31, 1999 and 1998, respectively.  Plan
assets at the end of 1998 included  shares of Trace Global  Opportunities  Fund,
which was a related party to Trace.  The shares were  purchased  during 1995 and
1997, at an aggregate cost of $5.0 million.  The value of the plan's  investment
in Trace Global  Opportunities  Fund, was approximately $4.3 million at December
31, 1998. 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 Foamex L.P.  During 1998,  250,000  shares of United Auto
Group  ("UAG"),   which  is  a  related  party  to  Trace,  were  purchased  for
approximately  $4.8  million.  The value of the UAG shares was $2.2  million and
$2.3 million at December 31, 1999 and 1998, respectively.

Retiree Medical and Life Insurance Benefits

       Foamex L.P.  provides  postretirement  health care and life insurance for
eligible  employees,  limited  primarily  to one  manufacturing  facility in the
United States.  These plans are unfunded and benefits are paid as the claims are
submitted.  Foamex L.P. retains the right,  subject to existing  agreements,  to
modify or eliminate these benefits.

       The components of retiree medical and life insurance benefits expense are
listed below.

                                            1999          1998            1997
                                           ------        ------          -----
                                                       (thousands)
       Service cost                          $20           $10           $   9
       Interest cost                          62            46              71
       Amortization
         Prior service costs                  (6)          (35)            (35)
         (Gains) losses and other            (21)          (29)            (21)
       Special termination benefits            -             -              74
                                            ----          ----            ----
       Total                                $ 55          $ (8)           $ 98
                                            ====          ====            ====

       The  following  table  outlines  the changes in  obligations  and benefit
payments,  and  outlines  the  development  of the  funded  status  and  amounts
recognized in the accompanying consolidated balance sheets.

                                                     December 31,  December 31,
                                                         1999          1998
                                                             (thousands)
 Change in Benefit Obligation
   Benefit obligations at beginning of year            $  651         $  927
   Service cost                                            20             10
   Interest cost                                           62             46
   Employee contributions                                  28             27
   Benefits paid                                         (164)          (312)
   Amendments                                             363              -
   Actuarial losses (gains)                               (92)           (47)
                                                       ------         ------
     Projected benefit obligation at end of year       $  868         $  651
                                                       ======         ======




                                      F-16
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.     RETIREE BENEFIT PLANS (continued)
<TABLE>
<CAPTION>
                                                                  December 31,     December 31,
                                                                     1999               1998
                                                                           (thousands)
Change in Plan Assets
<S>                                                                <C>               <C>
  Fair value of plan assets at beginning of year                   $    --           $    --
  Company contributions                                                136               285
  Employee contributions                                                28                27
  Benefits paid                                                       (164)             (312)
                                                                   -------           -------
    Fair value of plan assets at end of year                       $    --           $    --
                                                                   =======           =======

Funded Status of the Plan
  Plan assets in excess of (less than) benefit obligation          $  (868)          $  (651)
  Unamortized prior service cost                                       (73)             (442)
  Unamortized net (gains) losses                                      (644)             (573)
                                                                   -------           -------
    Net prepaid assets (accrued liabilities)                       $(1,585)          $(1,666)
                                                                   =======           =======
</TABLE>

       Significant  assumptions  used in the  calculation  of  retiree  and life
insurance benefit expense and obligations are listed below.

                                                      1999      1998      1997

  Discount rates on projected benefit obligations     7.5%      6.5%      7.0%
  Health care cost increase                           7.5%      6.0%      8.0%

       The health care cost increase  assumption  was revised  during 1999.  The
rate will  gradually be reduced to 5.0% by 2005.  Increasing or  decreasing  the
weighted  average  assumed health care cost trend rates by one percentage  point
would not have a significant  impact on the accumulated  postretirement  benefit
obligation or on service and interest costs.

6.     COMPENSATION PLANS

Incentive Compensation

       Most  of  Foamex  L.P.'s  salaried  employees  participate  in  incentive
compensation  programs.  These programs are based on the consolidated results of
Foamex  L.P.  and on the results of business  segments.  Incentive  compensation
expense was  approximately  $3.0 million in 1999,  $0.3 million in 1998 and $3.9
million in 1997.

Defined Contribution Plan

       Foamex L.P.  maintains  a defined  contribution  plan which is  qualified
under Section  401(k) of the Code ("401(k)  Plan") and is available for eligible
employees of Foamex L.P. and Foamex Carpet who elect to  participate.  Under the
terms of the  401(k)  Plan,  Foamex  L.P.  partially  matches  certain  employee
contributions.  Expense  for these  contributions  for  1999,  1998 and 1997 was
approximately $0.9 million, $0.8 million and $0.9 million, respectively.  During
1999 and 1998, Foamex Carpet contributed  approximately $0.1 million annually to
the plan for matching contribution expense for its employees.

7.     OTHER INCOME (EXPENSE), NET

       Other  income  (expense),  net  totaled  $0.9  million of expense and was
primarily  due to losses on the  disposal  of fixed  assets and letter of credit
fees related to the GFI Transaction (see Note 12).  Interest income totaled $2.2
million in 1999.



                                      F-17
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.     OTHER INCOME (EXPENSE), NET (continued)

       Other income  (expense),  net for 1998 primarily consist of: $3.0 million
of foreign currency translation and transaction losses; $1.5 million of fees and
$1.0  million of  continuing  costs  related to the GFI  Transaction;  and other
expenses offset by approximately $3.4 million of interest income.

       Other  income  (expense),  net for 1997 was  comprised  primarily of $1.4
million of interest income and a gain on the sale of assets of $0.4 million.

8.     INCOME TAXES

       The sources of income (loss) from continuing  operations before provision
for income taxes are listed below.

<TABLE>
<CAPTION>
                                                                         1999              1998                1997
                                                                      --------           --------           --------
                                                                                        (thousands)
<S>                                                                   <C>                <C>                <C>
       United States                                                  $ 13,959           $  5,364           $ 15,076
       Foreign                                                           2,935            (10,293)              (916)
                                                                      --------           --------           --------

       Income (loss) from continuing operations
         before provision for income taxes                            $ 16,894           $ (4,929)          $ 14,160
                                                                      ========           ========           ========

A  reconciliation  of the  statutory  federal  income  tax to the  income tax on
continuing operations is listed below

                                                                         1999              1998                1997
                                                                      --------           --------           --------
                                                                                        (thousands)
       Statutory income taxes                                         $  5,913           $ (1,725)          $  4,956
       State income taxes, net of federal benefit                          794                300                785
       Permanent difference on partnership income                       (6,921)            (1,570)            (2,119)
       Limitation on the utilization of foreign tax benefits                --              3,800                 --
       Write-off excess cost                                                --                770              4,305
       Increase (decrease) in valuation allowance                          711                 --             (5,028)
       Amortization of cost in excess of assets acquired                 1,038                 53                419
       Other, net                                                         (222)              (688)              (423)
                                                                      --------           --------           --------
       Total                                                          $  1,313           $    940           $  2,895
                                                                      ========           ========           ========

The provision for income taxes is summarized as follows:

                                                                         1999              1998                1997
                                                                      --------           --------           --------
                                                                                        (thousands)
         Federal                                                      $     --           $     --           $  1,958
         State                                                             115                 --              1,007
         Foreign                                                         1,117                673                498
                                                                      --------           --------           --------
           Total current                                                 1,232                673              3,463
                                                                      --------           --------           --------

       Deferred
         Federal                                                            --                318              4,781
         State                                                              --                 --                (87)
         Foreign                                                          (630)               (51)              (234)
                                                                      --------           --------           --------
           Total deferred                                                 (630)               267              4,460
                                                                      --------           --------           --------

       Change in valuation allowance                                       711                 --             (5,028)
                                                                      --------           --------           --------

       Total provision for income taxes                               $  1,313           $    940           $  2,895
                                                                      ========           ========           ========
</TABLE>

                                      F-18
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.     INCOME TAXES (continued)

       The tax effect of the  temporary  differences  that give rise to deferred
income tax assets and liabilities are listed below.
<TABLE>
<CAPTION>
                                                           December 31,       December 31,
                                                               1999              1998
                                                                    (thousands)
<S>                                                          <C>               <C>
Deferred income tax assets                                   $ 1,056           $    --
Valuation allowance for deferred income tax assets              (711)               --
                                                             -------           -------

  Deferred income tax assets                                     345                --
                                                             -------           -------

Deferred income tax liabilities
  Basis difference in property, plant and equipment             (568)             (991)
  Other                                                       (2,145)           (1,098)
                                                             -------           -------

  Deferred income tax liabilities                             (2,713)           (2,089)
                                                             -------           -------

Net deferred income tax assets (liabilities)                 $(2,368)          $(2,089)
                                                             =======           =======
</TABLE>

       During 1999,  the  valuation  allowance  for  deferred  income tax assets
increased by $0.7 million  relating to net operating  loss  carryfowards  from a
foreign subsidiary.

       During 1998, the valuation  allowance for deferred  income tax assets and
net deferred  income tax assets  decreased by $9.1 million  primarily due to the
reduction of capital loss carryforwards  associated with the transfer of General
Felt's common stock in  connection  with the GFI  Transaction  (see Note 12). In
addition, during 1998, deferred income tax assets were decreased by $6.1 million
associated  with the transfer of General Felt net assets in connection  with the
GFI Transaction.

       During 1997,  the  valuation  allowance  for  deferred  income tax assets
decreased  by $5.0  million for the  utilization  of the loss  carryforwards  in
connection with a sale of a facility.

       Foamex  L.P.  will  continually  review  the  adequacy  of the  valuation
allowance and recognize benefits only as reassessment  indicates that it is more
likely than not that the benefits will be realized.

9.     EXTRAORDINARY LOSSES

       In 1998, extraordinary losses of $3.2 million were recorded. The loss was
in connection with the GFI Transaction,  and related to the early extinguishment
of  approximately  $125.1  million  of term  loans  under a Foamex  L.P.  credit
facility.  The extraordinary  loss was generated  entirely from the write-off of
debt issuance costs.

       In 1997,  extraordinary losses of $48.6 million were recorded relating to
the early extinguishment of debt. Listed below are the components of the loss.

       o      In connection with a refinancing  plan, an  extraordinary  loss of
              approximately  $44.5 million was incurred.  The extraordinary loss
              was  comprised  of  approximately  $20.2  million  for premium and
              consent  fee  payments,   approximately   $12.6  million  for  the
              write-off of debt issuance costs and debt discount,  approximately
              $8.2  million  for  the  loss   associated   with  the   effective
              termination  and  amendment of interest rate swap  agreements  and
              approximately $3.5 million of professional fees and other costs.

       o      Foamex L.P. redeemed  substantially all of the outstanding  public
              debt  that  was  not  tendered  as part  of the  refinancing  plan
              referenced   above.  In  connection  with  these   redemptions  an
              extraordinary  loss  on  the  early   extinguishment  of  debt  of
              approximately $2.1 million was recorded.


                                      F-19
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.     EXTRAORDINARY LOSSES (continued)

       o      In  connection  with  the  sale  of  assets  discussed  in Note 3,
              proceeds  from the sale were used to repay  outstanding  term loan
              borrowings under the Foamex L.P. credit facility.  As a result, an
              extraordinary  loss  on  the  early   extinguishment  of  debt  of
              approximately $1.0 million was recorded.

       o      Net proceeds  remaining from a 1996  divestiture were used for the
              early  extinguishment of debt. As a result, an extraordinary  loss
              of approximately $1.0 million was recorded. The extraordinary loss
              was comprised of  approximately  $0.4 million of premium  payments
              and approximately  $0.6 million for the write-off of debt issuance
              costs.

10.    INVENTORIES

       The components of inventory are listed below.

                                             December 31,          December 31,
                                                1999                  1998
                                                      (thousands)
       Raw materials and supplies             $ 65,211              $ 93,241
       Work-in-process                          11,447                12,087
       Finished goods                           17,154                22,308
                                              --------              --------
       Total                                  $ 93,812              $127,636
                                              ========              ========

11.    SHORT-TERM BORROWINGS

       Foamex  Canada  Inc.,  a wholly owned  subsidiary  of Foamex L.P.,  has a
short-term  credit  facility that  provides for $8.0 million of Canadian  dollar
loans (U.S.  dollar  equivalent of $5.5 million) of which up to $2.0 million are
available in U.S. dollar loans. The amount of borrowings available is based on a
combination  of  accounts  receivable  and  inventory,  as defined in the credit
facility.  Interest on Canadian  dollar  borrowings is based on the bank's prime
lending rate plus 3/4%. On U.S.  dollar  loans,  interest is based on the bank's
U.S. dollar base rate in Canada plus 3/4%. The weighted  average  interest rates
on short-term borrowings  outstanding at year-end 1999, 1998 and 1997 were 7.3%,
7.3% and 5.4%,  respectively.  The unused  amount  under this line of credit was
$3.9 million as of December 31, 1999.

12.    LONG-TERM DEBT

       The components of long-term debt are listed below.
<TABLE>
<CAPTION>
                                                                       December 31,          December 31,
                                                                            1999                  1998
                                                                        ----------             ---------
       Foamex L.P. Credit Facility                                                (thousands)
<S>                                                                     <C>                   <C>
         Term Loan B (1)                                                 $  81,874             $  82,714
         Term Loan C (1)                                                    74,431                75,194
         Term Loan D (1)                                                   107,800               108,900
         Revolving credit facility (1)                                     113,685               139,438
       9 7/8% Senior subordinated notes due 2007 (2)                       150,000               150,000
       13 1/2% Senior subordinated notes due 2005 (includes
         $10,100 and $11,893 of unamortized debt premium) (2)              108,100               109,893
       Industrial revenue bonds (3)                                          7,000                 7,000
       Subordinated note payable (net of unamortized
         debt discount of $232 and $523) (3)                                 4,444                 6,491
       Other                                                                 7,076                 9,848
                                                                        ----------             ---------
                                                                           654,410               689,478
</TABLE>


                                      F-20
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    LONG-TERM DEBT (continued)

<TABLE>
<CAPTION>
                                                                        December 31,          December 31,
                                                                            1999                  1998
                                                                         ---------             ---------
                                                                                   (thousands)
<S>                                                                      <C>                 <C>
       Less current portion                                                  7,866               689,478
                                                                         ---------             ---------

       Long-term debt-unrelated parties                                   $646,544              $      -
                                                                         =========             =========

       The components of related party long-term debt are listed below.

                                                                        December 31,          December 31,
                                                                            1999                  1998
                                                                         ---------             ---------
                                                                                   (thousands)
       Foamex/GFI Note (3)                                               $  34,000             $  34,000
                                                                         =========             =========
<FN>
(1)  Debt of Foamex L.P.,  guaranteed by Foamex International and Foamex Capital
     Corporation ("FCC").
(2)  Debt of Foamex L.P. and FCC.
(3)  Debt of Foamex L.P.
</FN>
</TABLE>

       As of December 31, 1998,  Foamex L.P. was not in compliance  with various
debt covenants included in agreements  totaling $415.4 million.  Had the lenders
under Foamex L.P.'s debt agreement  accelerated the maturity of the indebtedness
as a  result  of  Foamex  L.P.'s  noncompliance,  the  acceleration  would  have
constituted  an event of default  and given the holders the right to require the
repurchase of substantially  all of Foamex L.P.'s long-term debt. As a result of
these  factors,  approximately  $715.8 million of long-term debt at December 31,
1998 was classified as a current  liability in the  consolidated  balance sheet,
which produced a working capital deficit.

Foamex L.P. Credit Facility

       At December 31, 1999, Foamex L.P. had a credit facility (the "Foamex L.P.
Credit  Facility")  with a group of banks which provided for a revolving  credit
facility  commitment  of $185.0  million  and three term loans  totaling  $264.1
million outstanding at December 31, 1999. Amendments in 1998 provided for a $2.5
million  quarterly  reduction of the  availability  under the  revolving  credit
facility, which extends through June 2003.

       Borrowings  under the Foamex L.P. Credit Facility are  collateralized  by
substantially  all of the assets of Foamex  L.P.  on a pari passu basis with the
IRBs  (described  below);  however,  the rights of the holders of the applicable
issue of the IRBs to receive  payment  upon the  disposition  of the  collateral
securing such issue of the IRBs has been preserved.

       In response to financial conditions at year-end 1998,  amendments to debt
agreements  were executed  during the first half of 1999. As a result the Foamex
L.P.  Credit  Facility,  which was amended and  restated in February  1998,  was
further amended and restated in June 1999 to modify financial  covenants for net
worth,  interest  coverage,  fixed charge  coverage and leverage  ratios through
December 2006. The agreement was also amended to no longer permit Foamex L.P. to
make certain cash payments, including the payment of an annual management fee of
$3.0 million to a subsidiary of Trace and distributions to Foamex International,
and to limit future investments in foreign subsidiaries and joint ventures.  The
"change of control"  definition under the agreement was also modified to conform
to the  definition  discussed  in "change of control" in Note 1.  Changes in the
interest  rate  structure,  effective in 2000,  were also made and are discussed
below. Foamex L.P. was in compliance with this agreement at year-end 1999.

       At year-end  1999,  interest was based on the  combination  of a variable
rate consisting of the higher of (i) the base rate of The Bank of Nova Scotia or
(ii) the Federal Funds rate plus 0.5% plus a margin.  The margins for revolving,
Term  B,  Term  C and  Term  D  loans  were  2.25%,  2.50%,  2.75%  and  2.875%,
respectively.  At the option of Foamex L.P.,  portions of the outstanding  loans
are convertible into LIBOR based loans plus 1.0% added to the

                                      F-21
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    LONG-TERM DEBT (continued)

margins  identified above. The effective  interest rates for the credit facility
at the end of 1999 ranged between 9.69% and 10.06%.

       Available  borrowings  under the revolving  credit facility totaled $24.2
million at year-end  1999.  Letters of credit  outstanding  at December 31, 1999
totaled $47.1 million.

       As part of the Foamex L.P.  Credit  Facility,  excess cash flow generated
annually,  as defined,  is required to prepay portions of Term B, C and D loans.
The prepayment amount determined for 1999 was $13.3 million and will be financed
through revolving loans under the facility.  The required payment is expected to
be made during the second quarter of 2000. The repayment  schedules for the Term
B, C and D loans  have been  adjusted,  as of  year-end  1999,  to  reflect  the
prepayment required.

       Effective  January 1, 2000, the interest rate on  outstanding  borrowings
under the Foamex L.P.  Credit  Facility  will  increase by 25 basis  points each
quarter that Foamex L.P.'s  leverage  ratio,  as defined,  exceeds 5.00 to 1.00.
Once the leverage ratio is reduced below this level,  the  cumulative  amount of
any 25 basis point  adjustments  to the  interest  rate on  borrowings  would be
eliminated.  At December 31, 1999,  the  calculated  leverage  ratio was 5.48 to
1.00.  Consequently,  the basis  point  adjustment  will be  applicable  for the
calculation of interest in the first quarter of 2000.

9 7/8% Senior Subordinated Notes

       The 9 7/8% Senior  Subordinated  Notes were issued by Foamex L.P. and FCC
and are due on June 15,  2007.  The  notes  represent  uncollateralized  general
obligations of Foamex L.P. and are  subordinated  to all Senior Debt, as defined
in the Indenture.  Interest is payable June 15 and December 15. The notes may be
redeemed at the option of Foamex  L.P.,  in whole or in part,  at any time on or
after June 15, 2002.  The initial  redemption is at 104.938% of their  principal
amount,  plus accrued and unpaid  interest,  as defined,  if any, thereon to the
date of  redemption  and  declining  to 100.0%  on or after  June 15,  2005.  In
addition,  at any time prior to June 15,  2000,  Foamex L.P.  may on one or more
occasions  redeem up to 35.0% of the initially  outstanding  principal amount of
the 9 7/8% Senior  Subordinated Notes at a redemption price equal to 109.875% of
the principal  amount,  plus accrued  interest and liquidated  damages,  if any,
thereon to the date of  redemption  with the cash proceeds of one or more Public
Equity Offerings, as defined.

       Upon the occurrence of a change of control, as defined,  each holder will
have the right to  require  Foamex  L.P.  to tender for such notes at a price in
cash equal to 101% of the aggregate  principal amount thereof,  plus accrued and
unpaid interest thereon,  if there is such a "change of control".  The notes are
subordinated in right of payment to all senior  indebtedness  and are pari passu
in  right  of  payment  to  the  13  1/2%  Senior  Subordinated  Notes  and  the
Subordinated Note Payable (described below).

13 1/2% Senior Subordinated Notes

       The 13 1/2% Senior  Subordinated Notes were issued by Foamex L.P. and FCC
and are due on August 15, 2005.  The notes  represent  uncollateralized  general
obligations of Foamex L.P. and are  subordinated  to all Senior Debt, as defined
in the Indenture. Interest is payable semiannually on February 15 and August 15.
The notes may be redeemed at the option of Foamex L.P.,  in whole or in part, at
any time on or after August 15, 2000.  The initial  redemption  is at 106.75% of
their principal amount, plus accrued and unpaid interest, if any, thereon to the
date of redemption and declining to 100.0% on or after August 15, 2004.

       Upon the occurrence of a change of control, as defined,  each holder will
have the right to  require  Foamex  L.P.  to tender for such notes at a price in
cash equal to 101% of the aggregate  principal amount thereof,  plus accrued and
unpaid interest,  if any, thereon,  if there is such a "change of control".  The
notes are  subordinated in right of the payment of all senior  indebtedness  and
are pari passu in right of payment to the 9 7/8% Senior  Subordinated  Notes and
to the Subordinated Note Payable (described above).

                                      F-22
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    LONG-TERM DEBT (continued)

Industrial Revenue Bonds ("IRBs")

       IRB debt  includes a $1.0  million  bond that  matures in 2005 and a $6.0
million  bond that  matures in 2013.  Interest is based on a variable  rate,  as
defined,  with options  available to Foamex L.P. to convert to a fixed rate.  At
the end of 1999,  the interest  rate was 5.5% on the $6.0 million bond and 4.05%
on the $1.0 million  bond.  The maximum  interest rate for either of the IRBs is
15.0% per annum.

       If  Foamex  L.P  exercises  its  option to  convert  the bonds to a fixed
interest  rate   structure  the  IRBs  are  redeemable  at  the  option  of  the
bondholders.  The obligations are  collateralized by certain  properties,  which
have an approximate net carrying value of $10.8 million at December 31, 1999 and
letters of credit approximating $7.3 million.

Subordinated Note Payable

       This  note  payable  was  issued  during  1993 to John  Rallis,  a former
President  and Chief  Operating  Officer of Foamex  International.  The note was
issued by Foamex L.P. in connection  with the  acquisition of Great Western Foam
Products Corporation and certain related entities and assets. The note carries a
maximum interest rate of 6.0% and the principal is payable in three equal annual
installments that began in May 1999.

Other

       At year-end  1999,  other debt  primarily  included a term loan held by a
majority owned Mexican  subsidiary.  Quarterly principal payments are due on the
term loan through its maturity in May 2002.  The interest  rate at year-end 1999
was 11.11%.

Related Party - Foamex/GFI Note

       As a result of the GFI Transaction,  discussed below,  Foamex L.P. owes a
$34.0  million  promissory  note payable to Foam Funding LLC, due in March 2000.
Interest is 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 is  convertible  to a  LIBOR-based  interest rate plus
0.75%. As of December 31, 1999, the interest rate for borrowings was 7.25%.

       The principal and current  interest payable under the Foamex/GFI Note are
collateralized  by a $34.5 million letter of credit issued under the Foamex L.P.
Credit  Facility.  At year-end 1999, the note was recognized as long-term in the
consolidated  balance sheet because of the ability and intent,  evidenced by the
letter of credit, to refinance the debt on a long-term basis.

GFI Transaction

       On February 27, 1998,  Foamex  International,  Foamex L.P. and certain of
their affiliates  completed a series of transactions which changed Foamex L.P.'s
structure  (collectively,  the "GFI Transaction").  Prior to the consummation of
these transactions,  Foamex L.P. defeased the $4.5 million outstanding principal
amount of its 9 1/2% senior  secured  notes due 2000.  Foamex  L.P.  settled its
intercompany  payables  to  General  Felt  with  $4.8  million  in cash  and the
Foamex/GFI  Note,  described  above.  The  initial  transaction  resulted in the
transfer  from Foamex  L.P.  to Foam  Funding  LLC,  an  indirect  wholly  owned
subsidiary of Trace, of all of the outstanding  common stock of General Felt, in
exchange for (i) the  assumption by Foam Funding LLC of $129.0 million of Foamex
L.P.'s  indebtedness and (ii) the transfer by Foam Funding LLC to Foamex L.P. of
a 1%  non-managing  general  partnership  interest  in Foamex  L.P. As a result,
General Felt ceased being a subsidiary  of Foamex L.P. and was relieved from all
obligations under Foamex L.P.'s 9 7/8% senior subordinated notes due 2007 and 13
1/2%  senior  subordinated  notes due 2005.  Upon  consummation  of the  initial
transaction, Foamex Carpet, a newly formed wholly owned subsidiary

                                      F-23
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    LONG-TERM DEBT (continued)

of Foamex  International,  Foamex  International,  Foam Funding LLC, and General
Felt entered into an Asset Purchase  Agreement dated February 27, 1998, in which
General  Felt  sold  substantially  all of its  assets  (other  than  cash,  the
Foamex/GFI Note and its operating facility in Pico Rivera, California) to Foamex
Carpet in  exchange  for (i) $20.0  million in cash and (ii) a  promissory  note
issued by Foamex Carpet to Foam Funding LLC in the aggregate principal amount of
$70.2 million.  The $20.0 million cash payment was funded with a distribution by
Foamex L.P.

       No gain has been recognized on the GFI Transaction. The net impact of the
GFI transaction was an increase in Foamex L.P.'s partners'  capital (deficit) of
approximately   $10.1  million,  a  distribution  of  $20.0  million  to  Foamex
International  and approximately  $1.5 million of fees charged to earnings.  The
$129.0  million of debt assumed by Foam Funding LLC in the GFI  Transaction  was
used to repay  approximately  $125.1  million of term loan  borrowings  that was
accounted for as an  extinguishment  of debt which resulted in an  extraordinary
loss of  approximately  $3.2 million.  The 1% non-managing  general  partnership
interest  acquired in connection with the GFI Transaction was accounted for as a
redemption of equity.

Interest Rate Swap Agreements

       Foamex L.P.  entered  into  interest  rate swaps to lower  funding  costs
and/or to manage interest costs and exposure to changing interest rates.  Foamex
L.P. did not hold or issue financial instruments for trading purposes.

       In  connection  with a  refinancing  plan in  1997,  Foamex  L.P.'s  then
existing  interest rate swap agreements with a notional amount of $300.0 million
were  considered to be  effectively  terminated  since the  underlying  debt was
extinguished.  These  interest rate swap  agreements had an estimated fair value
liability of $8.2 million at the date of the refinancing  plan which is included
in the extraordinary loss on the early extinguishment of debt. In lieu of a cash
payment for the  estimated  fair value of the then  existing  interest rate swap
agreements,  Foamex L.P. entered into an amendment of the then existing interest
rate swap  agreements  resulting  in one  interest  rate swap  agreement  with a
notional  amount of $150.0  million  through  June 2007.  Accordingly,  the $8.2
million fair value liability has been recorded as a deferred credit,  which will
be  amortized  as a  reduction  in  interest  and  debt  issuance  expense  on a
straight-line  basis through June 2007. On January 8, 1998,  Foamex L.P. entered
into a new  amendment to its interest  rate swap  agreement.  The new  amendment
provided for an interest rate swap  agreement  with a notional  amount of $150.0
million  through June 2002.  In September  1998,  Foamex L.P.  sold its existing
interest  rate swap  agreement  for a net gain of  approximately  $1.0  million.
Accordingly, the $1.0 million gain has been recorded as a deferred credit, which
will  be  amortized  through  June  2007,  which  is the  maturity  date  of the
underlying debt.

       The effect of the  interest  rate  swaps was a  favorable  adjustment  to
interest and debt issuance expense of $0.7 million and $2.2 million for 1998 and
1997, respectively.

Debt Covenants

The indentures,  credit  facilities and other  indebtedness  agreements  contain
certain  covenants that will limit,  among other things to varying degrees,  the
ability of Foamex L.P. (i) to pay distributions or redeem equity interests, (ii)
to make certain restrictive  payments or investments,  (iii) to incur additional
indebtedness  or issue Preferred  Equity  Interest,  as defined,  (iv) to merge,
consolidate or sell all or substantially  all of its assets or (v) to enter into
certain  transactions with affiliates or related persons.  In addition,  certain
agreements  contain provisions that, in the event of a defined change of control
or the occurrence of an undefined  material adverse change in the ability of the
obligor to perform its obligations,  the indebtedness must be repaid, in certain
cases, at the option of the holder.  Also, Foamex L.P. is required under certain
of these  agreements to maintain  specified  financial  ratios of which the most
restrictive are the maintenance of net worth,  interest  coverage,  fixed charge
coverage and leverage  ratios,  as defined.  Under the most  restrictive  of the
distribution  restrictions as of December 31, 1999,  Foamex L.P. was able to pay
Foamex  International funds only to the extent to enable Foamex International to
meet its tax payment liabilities.


                                      F-24
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.    LONG-TERM DEBT (continued)

       Foamex L.P. was in compliance with its various financial  covenants as of
December 31, 1999.

Future Obligations on Debt

       Scheduled maturities of long-term debt and long-term debt - related party
are shown below (thousands):

         2000                                            $  7,866
         2001                                               7,665
         2002                                               3,935
         2003                                             179,132
         2004                                              50,844
         Thereafter                                       429,100
                                                         --------
         Total                                            678,542
         Unamortized debt premium, net                      9,868
                                                         --------
         Total                                           $688,410
                                                         ========

13.    FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Concentration of Credit Risk

       Financial   instruments   which   potentially   subject  Foamex  L.P.  to
significant  concentrations  of credit risk  consist  primarily of cash and cash
equivalents and trade accounts  receivable.  Foamex L.P. maintains cash and cash
equivalents and certain other financial instruments with various large financial
institutions.  Foamex L.P.'s periodic evaluation of these financial institutions
are considered in Foamex L.P.'s investment strategy.

       Foamex L.P. sells foam products to the automotive, carpet, cushioning and
other  industries.  Foamex  L.P.  performs  ongoing  credit  evaluations  of its
customers  and  generally  does not require  collateral.  Foamex L.P.  maintains
allowance  accounts for potential credit losses and such losses have been within
management's expectations.

Fair Value of Financial Instruments

       The following  disclosures  of the estimated fair value amounts have been
determined based on Foamex L.P.'s assessment of available market information and
appropriate valuation methodologies.

       The estimated  fair values of Foamex  L.P.'s  financial  instruments  are
listed below.

                                               Carrying Amount      Fair Value
       Liabilities:                                      (thousands)
           Total debt - December 31, 1999        $690,037           $650,057
                                                 ========           ========

           Total debt - December 31, 1998        $726,435           $727,955
                                                 ========           ========


       Carrying amounts reported in the consolidated  balance sheet for cash and
cash equivalents, accounts receivable, accounts payable, accrued liabilities and
short-term  borrowings  approximates  fair value due to the short-term nature of
these instruments.

       The fair value of long-term debt is estimated using quoted market prices,
where  available,  or discounted cash flows.  Fair value estimates are made at a
specific point in time, based on relevant market information about the financial
instruments.  These estimates are subjective in nature and involve uncertainties
and matters of  significant  judgment and therefore,  cannot be determined  with
precision. Changes in assumptions could significantly affect the estimates.

                                      F-25
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                    1999           1998           1997
                                                                 --------       --------       --------
                                                                               (thousands)
<S>                                                              <C>            <C>            <C>
        Cash paid for interest                                   $ 65,507       $ 69,615       $ 45,330
                                                                 ========       ========       ========

        Cash paid for income taxes, net                          $  1,126       $    884       $  4,504
                                                                 ========       ========       ========

        Non-cash capital expenditures                            $    456       $     24       $    167
                                                                 ========       ========       ========

        Non-cash distribution of FJPS note                       $     --       $     --       $ 35,567
                                                                 ========       ========       ========

        Non-cash distribution of Foamex International note       $     --       $     --       $  2,000
                                                                 ========       ========       ========

        Non-cash distribution of investment in FJPS senior
          subordinated discount debentures                       $     --       $     --       $105,829
                                                                 ========       ========       ========
</TABLE>

15.    BUSINESS SEGMENTS

       In the  fourth  quarter  of  1998,  Foamex  L.P.  adopted  SFAS  No.  131
"Disclosure about Segments of an Enterprise and Related  Information."  SFAS No.
131 requires  companies to report  information  about their business segments on
the  basis  of how  they  are  managed  and  evaluated  by the  chief  operating
decision-makers.  Foamex L.P.'s reportable  business segments are Foam Products,
Carpet Cushion Products, Automotive Products and Technical Products. Each of the
business  segments  is  headed  by a senior  executive  who is  responsible  for
developing plans and directing the operations of the segment.

       Foam Products manufactures and markets foam used by the bedding industry,
the  furniture  industry  and  the  retail  industry.  Carpet  Cushion  Products
manufactures  and  distributes  prime,  rebond,  sponge  rubber and felt  carpet
cushion to Foamex  Carpet.  Automotive  Products  supplies  foam  primarily  for
automotive interior  applications.  Technical Products  manufactures and markets
reticulated  foams  (foams  that are well suited for  filtration,  reservoiring,
sound  absorption  and sound  transmissions)  and  other  custom  polyester  and
polyether foams for industrial, specialty and consumer and safety applications.

       The "other" column in the table below  represents  foreign  manufacturing
operations  in Mexico  and  Asia,  corporate  expenses  not  allocated  to other
business  segments and  restructuring  and other  charges  (credits).  Asset and
capital expenditure information by business segment is not reported because many
of Foamex L.P.'s facilities produce products for multiple business segments.

       The  accounting  policies  of the  business  segments  are  the  same  as
described in Note 2. Revenues and costs have been included in business  segments
where  specifically  identified.  Costs  shared by business  segments  have been
allocated on the basis of the amount  utilized.  Geographic sales are determined
based on the location in which the sale originated.

       During  1999,  sales  to a  customer  which  is  included  in  Automotive
Products, accounted for approximately 12.5% of Foamex L.P.'s net sales. Sales to
Foamex Carpet, reported under Carpet Cushion Products, totaled $187.7 million in
1999 and $185.5 million in 1998. No  unaffiliated  customers  accounted for more
than 10.0% of net sales in 1998 and 1997.

<TABLE>
<CAPTION>
                                                 Carpet
                                   Foam         Cushion     Automotive      Technical
                                 Products       Products       Products      Products        Other        Total
1999                                                                (thousands)
<S>                              <C>          <C>            <C>              <C>          <C>        <C>
Net sales                        $521,377     $187,668       $361,806         $92,180      $27,648    $1,190,679
Income (loss) from operations      54,439          869         22,853          23,048      (16,962)       84,247
Depreciation and amortization      16,390        6,436          4,596           2,564        2,604        32,590


                                      F-26
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.    BUSINESS SEGMENTS (continued)

                                                 Carpet
                                   Foam         Cushion     Automotive      Technical
                                 Products       Products       Products      Products        Other        Total
1998                                                                (thousands)
Net sales                        $559,690     $210,313       $285,190         $79,140      $21,585    $1,155,918
Income (loss) from operations      36,253          (58)        17,319          14,919       (2,925)       65,508
Depreciation and amortization      17,418        5,092          4,582           2,615        1,972        31,679

1997
Net sales                        $334,900     $273,920       $225,892         $76,254      $20,129      $931,095
Income (loss) from operations      30,974        8,795         24,885          18,071      (26,393)       56,332
Depreciation and amortization      10,237        4,166          3,309           2,290          880        20,882

                                                               United
                                                                States        Canada        Mexico    Consolidated
1999                                                                              (thousands)
Net sales                                                     $978,049       $61,486      $151,144    $1,190,679
Property, plant and equipment, net                             182,533         5,406        23,376       211,315

1998
Net sales                                                   $1,023,186       $62,529       $70,203    $1,155,918
Property, plant and equipment, net                             190,122         4,998        24,517       219,637

1997
Net sales                                                     $841,618       $58,005       $31,472      $931,095
Property, plant and equipment, net                             196,552         5,662        19,060       221,274
</TABLE>

16.    PARTNERS' EQUITY (DEFICIT)

       Foamex L.P. was formed as a Delaware limited  partnership on September 5,
1990, and initially capitalized on October 2, 1990, in accordance with a limited
partnership agreement as amended through February 1998. As of December 31, 1999,
the partnership  interests of Foamex L.P. are a 2% managing general  partnership
interest  held by FMXI and a 98%  limited  partnership  interest  held by Foamex
International.

       Net cash  distributions  in connection  with a tax sharing  agreement for
1999, 1998 and 1997 were paid (received) as follows:

                                     1999                1998             1997
                                     ----                ----           ------
                                                      (thousands)
       FMXI                         $  (5)            $     6         $     80
       Foamex International           (12)                287            8,371
       Trace Foam                       -                   -               80
       FJPS                             -                   -              306
                                     ----                ----           ------

         Total                       $(17)               $293           $8,837
                                     ====                ====           ======

Accumulated Other Comprehensive Loss

       The  accumulated  other  comprehensive  income  (loss)  consists  of  the
following:
<TABLE>
<CAPTION>
                                                                December 31,        December 31,      December 28,
                                                                    1999               1998              1997
                                                                                    (thousands)
<S>                                                               <C>                <C>              <C>
       Foreign currency translation adjustment                    $(6,011)           $(10,965)        $ (4,367)
       Minimum pension liability                                   (2,912)            (15,243)          (3,718)
                                                                 --------           ---------        ---------
                                                                  $(8,923)           $(26,208)        $ (8,085)
                                                                  =======            ========         ========
</TABLE>


                                      F-27
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



17.    RELATED PARTY TRANSACTIONS AND BALANCES

       Foamex L.P. regularly enters into transactions with its affiliates in the
ordinary course of business.

Supply Agreements

       In connection  with the GFI  Transaction  (see Note 12),  Foamex L.P. and
General Felt entered into a supply agreement that was  subsequently  assigned to
Foamex Carpet (the "Supply Agreement"). Pursuant to the Supply Agreement, Foamex
L.P.  will,  at the option of Foamex  Carpet,  supply  finished  carpet  cushion
products to Foamex  Carpet at the lower of: (i) cost,  as defined,  plus 4.7% or
(ii) fair market value,  as defined.  Foamex L.P.  will also supply  various raw
materials used in the manufacture of carpet cushion products to Foamex Carpet at
the lower of cost, as defined, or fair market value, as defined. During 1999 and
1998, Foamex L.P. had sales of approximately  $187.7 million and $185.5 million,
respectively, to Foamex Carpet under the Supply Agreement. In addition, pursuant
to the Supply  Agreement,  Foamex  Carpet  will,  at the option of Foamex  L.P.,
supply  various  finished  products to Foamex L.P. at the lower of: (i) cost, as
defined,  plus 15.0% or (ii) fair market value,  as defined.  Foamex Carpet will
also supply  various  raw  materials  to Foamex  L.P.  at the lower of cost,  as
defined or fair market value, as defined.  During 1999 and 1998, Foamex L.P. had
purchases of  approximately  $9.9 million and $1.3 million,  respectively,  from
Foamex  Carpet  under the  Supply  Agreement.  The  initial  term of the  Supply
Agreement  is until  December 31, 2004 at which time the Supply  Agreement  will
continue year to year unless notice of  termination  is given by either party or
unless terminated earlier due to an event of default, as defined.

       Foamex L.P.  had a supply  agreement  (the "Foamex  International  Supply
Agreement") with Foamex International pursuant to which, at the option of Foamex
L.P.,  Foamex  International  would purchase  certain raw  materials,  which are
necessary  for the  manufacture  of Foamex  L.P.'s  products,  and  resell  such
materials  to Foamex L.P. at a price  equal to net cost plus  reasonable  out of
pocket expenses.  Management believes that the terms of the Foamex International
Supply Agreement were no less favorable than those, which Foamex L.P. could have
obtained  from an  unaffiliated  third party.  The Foamex  International  Supply
Agreement  was  terminated  in April  1998.  During  1998 and 1997,  Foamex L.P.
purchased approximately $12.6 million and $138.6 million,  respectively,  of raw
materials under the Foamex International Supply Agreement.

Administrative Services Agreement

       Also, in  connection  with the GFI  Transaction,  Foamex L.P. and General
Felt entered into an  administrative  services  agreement that was  subsequently
assigned to Foamex Carpet (the "Services  Agreement").  Pursuant to the Services
Agreement,  Foamex L.P. will provide Foamex Carpet administrative and management
services, as defined, at cost plus out-of-pocket expenses. During 1999 and 1998,
Foamex L.P. invoiced approximately $0.5 million and $1.8 million,  respectively,
of  services  to  Foamex  Carpet  under the  Services  Agreement.  The  Services
Agreement  can be  terminated by either party by giving at least 30 days written
notice  prior to the end of a calendar  year.  As of December 31, 1999 and 1998,
Foamex L.P. had net  receivables due from Foamex Carpet of  approximately  $16.4
million and $16.8 million,  respectively,  associated with the Supply  Agreement
and Services Agreement.

Partners Distribution

       In 1999,  Foamex L.P.  distributed  $17.3 million in cash pro rata to its
partners. During 1998, in connection with the GFI Transaction,  Foamex L.P. made
a $20.0 million distribution to Foamex International (see Note 12).

       In  connection  with the 1997  Refinancing  Plan,  Foamex L.P.  purchased
approximately $116.7 million of aggregate principal amount of certain debentures
of  Foamex-JPS   Automotive  L.P.  ("FJPS")  for  approximately  $105.8  million
including   transaction  costs  of  approximately  $0.8  million.   Foamex  L.P.
subsequently distributed the debentures to FJPS and FMXI.

       During  1997,  Foamex  L.P.   distributed  its  $56.2  million  aggregate
principal amount note, as amended,  due 2006 (the "FJPS Note") from FJPS with an
accreted  value  as of June 12,  1997 of $35.6  million  to FJPS and  FMXI.  The
accretion  of the  original  issue  discount of $2.4 million for the period from
December  30, 1996 to June 12, 1997


                                      F-28
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.    RELATED PARTY TRANSACTIONS AND BALANCES (continued)

was  reflected  as a direct  increase  in the FJPS  Note and  partners'  capital
account, and thereby excluded from the consolidated statements of operations.

       In connection  with the 1997  Refinancing  Plan,  Foamex L.P. made a cash
distribution of approximately  $1.5 million to Trace Foam Company,  Inc. ("Trace
Foam"),  a wholly  owned  subsidiary  of Trace,  as a result  of  Foamex  L.P.'s
distribution to FJPS and FMXI of the Discount Debentures,  the FJPS Note and the
$2.0  million  aggregate  principal  amount  promissory  note  due  from  Foamex
International.

       In December 1995, Foamex L.P. entered into a $2.0 million promissory note
with Foamex International.  The note bears interest at a rate per annum equal to
six months LIBOR plus 4.0% and is payable semiannually in June and December. The
note was distributed to FJPS and FMXI on June 12, 1997.

Foamex International Notes

       On December 26, 1997, Foamex L.P. entered into a $2.5 million  promissory
note with  Foamex  International.  The note bears  interest at the rate of LIBOR
plus 2 3/8%.  The note and  interest  are payable on demand,  or if no demand is
made, then on December 31, 2001. Also, on December 31, 1998, Foamex L.P. entered
into another  promissory note with Foamex  International with a principal amount
of approximately $2.5 million.  The note bears interest at the rate LIBOR plus 2
3/8%. The note and interest thereon were repaid on March 31, 1999.

       On October 20, 1999, Foamex L.P. and Foamex International  entered into a
revolving note that allows Foamex  International  to borrow up to  approximately
$2.5 million  through  October 20, 2004.  The revolving note bears interest at a
rate equal to  three-month  LIBOR plus  2.5%,  per annum,  and is payable  upon
demand, or if no demand is made, then on October 20, 2004.

       At December 31, 1999, Foamex L.P. had a receivable of approximately  $0.7
million  relating to the  revolving  note.  The  receivable  is  classified as a
reduction of partners' capital (deficit).

Trace Promissory Notes

       On July 1, 1997,  Trace  borrowed  $5.0 million  pursuant to a promissory
note with an aggregate principal amount of $5.0 million issued to Foamex L.P. on
June 12, 1997. The promissory note is due and payable on demand or, if no demand
is made, on July 7, 2001, and bears interest at 2 3/8% plus  three-month  LIBOR,
as defined,  per annum payable quarterly in arrears  commencing October 1, 1997.
On June 12, 1997, another promissory note issued to Foamex L.P. by Trace in July
1996 was amended.  The amended  promissory  note is an extension of a promissory
note of Trace that was due in July 1997. The aggregate  principal  amount of the
amended  promissory  note was  increased to  approximately  $4.8 million and the
maturity of the promissory  note was extended.  The  promissory  note is due and
payable on demand or, if no demand is made, on July 7, 2001,  and bears interest
at 2 3/8% plus  three-month  LIBOR, as defined,  per annum payable  quarterly in
arrears.

       Note 3 includes  disclosures  regarding  1999 activity  concerning  Trace
promissory  notes  payable to Foamex L.P.  The Trace  notes are  included in the
other  component  of  stockholders'   deficit,  which  is  consistent  with  the
recognition in prior years.  Based on Trace's  financial  position  discussed in
Note 1, Trace may not be able to pay the aggregate amount of $9.2 million.

Trace Accounts Receivables

       At year-end 1999 and 1998, operating accounts receivables from Trace were
approximately  $2.7 million and $2.4  million,  respectively.  During  1998,  an
allowance  of $2.4  million was recorded as a  restructuring  and other  charges
(credits) due to the financial difficulties of Trace. Foamex L.P. established an
allowance  of  $0.3  million  during  1999  for  additional  operating  accounts
receivable from Trace.  The allowance was recorded as a restructuring  and other
charges (credit).

                                      F-29
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.    RELATED PARTY TRANSACTIONS AND BALANCES (continued

Trace Foam Distribution

       In connection  with the 1997  Refinancing  Plan,  Foamex L.P. made a cash
distribution of  approximately  $1.5 million to Trace Foam as a result of Foamex
L.P.'s  distribution  to FJPS  and FMXI of the FJPS  debentures,  a note  with a
principal  amount of  approximately  $56.2 million (net of  approximately  $20.6
million of original issue  discount) due from FJPS and a promissory  note in the
aggregate  principal amount of $2.0 million due from Foamex  International.  The
distribution to Trace Foam reduced partners' equity (deficit) of Foamex L.P.

Trace Management 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. During June 1997, the management services agreement was amended to increase
the  annual  fee from  $1.75  million to $3.0  million,  plus  reimbursement  of
expenses  incurred.  An amendment to the Foamex L.P. Credit Facility on June 30,
1999 no longer permits 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.

Tax Distribution

       On December 11, 1996, Foamex L.P. entered into a tax distribution advance
agreement,  pursuant to which its partners are entitled to obtain  advances,  in
the aggregate not to exceed $17.0 million,  against future  distributions  under
Foamex  L.P.'s  tax  distribution   agreement.  On  December  23,  1999,  Foamex
International repaid the $13.6 million of advances,  plus accrued interest, with
proceeds received from a $17.3 million  distribution from Foamex L.P., discussed
above.

Trace New York 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.  Foamex L.P. has closed
its New York office and  subleased the premises to a third party at an amount in
excess of its lease commitment.

Foamex/GFI  Note

       In connection with the GFI Transaction  (see Note 12) Foamex L.P. entered
into the  Foamex/GFI  Note with General Felt that was  subsequently  retained by
Foam Funding LLC.  During 1999 and 1998,  Foamex L.P.  paid  approximately  $2.1
million and $1.7 million,  respectively, of interest on the note payable to Foam
Funding LLC.

Other

       The  general  director  of Foamex  de Mexico  S.A.  de C.V.  ("Foamex  de
Mexico")  which is Foamex L.P.'s  operating  subsidiary in Mexico has a 5% stock
interest in Foamex de Mexico.

       Foamex L.P.  chartered  an  aircraft,  which was owned by a wholly  owned
subsidiary of Foamex  International  and incurred  costs of  approximately  $0.1
million,  $0.9  million and $1.2 million in 1999,  1998 and 1997,  respectively.
Foamex  International  sold this  aircraft  on March 31,  1999.  The sale of the
aircraft  triggered an obligation to Trace of  approximately  $0.6 million.  The
obligation  was offset against  Trace's two  promissory  notes payable to Foamex
L.P. The Trace notes are included in partners' deficit, which is consistent with
the recognition in prior years.


                                      F-30
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.    RELATED PARTY TRANSACTIONS AND BALANCES (continued)

       During  1999,  certain  employees  of Foamex L.P.  were also  employed by
Trace.  Foamex L.P. paid a portion of the total  compensation  of such employees
based on the amount of time devoted to Foamex L.P.'s  matters by such  employees
in the aggregate.  All such dual employment  relationships have been terminated.
Such payments totaled $1.8 million,  $2.2 million and $2.5 million in 1999, 1998
and 1997, respectively.

       Foamex L.P.  made  charitable  contributions  to the Trace  International
Holdings,  Inc.  Foundation  of  approximately  $0.2 million in each of 1998 and
1997.

       Foamex L.P., Recticel,  s.a.  ("Recticel"),  a European polyurethane foam
manufacturer,  whose  subsidiary  was a former  partner of Foamex L.P.  and is a
current  shareholder  of Foamex  International,  and Beamech Group  Limited,  an
unaffiliated  third party, have an interest in a Swiss corporation that develops
new  manufacturing  technology for the production of polyurethane foam including
the  VPFSM   manufacturing   process.   During  1997,   Foamex  L.P.   purchased
approximately  $1.9  million  of scrap  material  from  Recticel  under  various
agreements, the latest of which expired in March 1998.

18.    BUYOUT PROPOSALS

       On August  5,  1999,  Foamex  International  announced  that its Board of
Directors signed a letter of intent with Sorgenti Chemical  Industries,  LLC and
Liberty  Partners  Holdings  20,  LLC  (collectively,  the  "Purchasers")  for a
business  combination   providing  for  $11.50  per  share  for  all  of  Foamex
International's outstanding common stock (the "Sorgenti Transaction"). Under the
terms of the letter of intent, if Foamex  International  entered into a business
combination  with another party,  the Purchasers would be entitled to a break-up
fee of $6.0 million plus  reimbursement of certain expenses,  subject to certain
conditions,  including  the  willingness  of  the  Purchasers  to  enter  into a
definitive  merger agreement  providing for a price of at least $11.50 per share
prior to the expiration of the letter of intent.  The proposed  transaction  was
subject to a number of  conditions,  including  the  negotiation  of  definitive
documents  regarding certain  conditions  relating to the bank credit facilities
and the public debt of Foamex  International's  subsidiaries.  Additional issues
considered included minimum shareholder acceptance,  change of board membership,
and  other   provisions   providing  for  a  higher  break-up  fee  and  expense
reimbursement  if  Foamex  International  entered  into a  business  combination
providing  a  more  favorable   transaction.   On  December  15,  1999,   Foamex
International announced that the letter of intent with the Purchasers, which had
been extended,  expired by its terms. The Purchasers had submitted a revised bid
at a price and on terms that were less  favorable  than those  contained  in the
letter of intent and the Negotiating  Committee of Foamex  International's Board
of Directors rejected the revised bid.

       On  February  9,  2000,  Foamex  International  announced  that  it is in
discussions  with  respect to a proposal  for the  acquisition  of all of Foamex
International's  outstanding common stock for cash. Foamex  International stated
that the proposal is subject to a number of  conditions,  including  the buyer's
ongoing  due  diligence  and the  execution  of  definitive  agreements.  If the
proposal from the new group leads to a transaction,  it is anticipated that John
G. Johnson, Jr., Foamex  International's  President and Chief Executive Officer,
as well as  other  members  of  current  management,  would  participate  in the
management  of  Foamex  International  following  such  a  transaction.   Foamex
International  agreed to an exclusive  negotiating  period  ending five business
days after  delivery  of its  audited  financial  statements  included in Foamex
International's  Annual  Report on Form 10-K to the  prospective  buyer.  Foamex
International  expects  such  delivery  to be the same day as the  filing of its
Annual Report on Form 10-K with the Securities and Exchange Commission.

       In 1998,  Foamex  International  received an unsolicited  buyout proposal
from Trace, Foamex International's  principal stockholder.  Foamex International
entered into two merger agreements, which were subsequently terminated by Trace.

                                      F-31
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



19.    COMMITMENTS AND CONTINGENCIES

Operating Leases

       Foamex L.P. is obligated under various noncancelable lease agreements for
rental of facilities,  vehicles and other equipment.  Many of the leases contain
renewal  options  with  varying  terms and  escalation  clauses that provide for
increased  rentals based upon increases in the Consumer Price Index, real estate
taxes  and  lessors'  operating  expenses.   Total  minimum  rental  commitments
(excluding    commitments   accrued   as   part   of   Foamex   L.P.'s   various
restructuring/consolidation  plans) required under operating  leases at December
31, 1999 are:

                                               Operating
                                                 Leases
                                               ----------
                                               (thousands)
       2000                                      $13,443
       2001                                       11,487
       2002                                       10,016
       2003                                        8,030
       2004                                        5,044
       Thereafter                                 13,233
                                                --------
       Total                                     $61,253
                                                 =======

       Rental expense charged to operations under operating leases  approximated
$15.4  million,  $17.7  million  and  $10.1  million  for  1999,  1998 and 1997,
respectively.  Substantially  all such rental  expense  represented  the minimum
rental payments under operating leases.

Litigation - Foamex International Shareholders

       During  1999,  Foamex  International   received  several   communications
addressed  to its Board of  Directors  from  certain  of Foamex  International's
stockholders  regarding  aspects of the  relationship  between  Trace and Foamex
International.   Such   stockholders   questioned   the   propriety  of  certain
relationships and related transactions  between Trace and Foamex  International,
which previously had been disclosed in Foamex International's  periodic filings.
On June 14, 1999, Foamex  International  received a draft complaint from counsel
of certain  stockholders  naming Foamex  International  and certain  current and
former  directors,  which  included  allegations  similar to those in the Second
Amended Complaint,  as defined below.  Foamex  International was advised by such
counsel that such  stockholders  intended to file an action soon thereafter.  On
August 13, 1999, two stockholders  filed an action on behalf of an alleged class
of Foamex International's shareholders,  entitled Watchung Road Associates, L.P.
et al v.  Foamex  International  Inc.,  et al.,  Civil  Action  No.  17370  (the
"Watchung  Complaint"),  in the Court of Chancery of the State of Delaware,  New
Castle County. The suit names Foamex  International,  Mr. Marshall S. Cogan, Mr.
Etienne Davignon,  Mr. John Gutfreund,  Mr. Robert Hay, Dr. Stuart Hershon,  Mr.
John G. Johnson,  Jr. and Mr. John Tunney as defendants.  The Watchung Complaint
alleges  that the  individual  defendants  breached  their  fiduciary  duties by
agreeing to the potential buyout of Foamex  International  by Sorgenti  Chemical
Industries, LLC and Liberty Partners Holdings 20, LLC.

       The Watchung  Complaint alleges that the Sorgenti  Transaction's  buy-out
price of  $11.50  per  outstanding  share is  inadequate  and fails to take into
consideration  claims  Foamex  International  allegedly  has as a result  of the
supposed  wrongful  diversions  of  company  assets  in  Foamex  International's
dealings with Trace and its affiliates. The Watchung Complaint also alleges that
the  directors  breached  their  fiduciary  duties by agreeing  to the  proposed
Sorgenti  Transaction  without conducting an auction or active market check. The
suit alleges that the board placed Mr. Cogan's interest ahead of those of Foamex
International's  stockholders,  and  alleges  that a critical  condition  of the
Sorgenti  Transaction is a consulting agreement for Mr. Cogan. The Watchung suit
seeks to enjoin the Sorgenti  Transaction,  seeks  rescission  or damages if the
Sorgenti Transaction is consummated,  and seeks an accounting from the directors
for plaintiffs  alleged losses.  The Sorgenti  Transaction was not  consummated.
Defendants have moved to consolidate this action with In re Foamex International
Inc.  Shareholders  Litigation,  discussed  below, and to dismiss the complaint.
Plaintiffs have agreed to consolidate.

                                      F-32
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.   COMMITMENTS AND CONTINGENCIES (continued)

       On April 26, 1999, a putative securities class action entitled Molitor v.
Foamex  International Inc., et al., 99 Civ. 3004, was filed in the United States
District court for the Southern District of New York naming as defendants Foamex
International,  Trace and certain officers and directors of Foamex International
on behalf of  stockholders  who bought shares of Foamex  International's  common
stock during the period from May 7, 1998 through and  including  April 16, 1999.
The lawsuit alleges that the defendants violated Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 by misrepresenting  and/or omitting material
information  about Foamex  International's  financial  situation and operations,
with the result of  artificially  inflating the price of Foamex  International's
stock.  The lawsuit  also  alleges  that Trace and  Marshall  S. Cogan  violated
Section 20(a) of the Securities  Exchange Act of 1934 as controlling  persons of
Foamex  International.  The complaint seeks class  certification,  a declaration
that defendants violated the federal securities laws, an award of money damages,
and costs and  attorneys',  accountants'  and experts'  fees. On May 18, 1999, a
similar action entitled Thomas W. Riley v. Foamex International Inc., et al., 99
Civ. 3653 was filed in the same court.  The two actions have been  consolidated,
and  the  Consolidated  Amended  Class  Action  Complaint,   setting  forth  all
allegations  of the two earlier  complaints,  was filed on December 6, 1999. The
defendants  filed motions to dismiss the  consolidated  complaint on February 4,
2000. No discovery has taken place to date.

       Beginning  on or about  March 17,  1998,  six actions  (collectively  the
"Shareholder  Litigation")  were filed in the Court of  Chancery of the State of
Delaware,   New  Castle  County  (the  "Court"),   by   stockholders  of  Foamex
International. The Shareholder Litigation,  purportedly brought as class actions
on  behalf  of  all   stockholders   of  Foamex   International,   named  Foamex
International,  certain of its  directors,  certain of its  officers,  Trace and
Trace Merger Sub,  Inc.  ("Merger  Sub") as  defendants  alleging  that they had
breached their  fiduciary  duties to the plaintiffs  and other  stockholders  of
Foamex  International  unaffiliated  with Trace in connection  with the original
proposal of Trace to acquire the  publicly  traded  outstanding  common stock of
Foamex  International for $17.00 per share under an Agreement and Plan of Merger
(the "First Merger Agreement"). The complaints sought, among other things, class
certification, a declaration that the defendants breached their fiduciary duties
to the class,  preliminary and permanent  injunctions barring  implementation of
the  proposed  transaction,   rescission  of  the  transaction  if  consummated,
unspecified  compensatory  damages, and costs and attorneys' fees. A stipulation
and  order  consolidating  these six  actions  under  the  caption  In re Foamex
International  Inc.  Shareholders  Litigation,  Consolidated  Civil  Action  No.
16259NC, was entered by the Court on May 28, 1998.

       The parties to the  Shareholder  Litigation  entered into a Memorandum of
Understanding,  dated June 25,  1998 (the  "Memorandum  of  Understanding"),  to
settle the  Shareholder  Litigation,  subject  to,  inter alia,  execution  of a
definitive  Stipulation  of  Settlement  between the parties and approval by the
Court  following  notice  to  the  class  and  a  hearing.   The  Memorandum  of
Understanding  provided that as a result of, among other things, the Shareholder
Litigation and  negotiations  among counsel for the parties to the Memorandum of
Understanding,  a special meeting of stockholders would be held to vote upon and
approve the First Merger Agreement which provided,  among other things,  for all
of Foamex  International's  outstanding  common stock not owned by Trace and its
subsidiaries  (the "Public  Shares") to be  converted  into the right to receive
$18.75 in cash, without interest.

       The  Memorandum of  Understanding  also provided for  certification  of a
class,  for settlement  purposes only,  consisting of the Public Shares owned by
stockholders   of  Foamex   International   unaffiliated   with  Trace  and  its
subsidiaries  (the "Public  Shareholders"),  the  dismissal  of the  Shareholder
Litigation  with  prejudice and the release by the plaintiffs and all members of
the  class of all  claims  and  causes of  action  that were or could  have been
asserted against Trace,  Foamex  International and the individual  defendants in
the  Shareholder  Litigation  or  that  arise  out of  the  matters  alleged  by
plaintiffs.  Following the completion of the  confirmatory  discovery  which was
provided for in the  Memorandum  of  Understanding,  on  September 9, 1998,  the
parties entered into a definitive  Stipulation of Settlement and the Court set a
hearing  for October 27,  1998 to  consider  whether  the  settlement  should be
approved (the "Settlement Hearing"). In connection with the proposed settlement,
the plaintiffs  intended to apply for an award of attorney's fees and litigation
expenses in an amount not to exceed $925,000,  and the defendants  agreed not to
oppose this application.  Additionally,  Foamex  International agreed to pay the
cost, if any, of sending notice of the settlement to the Public Shareholders. On
September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement of
Class Action and Settlement  Hearing was mailed to the members of the settlement
class. On October 20, 1998, the parties to the Shareholder  Litigation requested
that the Court cancel the Settlement  Hearing in light of

                                      F-33
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.    COMMITMENTS AND CONTINGENCIES (continued)

the  announcement  made by Trace on October 16, 1998, that it had been unable to
obtain the necessary  financing  for the  contemplated  acquisition  by Trace of
Foamex International's common stock at a price of $18.75 per share which was the
subject  matter of the  proposed  settlement.  This  request was approved by the
Court on October 21, 1998,  and Foamex  International  issued a press release on
October  21,  1998,  announcing  that the Court  had  cancelled  the  Settlement
Hearing.

       On  November  10,  1998,  counsel for  certain of the  defendants  in the
Shareholder  Litigation  gave notice  pursuant to the  Stipulation of Settlement
that such  defendants  were  withdrawing  from the  Stipulation of Settlement in
light of the  notice  given by Trace to  Foamex  International  and the  special
committee of the Board of Directors on November 5, 1998 whereby Trace terminated
the First Merger  Agreement on the grounds that the  financing  condition in the
First Merger Agreement was incapable of being satisfied.

       On November 12, 1998, the plaintiffs in the Shareholder  Litigation filed
an Amended  Class  Action  Complaint  (the  "Amended  Complaint").  The  Amended
Complaint named Foamex International,  Trace, Merger Sub, Mr. Marshall S. Cogan,
Mr. Andrea Farace, Dr. Stuart Hershon, Mr. John Tunney, and Mr. Etienne Davignon
as defendants,  alleging that they breached their fiduciary duties to plaintiffs
and the other Public Shareholders in connection with a second Agreement and Plan
of Merger (the  "Second  Merger  Agreement"),  that the  proposal to acquire the
Public Shares for $12.00 per share lacked entire  fairness,  that the individual
defendants  violated  8  Del.  Code  ss.  251 in  approving  the  Second  Merger
Agreement, and that Trace and Merger Sub breached the Stipulation of Settlement.
On December 2, 1998,  plaintiffs  served a motion for a preliminary  injunction,
seeking an Order to  preliminarily  enjoin the defendants from proceeding  with,
consummating or otherwise effecting the merger contemplated by the Second Merger
Agreement.  In January  1999,  Trace advised that it could not finance the offer
reflected  in  the  Second  Merger  Agreement.  As  a  result,  the  preliminary
injunction motion did not go forward.

       On June 9, 1999, the plaintiffs in the Shareholder  Litigation  moved for
leave to file a Second  Amended and  Supplemental  Class  Action and  Derivative
Complaint (the "Second  Amended  Complaint").  The Second Amended  Complaint was
filed on July 14, 1999, and named Foamex  International,  Trace, Merger Sub, Mr.
Marshall S. Cogan, Mr. Andrea Farace,  Dr. Stuart Hershon,  Mr. John Tunney, and
Mr. Etienne Davignon as defendants, alleging that the named individuals breached
their fiduciary  duties by causing Foamex  International  to waste assets in its
transactions with Trace and by failing to enforce Foamex  International's rights
under the First Merger Agreement,  seeking  appointment of a receiver for Foamex
International,  and alleging that Trace and Merger Sub breached the  Stipulation
of Settlement.

       On August 26, 1999, the plaintiffs in the  Shareholder  Litigation  moved
for leave to file a Third Amended and  Supplemental  Class Action and Derivative
Complaint (the "Third Amended Complaint"). The Third Amended Complaint was filed
on October 27, 1999. The Third Amended  Complaint  alleges both class claims and
derivative  claims, and names Foamex  International,  Mr. Marshall S. Cogan, Mr.
Andrea Farace, Dr. Stuart Hershon,  Mr. John Tunney,  Mr. Etienne Davignon,  Mr.
John Gutfreund, Mr. Robert Hay and Mr. John G. Johnson, Jr. as defendants.

       The  Third  Amended  Complaint  alleges  that the  individual  defendants
breached their duties to Foamex  International's Public Shareholders by agreeing
to the  Sorgenti  Transaction  at an  inadequate  price  that fails to take into
consideration  Foamex  International's  allegedly valuable claims arising out of
purported diversions of money from Foamex International to Trace, and by failing
to  maximize  shareholder  value in a sale of Foamex  International  and instead
agreeing to a deal with a buyer who is willing to enter into a  consulting  deal
with Mr. Cogan to get his and the board's approval.  The Third Amended Complaint
purports to assert a  derivative  claim for waste and breach of  fiduciary  duty
against Mr. Cogan,  Mr. Farace,  Dr.  Hershon,  Mr. Tunney,  Mr.  Davignon,  Mr.
Gutfreund,  and Mr. Hay. The Third Amended  Complaint seeks the appointment of a
receiver for Foamex  International,  alleging that the directors have mismanaged
Foamex  International.  The Third Amended Complaint also alleges that Mr. Cogan,
Mr. Farace, Dr. Hershon,  Mr. Davignon,  Mr. Tunney, Mr. Gutfreund,  and Mr. Hay
breached their  fiduciary  duties by failing to enforce  Foamex  International's
rights under the First Merger Agreement.

                                      F-34
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.    COMMITMENTS AND CONTINGENCIES (continued)

       The Third Amended  Complaint  seeks:  a declaration  that the  individual
defendants have breached their fiduciary  duties;  damages;  the imposition of a
constructive  trust on profits and  benefits  Mr.  Cogan,  Trace,  and the other
individual  defendants allegedly received as a result of the alleged wrongdoing;
an  injunction  against  the  Sorgenti  Transaction  under  its  present  terms;
rescission  and damages if the deal is  consummated;  and the  appointment  of a
receiver for Foamex  International.  Defendants  have moved to consolidate  this
action with Watchung Road Associates, L.P., et ano v. Foamex International Inc.,
et al., discussed above, and to dismiss the complaint. Plaintiffs have agreed to
consolidation and opposed the motion to dismiss.

       The defendants  intend to vigorously defend these  litigations,  which if
adversely  determined,  could have a material  adverse  effect on the  financial
position,  results  of  operations  and cash flows of Foamex  International  and
Foamex L.P.

Litigation - Breast Implants

       As of  February  24,  2000,  Foamex  L.P.  and Trace were two of multiple
defendants  in actions  filed on behalf of  approximately  3,857  recipients  of
breast  implants  in various  United  States  federal  and state  courts and one
Canadian provincial court, some of which allege substantial damages, but most of
which allege  unspecified  damages for personal injuries of various types. Three
of these cases seek to allege claims on behalf of all breast implant  recipients
or other allegedly affected parties, but no class has been approved or certified
by the court. In addition, three cases have been filed alleging claims on behalf
of approximately 39 residents of Australia,  New Zealand,  England, and Ireland.
Foamex L.P. believes that the number of suits and claimants may increase. During
1995,  Foamex L.P. and Trace were granted  summary  judgments  and  dismissed as
defendants  from all cases in the  federal  courts of the United  States and the
state courts of California.  Appeals for these  decisions were withdrawn and the
decisions are final.

       Although  breast  implants  do not contain  foam,  certain  silicone  gel
implants  were  produced  using  a  polyurethane  foam  covering  fabricated  by
independent  distributors  or  fabricators  from bulk foam purchased from Foamex
L.P.  or Trace.  Neither  Foamex  L.P.  nor Trace  recommended,  authorized,  or
approved the use of its foam for these purposes. Foamex L.P. is also indemnified
by Trace for any such liabilities relating to foam manufactured prior to October
1990.  Trace's  insurance  carrier has continued to pay Foamex L.P.'s litigation
expenses  after Trace's  filing under the  Bankruptcy  Code.  Trace's  insurance
policies  continue to cover  certain  liabilities  of Trace but if the limits of
those policies are exhausted, it is unlikely that Trace will be able to continue
to provide  additional  indemnification.  While it is not feasible to predict or
determine the outcome of these actions, based on management's present assessment
of the merits of pending claims, after consultation with the general counsel of
Foamex L.P.,  and without  taking into account the  indemnification  provided by
Trace, the coverage  provided by Trace's and Foamex L.P.'s  liability  insurance
and potential  indemnity from the  manufacturers of polyurethane  covered breast
implants,  management  believes  that the  disposition  of the matters  that are
pending or that may reasonably be  anticipated to be asserted  should not have a
material adverse effect on either Foamex L.P.'s consolidated  financial position
or results of operations.  If management's assessment of Foamex L.P.'s liability
with respect to these actions is  incorrect,  such actions could have a material
adverse effect on the financial  position,  results of operations and cash flows
of Foamex L.P.

Litigation - Other

       Foamex L.P. is party to various  other  lawsuits,  both as defendant  and
plaintiff,  arising  in the  normal  course of  business.  It is the  opinion of
management that the  disposition of these lawsuits will not,  individually or in
the  aggregate,  have a material  adverse  effect on the  financial  position or
results of operations of Foamex L.P. If management's assessment of Foamex L.P.'s
liability with respect to these actions is incorrect,  such actions could have a
material adverse effect on Foamex L.P.'s consolidated financial position.


                                      F-35
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.   COMMITMENTS AND CONTINGENCIES (continued)

Environmental

       Foamex L.P. is subject to extensive and changing  federal,  state,  local
and foreign environmental laws and regulations,  including those relating to the
use, handling,  storage,  discharge and disposal of hazardous substances and the
remediation of  environmental  contamination,  and as a result,  is from time to
time involved in administrative and judicial  proceedings and inquiries relating
to environmental  matters.  As of December 31, 1999, Foamex L.P. had accruals of
approximately $3.5 million for environmental  matters.  During 1998, Foamex L.P.
established an allowance of $0.6 million  relating to receivables from Trace for
environmental indemnifications due to the financial difficulties of Trace.

       The Clean Air Act Amendments of 1990 (the "1990 CAA Amendments")  provide
for the establishment of federal emission standards for hazardous air pollutants
including  methylene  chloride,  propylene oxide and TDI,  materials used in the
manufacturing  of foam. On December 27, 1996,  the United  States  Environmental
Protection Agency (the "EPA") proposed regulations under the 1990 CAA Amendments
that  will  require  manufacturers  of slab  stock  polyurethane  foam  and foam
fabrication plants to reduce emissions of methylene chloride. The final National
Emission  Standard for  Hazardous  Air  Pollutants  ("NESHAP")  was  promulgated
October 7,  1998.  NESHAP  requires  a  reduction  of  approximately  70% of the
emission  of  methylene  chloride  for the slab  stock foam  industry  effective
October 7, 2001. Foamex L.P. believes that the use of alternative  technologies,
including  VPFSM,  which do not utilize  methylene  chloride  and its ability to
shift  current   production  to  the  facilities  which  use  these  alternative
technologies  will  minimize  the  impact  of  these  regulations.  The 1990 CAA
Amendments also may result in the imposition of additional  standards regulating
air emissions from polyurethane foam manufacturers, but these standards have not
yet been proposed or promulgated.

       Foamex L.P. has reported to  appropriate  state  authorities  that it has
found soil and  groundwater  contamination  in excess of state  standards at two
facilities and soil  contamination  in excess of state  standards at three other
facilities.  Foamex  L.P.  has  begun  remediation  and  is  conducting  further
investigations  into the extent of the  contamination  at these  facilities and,
accordingly,  the extent of the remediation that may ultimately be required. The
actual cost and the timetable of any such  remediation  cannot be predicted with
any degree of certainty  at this time.  Foamex L.P. has accruals of $2.5 million
for the estimated  cost of completing  remediation at these  facilities.  Foamex
L.P. is in the process of addressing potential  contamination at its Morristown,
Tennessee facility, and has submitted a sampling plan to the State of Tennessee.
The extent of the  contamination  and responsible  parties,  if any, has not yet
been determined.  A former owner may be liable for cleanup costs;  nevertheless,
the cost of remediation, if any, is not expected to be significant.

       Federal  regulations  require  that by the end of  1998  all  underground
storage tanks  ("USTs") be removed or upgraded in all states to meet  applicable
standards.  Foamex L.P. has upgraded all USTs at its  facilities  in  accordance
with  these  regulations.  Foamex  L.P.  believes  that  its  USTs do not pose a
significant risk of environmental liability. However, there can be no assurances
that such USTs will not result in  significant  environmental  liability  in the
future.

       On April 10,  1997,  the  Occupational  Health and Safety  Administration
promulgated new standards  governing  employee  exposure to methylene  chloride,
which  is used  as a  blowing  agent  in some  of  Foamex  L.P.'s  manufacturing
processes.  The phase-in of the  standards was completed in 1999 and Foamex L.P.
has  developed  and  implemented  a  compliance  program.  Capital  expenditures
required  and  changes  in  operating   procedures   are  not   anticipated   to
significantly impact Foamex L.P.'s competitive position.

       Foamex  L.P.  has been  designated  as a  Potentially  Responsible  Party
("PRP") by the EPA with respect to six sites.  Estimates of total  cleanup costs
and fractional allocations of liability are generally provided by the EPA or the
committee of PRP's with respect to the  specified  site. In each case and in the
aggregate, the liability of Foamex L.P. is not considered to be significant.


                                      F-36
<PAGE>
                          FOAMEX L.P. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.    COMMITMENTS AND CONTINGENCIES (continued)


       Although it is possible that new information or future developments could
require Foamex L.P. to reassess its potential  exposure  relating to all pending
environmental  matters,  including those described herein,  Foamex L.P. believes
that,  based upon all currently  available  information,  the resolution of such
environmental  matters will not have a material  adverse effect on Foamex L.P.'s
operations,  financial position,  capital expenditures or competitive  position.
The possibility  exists,  however,  that new  environmental  legislation  and/or
environmental  regulations may be adopted, or other environmental conditions may
be found to exist, that may require  expenditures not currently  anticipated and
that may be significant.



                                      F-37
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors
Foamex Capital Corporation
Wilmington, Delaware

In our opinion, the accompanying  consolidated balance sheets present fairly, in
all material  respects,  the financial  position of Foamex  Capital  Corporation
("FCC") (a wholly owned subsidiary of Foamex L.P.) at December 31, 1999 and 1998
in  conformity  with  accounting  principles  generally  accepted  in the United
States.  These balance sheets are the  responsibility of FCC's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing standards  generally accepted in the United Sates which require that we
plan and  perform the audit to obtain  reasonable  assurance  about  whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for the opinion expressed above.

The  accompanying  financial  statements  have been  prepared  assuming FCC will
continue  as a  going  concern.  As  discussed  in  Note 2 to  the  accompanying
financial  statements,  on July 21, 1999,  Trace  International  Holdings,  Inc.
("Trace"),  a major stockholder of Foamex  International  Inc., filed a petition
for relief under  Chapter 11 of the  Bankruptcy  Code.  On January 24, 2000,  an
order was signed  converting  the Trace case from Chapter 11 to Chapter 7 of the
Bankruptcy  Code. A trustee was appointed to oversee the  liquidation of Trace's
assets.  The outcome of the Trace bankruptcy could result in the acceleration of
substantially  all of Foamex L.P.'s debt of which FCC is a joint  obligor.  This
matter  raises  substantial  doubt  about  FCC's  ability to continue as a going
concern.  Management's plans in regard to this matter are described in Note 2 to
the accompanying  financial statements.  The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.




PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
March 10, 2000






                                      F-38


<PAGE>


                           FOAMEX CAPITAL CORPORATION
                   (A Wholly Owned Subsidiary of Foamex L.P.)
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                        December 31,     December 31,
                                                                           1999              1998
                                                                          ------            ------
<S>                                                                       <C>               <C>
        CASH                                                              $1,000            $1,000
                                                                          ======            ======

        COMMITMENTS AND CONTINGENCIES


        STOCKHOLDER'S EQUITY
           Common stock, par value $.01 per share;
               1,000 shares authorized, issued and outstanding            $   10            $   10
           Additional paid-in capital                                        990               990
                                                                          ------            ------
           Total Stockholder's Equity                                     $1,000            $1,000
                                                                          ======            ======
</TABLE>












       The accompanying notes are an integral part of the balance sheets.

                                      F-39
<PAGE>
                           FOAMEX CAPITAL CORPORATION
                   (A Wholly Owned Subsidiary of Foamex L.P.)
                             NOTES TO BALANCE SHEETS

1.     ORGANIZATION

       Foamex Capital Corporation  ("FCC"), a wholly-owned  subsidiary of Foamex
L.P., was formed on July 20, 1992 and initially capitalized on July 23, 1992 for
the purpose of obtaining financing from external sources.

2.     COMMITMENTS AND CONTINGENCIES

       Trace International Holdings, Inc. ("Trace") is a privately held company,
which  owned   approximately  29%  of  Foamex   International   Inc.'s  ("Foamex
International")  outstanding  voting  common stock at March 10, 2000,  and whose
former  Chairman  also  serves  as  Foamex  International's   Chairman.   Foamex
International's  common  stock owned by Trace is pledged as  collateral  against
certain  of  Trace's  obligations.  The  Foamex  L.P.  Credit  Facility  and the
Foamex/GFI  Note,  pursuant to which  approximately  $411.8  million of debt was
outstanding as of December 31, 1999, provide that a "change of control" would be
an event of default and could result in the  acceleration of such  indebtedness.
"Change of control" means, for this purpose, that (i) a person or related group,
other  than  Trace,  beneficially  owns more than 25% of Foamex  International's
outstanding voting stock and (ii) such voting common stock constitutes a greater
percentage  of such voting  stock than the amount  beneficially  owned by Trace.
Additionally,  certain  indentures to which FCC is a joint  obligor  relating to
senior  subordinated notes of $248.0 million contain similar "change of control"
provisions,  which  require  the  issuers to tender for such notes at a price in
cash equal to 101% of the aggregate  principal amount thereof,  plus accrued and
unpaid interest thereon, if there is such a "change of control".

       On July 21,  1999,  Foamex  L.P.  was  informed  by Trace that it filed a
petition for relief under Chapter 11 of the Bankruptcy  Code in Federal Court in
New York City. Subsequently, on January 24, 2000, an order was signed converting
the Trace  bankruptcy  from  Chapter 11 to Chapter 7 of the  Bankruptcy  Code. A
trustee was  appointed to oversee the  liquidation  of Trace's  assets.  Neither
Trace's  bankruptcy filing nor the conversion to Chapter 7 constituted a "change
of control"  under the  provisions of the debt  agreements  described  above.  A
"change of control"  could take place however,  if the  bankruptcy  court allows
Trace's  creditors to foreclose on and take ownership of Foamex  International's
common stock owned by Trace, or otherwise authorizes a sale or transfer of these
shares,  under  circumstances  in which a person or  related  group,  other than
Trace, acquired more than 25% of Foamex International's outstanding voting stock
and owned a greater percentage of such voting stock than the amount beneficially
owned by Trace. On November 22, 1999, the bankruptcy court allowed two creditors
to take ownership of 11% and 6%, respectively,  of Foamex International's common
stock.  Such an event  did not  constitute  a  "change  of  control"  under  the
provisions of the debt agreements.

       Management  believes  that it is unlikely that a "change of control" will
occur as a result of Trace's bankruptcy proceedings.  However, Foamex L.P. would
seek to  resolve  the issues  that may arise  should  the  "change  of  control"
provisions  be  triggered,  by  requesting  waivers  of such  provisions  and/or
refinancing  certain debt, if necessary.  There can be no assurance  that Foamex
L.P. or its subsidiaries will be able to do so, or that Foamex L.P. will be able
to obtain waivers of such provisions. Such circumstances raise substantial doubt
about  Foamex  L.P.'s and FCC's  ability to  continue  as a going  concern.  The
accompanying  financial statements were prepared on a going-concern basis and do
not  include  any  adjustments  that might  result from the outcome of the Trace
bankruptcy filing.

       FCC is a joint obligor and severally  liable on the following  borrowings
of Foamex L.P.:

       9 7/8% Senior  Subordinated  Notes due 2007 ("9 7/8% Senior  Subordinated
       Notes")

       The 9 7/8% Senior  Subordinated  Notes were issued by Foamex L.P. and FCC
(the   "Issuers")   and  are  due  on  June  15,  2007.   The  notes   represent
uncollateralized  general obligations of the Issuers and are subordinated to all
Senior  Debt,  as  defined in the  Indenture.  Interest  is payable  June 15 and
December 15. The notes may be redeemed at the option of the Issuers, in whole or
in part,  at any time on or after June 15, 2002.  The initial  redemption  is at
104.938%  of their  principal  amount,  plus  accrued  and unpaid  interest,  as
defined, if any, thereon to the date of

                                      F-40
<PAGE>
                           FOAMEX CAPITAL CORPORATION
                   (A Wholly Owned Subsidiary of Foamex L.P.)
                             NOTES TO BALANCE SHEETS

2.     COMMITMENTS AND CONTINGENCIES (continued)

redemption  and declining to 100.0% on or after June 15, 2005.  In addition,  at
any time prior to June 15, 2000, the Issuers may on one or more occasions redeem
up to 35.0% of the initially  outstanding  principal amount of the 9 7/8% Senior
Subordinated  Notes at a  redemption  price equal to  109.875% of the  principal
amount,  plus accrued  interest and liquidated  damages,  if any, thereon to the
date  of  redemption  with  the  cash  proceeds  of one or  more  Public  Equity
Offerings, as defined.

       Upon the occurrence of a change of control, as defined,  each holder will
have the right to  require  the  Issuers  to tender for such notes at a price in
cash equal to 101% of the aggregate  principal amount thereof,  plus accrued and
unpaid interest thereon,  if there is such a "change of control".  The notes are
subordinated in right of payment to all senior  indebtedness  and are pari passu
in right of payment to the 13 1/2% Senior  Subordinated  Notes (described below)
and Foamex L.P.'s subordinated note payable.

       13 1/2% Senior Subordinated Notes due 2005, Series B ("13 1/2% Senior
       Subordinated Notes")

       The 13 1/2% Senior  Subordinated Notes were issued by the Issuers and are
due on August 15, 2005. The notes represent uncollateralized general obligations
of the  Issuers  and are  subordinated  to all  Senior  Debt,  as defined in the
Indenture.  Interest is payable  semiannually  on February 15 and August 15. The
notes may be redeemed at the option of the Issuers,  in whole or in part, at any
time on or after August 15, 2000. The initial  redemption is at 106.75% of their
principal amount, plus accrued and unpaid interest,  if any, thereon to the date
of redemption and declining to 100.0% on or after August 15, 2004.

       Upon the occurrence of a change of control, as defined,  each holder will
have the right to  require  the  Issuers  to tender for such notes at a price in
cash equal to 101% of the aggregate  principal amount thereof,  plus accrued and
unpaid interest,  if any, thereon,  if there is such a "change of control".  The
notes are  subordinated in right of the payment of all senior  indebtedness  and
are pari  passu in right of  payment  to the 9 7/8%  Senior  Subordinated  Notes
(described above) and Foamex L.P.'s subordinated note payable.















                                      F-41
<PAGE>

                          FOAMEX L.P. AND SUBSIDIARIES
                      INDEX TO FINANCIAL STATEMENT SCHEDULE




Index to Financial Statement Schedule

Schedule II - Valuation and Qualifying Accounts

All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require  submission of the schedule,  or
because the  information  required is  included  in the  consolidated  financial
statements and notes thereto.






















                                      S-1

<PAGE>

                                                                     Schedule II
                          FOAMEX L.P. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                   (thousands)

<TABLE>
<CAPTION>
                                                         Balance at   Charged to    Charged to                       Balance at
                                                        Beginning of   Costs and      other                           End of
                                                           Period      Expenses     Accounts           Deductions     Period
        YEAR ENDED DECEMBER 31, 1999
<S>                                                       <C>          <C>          <C>                 <C>          <C>
        Allowance for Uncollectible Accounts              $  6,349     $ 2,493      $     --            $  4,509     $ 4,333
                                                          ========     =======      ========            ========     =======

        Reserve for Discounts                             $    929     $    --      $  9,365  (1)       $  9,317     $   977
                                                          ========     =======      ========            ========     =======

        Deferred Income Tax Asset Valuation Allowance     $     --     $   711      $     --            $     --     $   711
                                                          ========     =======      ========            ========     =======


        YEAR ENDED DECEMBER 31, 1998
        Allowance for Uncollectible Accounts              $  6,844     $ 2,000      $   (762) (1)(2)    $  1,733     $ 6,349
                                                          ========     =======      ========            ========     =======

        Reserve for Discounts                             $  1,238     $    --      $  6,889  (1)       $  7,198     $   929
                                                          ========     =======      ========            ========     =======

        Deferred Income Tax Asset Valuation Allowance     $  9,097     $    --      $ (9,097) (4)       $     --     $    --
                                                          ========     =======      ========            ========     =======


        YEAR ENDED DECEMBER 28, 1997
        Allowance for Uncollectible Accounts              $  3,060     $ 2,295      $  2,898  (1)       $  1,409     $ 6,844
                                                          ========     =======      ========            ========     =======

        Reserve for Discounts                             $  3,268     $    --      $ 10,182  (1)       $ 12,212     $ 1,238
                                                          ========     =======      ========            ========     =======

        Deferred Income Tax Asset Valuation Allowance     $ 15,988     $(5,028)     $ (1,863) (3)       $     --     $ 9,097
                                                          ========     =======      ========            ========     =======
</TABLE>

_________________________
(1)  Discounts and billing adjustments reflect a reduction in net sales.
(2)  Includes  $3.2  million  of  reserves   transferred  out  due  to  the  GFI
     Transaction.
(3)  Represents an  adjustment  to cost in excess of net assets  relating to the
     utilization of preacquisition deferred income tax assets of General Felt.
(4)  Represents valuation allowances transferred out due to the GFI Transaction.







                                      S-2