Exhibit 10.5

TEMPUR WORLD, LLC

BERNALILLO COUNTY, NEW MEXICO

and

TEMPUR PRODUCTION USA, INC.

 

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BOND PURCHASE AGREEMENT

 

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Dated: October 26, 2005

Bernalillo County, New Mexico

Taxable Industrial Revenue Bonds

(Tempur Production USA, Inc. Project)

Fixed Rate Unsecured Industrial Revenue Bonds Series 2005B

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BOND PURCHASE AGREEMENT

TEMPUR WORLD, LLC (together with its successors, assigns and transferees, the
“Purchaser”), BERNALILLO COUNTY, NEW MEXICO (the “Issuer”) and TEMPUR PRODUCTION
USA, INC. (the “Company”) agree:

Section 1. Recitals. The Issuer and The Bank of New York Trust Company, N.A., as
Trustee (the “Trustee”), have entered into a Trust Indenture dated as of
September 1, 2005 (the “Indenture”). Pursuant to the Indenture, the Issuer will
issue its Taxable Industrial Revenue Bonds (Tempur Production USA, Inc. Project)
Fixed Rate Unsecured Industrial Revenue Bonds Series 2005B in the maximum
principal amount of $25,000,000 (the “Bonds”). Proceeds of the Bonds will be
used to finance the acquisition, construction and equipping of an approximately
750,000 square foot mattress and pillow manufacturing plant in the County of
Bernalillo, City of Albuquerque, New Mexico (the “Project”).

Section 2. Purchase and Delivery. On the basis of the representations and
covenants contained in this Bond Purchase Agreement (this “Agreement”) and
subject to the terms and conditions contained in this Agreement, the Purchaser
agrees to purchase the Bonds from the Issuer and the Issuer agrees to sell the
Bonds to the Purchaser. As consideration for the sale of the Bonds, the
Purchaser agrees to make advances on the Bonds at the times and under the
conditions specified in Section 2.10 of the Indenture. The Issuer will deliver
the initial Bonds to the Purchaser, at or prior to 10:00 a.m., Eastern Time, on
October 27, 2005, or at such other time not later than five business days
thereafter as the Issuer, the Trustee and the Purchaser may agree (the “Closing
Date”).

Section 3. Issuer Representations. The Issuer represents that, as of the date of
this Agreement:

(a) Each of the representations of the Issuer in the Lease Agreement dated as of
September 1, 2005 (the “Lease” and, together with the Indenture and this Bond
Purchase Agreement, the “Bond Documents”) and the Indenture is true and correct
as if made on and as of the date of this Agreement.

(b) Pursuant to an ordinance duly adopted by the County Commission of the Issuer
on August 23, 2005 (the “Bond Ordinance”), the Issuer duly authorized and
approved (i) the execution and delivery by the Issuer of the Bond Documents and
the performance by the Issuer of its obligations under the Bond Documents, and
(ii) the issuance, execution and delivery of the Bonds. The Bond Ordinance has
not been amended, modified or repealed.

(c) The Issuer is duly authorized under the Constitution and laws of the State
to issue the Bonds and to execute, deliver and perform its obligations under the
Bond Documents and the Bonds, to pledge the security described in the Indenture
and pledged thereby in the manner and to the extent therein set forth; based on
the opinion of Bond Counsel, all actions required of the Issuer for the issuance
of the Bonds and the execution and delivery of, and the performance of its
obligations under, the Bond Documents and the Bonds have been duly and
effectively taken; the Bond Documents have been duly executed, issued and
delivered by the Issuer and, assuming the due authorization and execution
thereof by the other parties thereto, are valid, binding and enforceable
agreements of the Issuer, except as the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and general principles of equity, and, based on the opinion of
Bond Counsel, the Bonds have been duly authorized, executed, issued and
delivered and constitute, and in the hands of the Purchaser will constitute,
valid and binding limited obligations of the Issuer, enforceable in accordance
with their terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and general principles of equity.

(d) There is no action, suit, proceeding, inquiry or investigation at law or in
equity or before or by any court, public board or body or other governmental
authority pending, with respect to which the Issuer has received service of
process, or, to the knowledge of the Issuer, threatened against or affecting it
wherein an unfavorable decision, ruling or finding could adversely affect the
transactions contemplated by this Agreement, or which in any way raises any
question concerning the validity of the Bonds or the Bond Documents, nor to the
best knowledge and belief of the Issuer is there any basis therefor.

 

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(e) The execution, delivery and performance by the Issuer of the Bond Documents
and the Bonds do not and will not violate any order, injunction, ruling or
decree by which the Issuer is bound, and do not and will not constitute a breach
of or a default under any agreement, indenture, mortgage, lease, note or other
obligation, instrument or arrangement to which the Issuer is a party or by which
the Issuer or any of its property is bound, or contravene or constitute a
violation of any law, rule or regulation to which the Issuer or any of its
property is subject, and no approval or other action by, or filing or
registration with, any governmental authority or agency is required in
connection therewith which has not been previously obtained or accomplished
(except that the Issuer makes no representation as to compliance with state
securities or “Blue Sky” laws or the securities laws of the United States and as
to any permits, governmental permissions, including environmental clearances,
rights and licenses as may be necessary for the construction and operation of
the Project, as to which no representation or warranty or covenant is made).

(f) The statements contained in any certificate provided under this Agreement
and signed and delivered to the Purchaser by any authorized official of the
Issuer will be deemed a representation and warranty by the Issuer to the
Purchaser.

Section 4. Company Representations. The Company represents that, as of the date
of this Agreement:

(a) The Company is a for-profit corporation duly incorporated and validly
existing and in good standing under the laws of the State of Virginia and has or
will obtain at the necessary time, all necessary licenses and permits to lease
and operate the Project and other property financed with the proceeds of the
Bonds. The Company has not received any notice of an alleged violation and is
not in violation of any zoning, land use, environmental or other similar law or
regulation applicable to the property subject to the Lease. The Company has full
right, power and authority to approve the Bond Documents and to perform the
other acts and things as provided for in this Agreement. The Company has full
right, power and authority to approve, enter into, deliver and/or perform its
obligations under the Bond Documents.

(b) The approval by the Company of the Bond Documents and the execution,
delivery and performance of its obligations under the Bond Documents, compliance
by the Company with the provisions hereof and of any and all of the foregoing
documents, the application by the Company of the proceeds of the sale of the
Bonds for the purposes described in the Indenture, and the consummation of the
transactions contemplated herein do not and will not conflict with or result in
the breach of any of the terms, conditions or provisions of, or constitute a
default under, the Articles of Incorporation, as amended, or the By-Laws, as
amended, of the Company or any material agreement, indenture, mortgage, lease or
instrument to which the Company is a party or by which the Company or any of its
property is or may be bound or any existing law or court or administrative
regulation, decree or order which is applicable to the Company or any of its
property, and do not and will not result in the creation or imposition of any
lien of any nature upon any of the property of the Company, except for Permitted
Liens (as defined in the Lease).

(c) No “Default,” “Event of Default” or event which, with notice or lapse of
time or both, would constitute a “Default” or an “Event of Default” under the
Bond Documents has occurred and is continuing.

(d) The Company has duly authorized all necessary action to be taken by it for
(i) the issuance and delivery of the Bonds by the Issuer upon the terms and
conditions and for the uses set forth or described herein and in the Indenture;
(ii) the approval of the Bonds and the Indenture; and (iii) the execution,
delivery or receipt of and the performance as applicable, of its obligations
under the Bond Documents and any and all such other agreements and documents as
may be required to be executed, delivered or received by the Company in order to
carry out, effectuate and consummate the transactions contemplated herein and
therein.

(e) The Company will not take or omit to take any action which will in any way
cause or result in the proceeds of the sale of the Bonds being applied in a
manner other than as provided in the Indenture and the Lease.

(f) To the knowledge of the Company, there is no action, suit, proceeding,
inquiry or investigation at law or in equity before or by any public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or its property wherein an unfavorable decision, ruling or

 

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finding would have a material adverse effect on (i) the transactions
contemplated in this Agreement or (ii) the validity or enforceability in
accordance with their respective terms of the Bond Documents.

(g) On or before the date of the sale of the Bonds, the Company will approve or
execute and deliver, as applicable, the Bond Documents. This Agreement is, and
when executed and delivered, as applicable, the Bond Documents will be the
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally and general principles of equity.

(h) To the knowledge of the Company, all approvals, consents, authorizations,
certifications, and other orders of any government authority, board, agency or
commission having jurisdiction, and all filings with such entities, failure to
obtain or make which would materially adversely affect the performance by the
Company of its obligations hereunder or under the Bond Documents, have been duly
obtained. All permits and approvals required to date for the construction and
operation of the Project have been obtained or will be obtained in due course.

(i) Any certificate signed by an authorized officer of the Company delivered to
the Issuer or to the Purchaser in connection with the issuance of the Bonds will
be deemed a representation and warranty by the Company to the Issuer and the
Purchaser as to the statements made therein.

Section 5. Purchaser Representations. The Purchaser represents and acknowledges
that, as of the date of this Agreement:

(a) The Purchaser is a limited liability company duly organized and validly
existing and in good standing under the laws of the State of Delaware. The
Purchaser has full right, power and authority to approve the Bond Documents and
to perform the other acts and things as provided for in this Agreement. The
Purchaser has full right, power and authority to approve, enter into, deliver
and/or perform its obligations under the Bond Documents.

(b) The Purchaser is purchasing the Bonds for its own account for investment and
with no present intention of distributing or reselling the Bonds or any interest
in the Bonds but without prejudice, however, to its right at all times to sell
or otherwise dispose of all or any part of the Bonds in compliance with the
Securities Act of 1933, as amended, the regulations promulgated thereunder,
applicable state securities laws and regulations and the terms of the Bonds.

(c) The Purchaser understands that the Bonds are special, limited, and not
general, obligations of the Issuer, are payable solely from the revenues
received by the Purchaser on behalf of the Issuer under the Lease and from the
security therefor as described in the Indenture but from no other sources. It
understands that the Bonds are not secured by any obligation or pledge of any
monies received or to be received from taxation or from the State of New Mexico
(the “State”) or any political subdivision or taxing district thereof
(including, without implied limitation, the Issuer), and that the Bonds will
never represent or constitute a general obligation, debt or bonded indebtedness
of the Issuer, the State, or any political subdivision thereof, and that no
right will exist to have taxes levied by the Issuer, the State, or any political
subdivision thereof, for the payment of principal of, premium, if any, and
interest on the Bonds. The Purchaser understands that the payment of the Bonds
depends upon the general credit of the Company, and upon the security granted in
the Indenture for the Company’s obligations under the Lease.

Pursuant to the terms of the Lease, the Company shall make payments to the
Trustee for the account of the Issuer, in such amounts at such times as are
necessary to make all payments of principal of, interest on and redemption price
of the Bonds in accordance with the terms of the Bond Documents as and when due,
and all such payments shall be netted against any monies and investment made by
the Purchaser to the Project Fund (as defined in the Indenture) (including
interest income); provided however that the Fiscal Agent shall not make payments
when due of principal of and interest on, or the redemption price of, the Bonds
until all payments due of principal of and interest on, or the redemption price
of, the Series 2005A Bonds (as defined in the Indenture) have been made in full
as required under

 

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the Indenture. The Purchaser will look only to the Company for payment of the
Bonds and upon the security granted in the Indenture for the Company’s
obligations under the Lease.

(d) The Purchaser has received copies of financial statements of the Company,
has been afforded the opportunity to discuss the business, assets and financial
position of the Company with the officers, employees and auditors of the
Company, and has received such information concerning the Company and its
business, assets and financial position, and the Project as it deems necessary
in making its decision to purchase the Bonds.

(e) The Purchaser is duly and legally authorized to purchase the Bonds, has
knowledge and experience in financial and business matters, is capable of
evaluating the merits and risks of its purchase of the Bonds, is aware of the
intended use of proceeds of the Bonds, and understands that interest on the
Bonds is not excludable from gross income for federal income tax purposes.

(f) The Purchaser understands that the Issuer has not undertaken to furnish any
information with respect to the Company or to ascertain the accuracy of any
information furnished to the Purchaser with respect to the Company and the
Purchaser has not requested or received any representations from the Issuer with
respect to any such information, its accuracy or completeness. The Purchaser,
for itself and for any subsequent holder of the Bonds, waives any requirement of
due diligence in investigation or inquiry on the part of the Issuer, its
officials, counsel, agents and consultants and all claims, actions or causes of
action which the Purchaser may have from and after the date hereof against the
Issuer, its officials, counsel, agents and consultants growing out of any such
action which any of the foregoing took, or could have taken, in connection with
the authorization, execution, delivery, sale or resale of the Bonds to or by the
Purchaser or in connection with any statement or representation which induced
the Purchaser to purchase the Bonds.

(g) The Purchaser has received and reviewed copies in draft and final form of
the Bond Documents and the Bond Ordinance.

(h) This Agreement constitutes a legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights generally and
general principles of equity.

(i) The Purchaser has been informed by the Company and agrees that the Indenture
has not been qualified under the Trust Indenture Act of 1939, and that the Bonds
(i) are not being registered or otherwise qualified for sale under (a) the
Securities Act of 1933, as amended, or (b) the “Blue Sky” laws and regulations
of any state, (ii) will not be listed on any stock or other securities exchange,
(iii) will not carry a rating from any rating service and (iv) will not be
readily marketable. The Purchaser has been informed by the Company and agrees
that a legend will be placed on the Bond certificates or any other documents
evidencing ownership of the Bonds to the effect that they have not been
registered under the Securities Act of 1933, as amended, or the applicable state
“Blue Sky” laws and that they may only be transferred in compliance with the
Indenture and the terms of the Bonds.

(j) The Purchaser acknowledges that its purchase of the Bonds constitutes a
transaction in a bond secured by the Indenture which is, among other things, a
personal property security agreement, pursuant to which the Bonds are offered
and sold as a unit.

(k) The execution, delivery and performance of this Agreement by the Purchaser
will not constitute a default under any other material agreement by which the
Purchaser is bound.

Section 6. Indemnification.

(a) The Company agrees to indemnify, defend and hold harmless all officials,
commissioners, officers and employees of the Issuer and each person, if any, who
has the power to direct or cause the direction of the management and policies of
the Issuer (the “Indemnified Parties”) against any and all losses, claims,
damages, liabilities, joint or several, or any expenses related thereto
whatsoever arising out of or in connection with or caused by any pledge,
offering, sale or resale of the Bonds in violation of any federal or state
securities laws or by an untrue statement or misleading statement or alleged
untrue statement or alleged

 

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misleading statement of a material fact made to any person or caused by an
omission or alleged omission of any material fact in connection with the Bonds
or the pledge, sale, resale or delivery thereof.

In case a claim shall be made or any action shall be brought against one or more
of the Indemnified Parties based upon the matters described in the preceding
paragraph and in respect of which indemnity is sought against the Company
pursuant to the preceding paragraph, the Indemnified Party or Parties seeking
indemnity shall promptly notify the Company, in writing, and the Company shall
promptly assume or cause the assumption of the defense thereof, including the
employment of counsel chosen by the Company and approved in writing by the
Issuer (provided that such approval by the Issuer shall not be unreasonably
withheld), the payment of all expenses and the right to participate in
negotiations and to consent to settlement. If any Indemnified Party is advised
in a written opinion of counsel that there may be legal defenses available to
such Indemnified Party which are adverse to or in conflict with those available
to the Company, or that the defenses of such Indemnified Party should be handled
by separate counsel, the Company shall not have the right to assume or cause the
assumption of the defense of such Indemnified Party, however, the Company shall
be responsible for the reasonable fees and expenses of counsel retained by such
Indemnified Party in assuming its own defense. If the Company shall have failed
to assume or cause the assumption of the defense of such action or to retain
counsel reasonably satisfactory to the Issuer or in the event it is determined
the defense of such Indemnified Party should be handled by separate counsel
within a reasonable time after notice of the commencement of such action, the
reasonable fees and expenses of counsel retained by the Indemnified Party shall
be paid by the Company. Notwithstanding, and in addition to, any of the
foregoing, any one or more of the Indemnified Parties shall have the right to
employ separate counsel with respect to any such claim or in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be paid by such Indemnified Party or Parties unless the employment of such
counsel has been specifically authorized in writing by the Company. The Company
shall not be liable for any settlement of any such action effected without the
written consent of the Company, but if settled with the written consent of the
Company or if there is a final judgment for the plaintiff in any such action
with or without consent, the Company agrees to indemnify and hold harmless the
Indemnified Parties from and against any loss or liability by reason of such
settlement or judgment. The covenants and agreements of the Company herein
contained shall survive the delivery of the Bonds.

(b) In order to provide for just and equitable contribution in circumstances in
which the indemnity provided for in this Section is for any reason held to be
unavailable to the Indemnified Parties other than in accordance with its terms,
the Company shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Issuer in such proportions as determined by a court having
jurisdiction of the matter; provided, however, that no person guilty of
fraudulent misrepresentation or willful misconduct shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation or willful misconduct. For purposes of this Section, each
person, if any, who controls an Indemnified Party shall have the same rights to
contribution as such Indemnified Party.

Section 7. Conditions. The obligation of the Purchaser to purchase the Bonds and
the obligation of the Issuer to sell the Bonds are subject to satisfaction of
the following conditions precedent:

(a) The representations of the Issuer, the Purchaser and the Company in this
Agreement will be true and correct on and as of the Closing Date as if made on
and as of the Closing Date.

(b) As of the Closing Date, no Default (as defined in the Indenture) or Event of
Default (as defined in the Lease) will have occurred and be continuing, and no
event will have occurred and be continuing which, with the lapse of time or the
giving of notice or both, would constitute a Default or Event of Default.

(c) On or before the Closing Date, all actions required to be taken as of the
Closing Date in connection with the Bonds, the Bond Ordinance and the Bond
Documents by the Issuer and the Company will have been taken, and the Issuer and
the Company will each have performed and complied with all agreements, covenants
and conditions required to be performed or complied with by the Bond Ordinance
and the Bond Documents.

 

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(d) The Indenture will have been duly executed and delivered by the Issuer and
the Trustee. The Lease will have been duly executed by the Issuer and the
Company. Each of the Bond Documents, the Bond Ordinance and all other official
action of the Issuer relating to the Bonds, the Project and the Bond Documents
will be in full force and effect on the Closing Date and will not have been
amended, modified or supplemented on or before the Closing Date.

(e) The Issuer, the Company and the Purchaser will have received the following,
each dated the Closing Date:

(i) the approving opinion of Brownstein Hyatt & Farber, P.C., Company Counsel,
substantially in the form of Exhibit A;

(ii) the opinion of counsel to the Company (which opinion, as to matters of
New Mexico law may be given by Brownstein Hyatt & Farber, P.C., as New Mexico
counsel to the Company), substantially in the form of Exhibit B;

(iii) the opinion of Hughes & Strumor Ltd Co., Bond Counsel, substantially in
the form set forth in Exhibit C;

(iv) an opinion of counsel to the Purchaser, substantially in the form set forth
in Exhibit D;

(v) a certificate of and with reference to the Issuer signed by a duly
authorized officer of the Issuer to the effect set forth in subsections (a),
(b) and (c) of this Section 7;

(vi) a certificate of and with reference to the Company signed by a duly
authorized officer of the Company to the effect set forth in subsections (a),
(b) and (c) of this Section 7; and

(vii) a certificate of and with reference to the Purchaser signed by a duly
authorized officer of the Purchaser to the effect set forth in subsection (a) of
this Section 7; and

(viii) a certificate of the Trustee signed by a duly authorized officer of the
Trustee, to the effect that (A) he or she is an authorized officer of the
Trustee; (B) the Indenture has been duly executed and delivered by the Trustee;
and (C) the Trustee has all necessary corporate powers required to execute and
deliver, and to perform its obligations under, the Indenture.

If any conditions to the obligations of the Purchaser or the Issuer under this
Agreement are not satisfied and if the satisfaction of such conditions is not
waived by the Purchaser and the Issuer, then, at the option of the Purchaser and
the Issuer, (x) the Closing Date will be postponed for such period, not to
exceed seven days, as may be necessary for such conditions to be satisfied or
(y) the obligations of the Purchaser and the Issuer under this Agreement will
terminate, and neither the Purchaser nor the Issuer will have any further
obligations or liabilities under this Agreement, however, the Company will
continue to be obligated to reimburse the Issuer for the expenses of the Issuer.

Section 8. Survival. All agreements, covenants and representations and all other
statements of the Issuer, the Company and the Purchaser and their respective
officers set forth in or made pursuant to this Agreement will survive the
Closing Date and the delivery of and payment for the Bonds.

Section 9. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New Mexico applicable to agreements
made and to be performed in the State of New Mexico, without regard or effect
given to conflict of laws or rules which would require the application of any
other jurisdiction.

Section 10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed and delivered will constitute an
original and all together will constitute but one and the same instrument.

Section 11. Severability. If any section, paragraph, clause or provision of this
Agreement shall for any reason be held to be invalid or unenforceable, the
invalidity or unenforceability of such section, paragraph, clause or provision
shall not affect any of the remaining provisions of this Agreement.

 

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IN WITNESS WHEREOF, the Issuer, the Company and the Purchaser have caused this
Agreement to be executed by their duly authorized officers, as of the day and
year first above written

 

BERNALILLO COUNTY, NEW MEXICO

By   /s/    ALAN B. ARMIJO           Chair, Board of County Commissioners

 

TEMPUR WORLD, LLC

By   /s/    WILLIAM H. POCHE         Its   Assistant Treasurer

 

TEMPUR PRODUCTION USA, INC.

By   /s/    WILLIAM H. POCHE         Its   Assistant Treasurer

 

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