Exhibit 10.1

 

Master Retailer Agreement

 

This Master Retailer Agreement (this “Agreement”) is made effective as of
January 1, 2014 (the “Effective Date”), by and between Sealy Mattress Company,
an Ohio corporation (“Vendor”), and Mattress Firm, Inc., a Delaware corporation
(“Retailer”).

 

WHEREAS, Retailer is engaged in the retail sale of mattresses, bedding and
related products through physical store locations and online (the “Business”);
and

 

WHEREAS, Retailer desires to sell and offer for sale one or more of Vendor’s
products (collectively, the “Products”) in the operation of the Business;

 

In consideration of the mutual covenants and promises of the parties set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.              Authorized Retailer.   Subject to the terms and conditions of
this Agreement, Vendor hereby appoints Retailer, and Retailer hereby accepts
such appointment, as a non-exclusive authorized retailer of the Products for the
term of this Agreement.

 

2.              Annual Merchandising Programs.  From time to time during the
term of this Agreement, Vendor may agree to establish certain business
development programs available to authorized retailers on an annual basis,
including Retailer (each, an “Annual Merchandising Program”).  Vendor
anticipates that these programs may be available in the future, although the
terms of such programs may change over time in form and scope, or be eliminated
depending on internal and external factors.  Participation in any such program
is subject to Retailer’s compliance with the terms and conditions of this
Agreement.  In the event of any conflict between the terms in this Agreement and
the terms in an Annual Merchandising Program, the terms in the Annual
Merchandising Program will govern.

 

3.              Products.

 

a.              From time to time during the term of this Agreement, Retailer
may sell or offer for sale one or more of the Products at one or more physical
store locations operated by Retailer or one or more websites operated by
Retailer.  Absent any agreement to the contrary as part of an Annual
Merchandising Program, Retailer has no obligation to sell any specified amount
of the Products nor any obligation to offer the Products for sale in any
particular store operated by Retailer.

 

b.              Retailer and Vendor shall mutually agree upon the Products
available for sale through Retailer from time to time hereunder.  In any store
offering Products for sale, Retailer agrees to keep a representative number of
Product sample sets in good condition conspicuously displayed.  Retailer shall
have the right to reject for any reason any Product line proposed to be offered.

 

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c.               From time to time, Retailer and Vendor may develop and identify
Products that shall be sold exclusively through Retailer and not available for
retail sale to or through any other person or entity, including Vendor or other
authorized retailers of Vendor.

 

d.              Vendor reserves the right: (i) to change the design of or modify
any Product; (ii) to discontinue any Product; and (iii) to add new and
additional products to its product lines, which products shall constitute
Products for purposes of this Agreement.  Notwithstanding the foregoing, without
prior written notice to Retailer, Vendor shall not modify any Product, including
its contents, if such modification would render false or inaccurate any product
description of such Product provided to Retailer or any of Retailer’s consumers.

 

4.              Customers.  Retailer will not sell or ship Products to any
person or entity other than retail consumers (end-users of the product);
provided that the foregoing shall not prohibit Retailer from selling or shipping
Products to hospitals, charities, shelters or government entities or
participating in government programs, but Retailer agrees to defend, indemnify
and hold harmless Vendor from any claims related to any sale or shipment to any
entities other than retail customers.

 

5.              Pricing.  Retailer shall purchase the Products from Vendor at
the prices set forth in the applicable Annual Merchandising Program (the
“Prices”).  Such Prices may be increased during the term of an Annual
Merchandising Program following 90 days’ prior written notice to Retailer from
Vendor.

 

6.              Order Processing.  As needed from time to time, Retailer shall
order Products from Vendor by delivering written notice to Vendor specifying
(i) the type and quantity of Products ordered, (ii) the location(s) to which
such Products shall be delivered and (iii) the requested date(s) of delivery of
such Products (such notice is referred to as a “Product Order”).  Vendor shall
deliver Products as directed in the Product Order and shall be responsible for
arranging shipment of such Products unless otherwise requested by Retailer. 
Risk and title of Products shall pass to Retailer FOA Retailer’s warehouse,
subject to Section 12 of this Agreement.  Vendor shall deliver Products within a
designated period of time after the Product Order placement unless otherwise
agreed by Retailer in writing.

 

7.              Payment Terms.  Vendor shall invoice Retailer within five days
after shipment of Products purchased by Retailer.  Retailer shall pay the amount
set forth on such invoice, unless disputed in good faith, as follows:  payment
terms 2% discount for cash payment within 45 days of invoice date; net due 60
days from invoice date.  Retailer may reduce the aggregate gross amount on an
invoice by 2% if it remits cash payment within 45 days of invoice date.

 

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8.              Term; Termination.

 

a.              This Agreement will commence on the Effective Date and continue
for a period of three years.

 

b.              Either party may terminate this Agreement or any Annual
Merchandising Program established hereunder at any time upon 90 days written
notice to the other party.  Additionally, either party may terminate this
Agreement upon written notice in the event of a material breach by the other
party, which such other party has failed to cure within 10 days of written
notice thereof.

 

c.               Upon termination:

 

i.                  Retailer shall remit to Vendor within 30 days of the date of
termination all sums due and payable for the Products purchased by Retailer
prior to the date of termination, as such amount may be offset by any
outstanding merchandise credit memorandum;

 

ii.               Vendor shall remit to Retailer the balance of any merchandise
credit memorandum in immediately available funds within 30 days of the date of
termination;

 

iii.            Retailer shall promptly cease and desist use of all Vendor
intellectual property and shall cease and desist holding itself out in any way
as an authorized retailer of the Products, provided that, unless Vendor
repurchases Retailer’s inventory of the Products (including floor samples) at
fair value, Retailer shall have the right to sell such Products and use Vendor’s
intellectual property in connection therewith; and

 

iv.           Vendor shall be solely responsible for all customer warranty
claims (excluding comfort exchanges) initiated after the date of termination.

 

d.              Notwithstanding Section 8.c.iii, Retailer shall have the right
at any time and from time to time after the termination of this Agreement to
sell Products that are returned to Retailer, and Vendor grants to Retailer a
limited, royalty-free license to use Vendor’s trademarks specifically for such
purpose.

 

9.              Subsidies /Co-op Advertising Allowance.

 

a.              In order to assist Retailer in the funding of advertising and
marketing expenses related to the promotion of the Products, at the end of a
time period specified by the parties, Vendor will accrue for co-operative
advertising funds on Retailer’s behalf into internally held accounts an
aggregate amount (the “Co-Op Funds”) equal to mutually agreed upon percentage of
Retailer’s Net Purchases during such time period.  Such percentage and time
period shall be set forth in the applicable Annual Merchandising Program. 
Unless otherwise stated in an applicable Annual Merchandising Program, “Net
Purchases” shall mean an amount equal to (a) the aggregate Prices for all
Products ordered by Retailer during such calendar month, less (b) the aggregate
Price of all Products returned to Vendor during such calendar month in
accordance with Section 14(c), less (c) any floor sample purchases, and less
(d) promotional discounts.  Within 15 days after the end of each specified time
period, Vendor will issue to Retailer a merchandise credit memorandum for
Retailer’s Co-Op Funds accrued during the

 

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time period.  At Retailer’s request, Vendor will provide supporting detail of
the Dealer’s Net Purchases of Products during the time period on which
co-operative advertising funds are accrued.

 

b.              The designated credit memorandum may be applied by Retailer to
offset future payments for purchases of Product.  If any portion of a credit
memorandum remains available at the expiration of this Agreement, unless the
parties agree to extend this Agreement or enter into a new Master Retailer
Agreement, Vendor shall remit such unused portion of the credit memorandum to
Retailer in immediately available funds within 30 days after the termination of
this Agreement.

 

10.       New Store Funds from Mattress Vendors.

 

a.              If Retailer purchases mattresses from Vendor, for each new
retail store opened by Retailer during the term of this Agreement at which
Vendor’s products are to be sold, Vendor will, within 10 days after Vendor’s
receipt of Retailer’s initial floor sample order for such store, pay Retailer a
mutually agreed upon amount as set forth in the applicable Annual Merchandising
Program (a “New Store Incentive”) in the form of, in Retailer’s sole discretion,
a merchandise credit memorandum, Store Support (defined below) or cash, or any
combination of the foregoing.

 

b.              Notwithstanding the foregoing, Vendor will not be obligated to
pay Retailer a New Store Incentive for any store that is opened within a two
mile radius of a store that had been closed by Retailer within the six months
prior to the opening of the new store; provided that if Retailer opens more than
one new store within such defined area during such six month period, Vendor
shall be obligated to pay the New Store Incentives in respect of all such other
new stores.  Additionally, Vendor shall not be obligated to pay Retailer a New
Store Incentive for any new store at which Products are not initially sold;
provided that such New Store Incentive shall become due and payable in the event
that Products are subsequently sold at such store.

 

c.               If Retailer obtains a new store by acquisition or assignment
(each, an “Acquired Store”) and the prior owner or operator of such store offers
Vendor’s Products for retail sale at the time of such acquisition or assignment,
Vendor shall not be obligated to pay Retailer a New Store Incentive for such
store.  Vendor shall be obligated to pay Retailer a New Store Incentive for any
other Acquired Store that does not offer Vendor’s Products at the time of
acquisition or assignment.

 

d.              If any new retail store is not opened within 90 days of the
issuance of a New Store Incentive for such retail store, Retailer agrees to
refund such New Store Incentive or, at Retailer’s discretion, instruct Vendor to
reduce the next succeeding credit memorandum by an amount equal to the New Store
Incentive.

 

e.               In the event that, prior to the applicable NSF Accrual Date (as
defined below), (i) this Agreement is terminated or expires, (ii) a new store
for which Retailer received a New Store Incentive is closed or ceases to offer
Products for sale for a

 

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consecutive three month period or (iii) an Acquired Store for which Retailer
received an Acquired Store Incentive is closed or ceases to offer Products for
sale for a consecutive three month period (each, a “Refund Triggering Event”),
Retailer shall will refund a pro-rated amount of all applicable New Store
Incentive(s) or Acquired Store Incentive(s) based on the number of months
between the Refund Triggering Event and the NSF Accrual Date.  Such amount will
be paid to Vendor within 30 days of the Refund Triggering Event.  For purposes
of this Agreement, “NSF Accrual Date” means the day that is 36 months after such
New Store Incentive or Acquired Store Incentive was paid.

 

11.       This section intentionally left blank

 

12.       Floor Sample Discounts.  Retailer may purchase Products to be used as
floor samples at a mutually agreed upon discount off of the Prices (the
“Discounted Prices”), as set forth in the applicable Annual Merchandising
Program.  At Vendor’s discretion, replacement Products ordered for use as floor
samples for exising lines may be purchased at such Discounted Prices.  Retailer
may purchase Products to be used as floor samples for any new line introduced by
Vendor at Discounted Prices.  Retailer shall specify in the Product Order for
such Products that such Products will be used as floor samples.

 

13.       Volume Rebate Funds.  Vendor will accrue and award volume rebate funds
to Retailer on an agreed upon time period during the term of this Agreement as
set forth in the applicable Annual Merchandising Program.  The volume rebates
will be paid in the form of a merchandise credit memorandum within 30 days after
the end of the agreed upon time period.

 

14.       Warranty; Return Allowance.

 

a.              Vendor hereby warrants to Retailer that all Products purchased
by Retailer, whether for use as floor samples, for resale or otherwise, from
Vendor shall be covered by the terms of a limited written warranty issued by
Vendor.

 

b.              Each month, if set forth in the applicable Annual Merchandising
Program, Vendor shall provide a credit to Retailer in a mutually agreed upon
amount (the “Return Credit”), which Return Credit shall be the limit of Vendor’s
responsibility for defective or returned Products except as set forth in
Section 14(e).  Retailer shall be responsible for either issuing a refund to the
customer or making a Product replacement otherwise agreed upon by Retailer and
such customer.  The Return Credit shall be issued on a monthly basis within 15
calendar days after the end of the applicable month.  Except as set forth in
Section 14(c) or the Annual Merchandising Program, Vendor is not required to
pick up or take back any defective or returned Products.

 

c.               Retailer has the right to reject defective Products or
misdeliveries (including in respect of floor samples) at the point of receipt,
and such returns will be taken back by Vendor.  Notwithstanding Section 14(b),
serial failures and company

 

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recalls will be excluded from the Return Credit and accepted for return by
Vendor.  In the case of Products rejected at the point of receipt or returned in
connection with serial failures or company recalls, Retailer shall receive a
merchandise credit memorandum in an amount equal to 100% of the Price paid by
Retailer for such returned Products.

 

d.              Retailer has the right to immediately discontinue offering any
Product for sale if the rate of return for such Product equals or exceeds an
agreed upon percentage following an agreed upon period of time. In such event,
Vendor shall take back, at cost plus delivery charges, all inventory of such
Product held by Retailer, including floor samples.

 

e.               Notwithstanding anything contained in this Agreement or any
Annual Merchandising Program to the contrary, in the event that Retailer
reasonably determines Products are not built to specifications (including
component quality and specifications) or fail to conform to Vendor’s limited
written warranty, Retailer shall notify Vendor in writing of such defects or
failures.  Promptly following such written notice, Vendor shall take back, at
Vendor’s expense, all Products of the same line as the defective or
non-conforming Products that remain in Retailer’s inventory, and Retailer shall
not be obligated to take any further delivery of such Product line.  All
Products returned under this Section 14(e) shall be applied against any
wholesale volume purchase commitments of Retailer, if any.

 

15.       Brand Standards; Minimum Advertised Price.

 

a.              Retailer agrees to comply with any marketing or online
advertisement requirements established by Vendor and generally applicable to
other authorized retailers of the Products as well as any brand standards or
other requirements or criteria relating to the display, marketing or sale
techniques regarding the Products.  All such requirements and standards shall be
referenced in the applicable Annual Merchandising Program.

 

b.              Retailer will keep all displayed floor samples well-maintained
and clean.

 

c.               Retailer will use the most current displays and point-of-sale
materials provided by Vendor.

 

d.              Retailer acknowledges that Vendor may have a Minimum Advertised
Price (“MAP”) Policy in place, and, if so, Vendor shall provide Retailer with a
current copy of such MAP Policy.

 

16.       Product Details; Trademark License.

 

a.              For each Product, Vendor shall provide to Retailer a full
description of the features and benefits of each such Product, a complete list
of such Product’s specifications and a picture for display of such Product. 
Retailer shall incorporate such descriptions and pictures on the website(s) in
connection with each Product offered online and, as applicable, into any print
advertisement.

 

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Retailer shall not materially alter any such description without Vendor’s prior
written consent.

 

b.              Vendor may, from time to time, reasonably request changes or
revisions to a website or any pages of a website that is controlled by Retailer
and which references, depicts or describes the Products or Retailer’s
relationship to Vendor, which requested changes or revisions shall be considered
by Retailer in good faith and, unless unreasonable, incorporated promptly in the
applicable website.

 

c.               Vendor hereby grants to Retailer a non-exclusive, royalty-free
license to use such descriptions and pictures in connection with the authorized
sale and promotion of Products during the term of this Agreement.  Additionally,
Vendor grants to Retailer a non-exclusive, royalty-free license to use Vendor’s
trademarks, trade names, images and Vendor-provided promotional materials in
connection with the authorized sale and promotion of Products during the term of
this Agreement.

 

17.       Store Support.  From time to time, at Vendor’s cost, Vendor shall
provide Retailer with the store support identified in the applicable Annual
Merchandising Program, which may include promotional materials, “Comfort By
Color” materials (including costs of colored foot protectors, pillow shams,
headboards and graphic displays), display cases and other materials reasonably
requested by Retailer to assist with store operations, appearance and sale
performance.

 

18.       Training.  Vendor shall provide Product training to Retailer’s sales
associates prior to the roll-out of any new Products, as well as from time to
time, as reasonably requested by Retailer.

 

19.       Indemnification.

 

a.              Vendor shall indemnify and hold harmless Retailer and its
officers, directors, shareholders, members, partners and employees from and
against any and all claims, actions, proceedings, judgments and other
liabilities and expenses (including reasonable attorneys’ fees and costs) of any
nature arising out of or relating to:

 

i.                  the authorized use by Retailer of Vendor’s intellectual
property;

 

ii.               the authorized use of promotional materials and other
information provided by Vendor, including in training sessions;

 

iii.            any material breach of this Agreement by Vendor; or

 

iv.           Product liability claims.

 

b.              Retailer shall indemnify and hold harmless Vendor and its
officers, directors, shareholders, members, partners and employees from and
against any and all claims, actions, proceedings, judgments and other
liabilities and expenses (including reasonable attorneys’ fees and costs) of any
nature arising out of or relating to:

 

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i.                  Retailer’s unauthorized use of Vendor’s trademarks,
promotional materials, and other information provided by Vendor, including in
training sessions;

 

ii.               customer warranty claims for comfort exchanges; or

 

iii.            any material breach of this Agreement by Retailer; or

 

iv.           Any claim arising out of shipment and/or sale to third parties
other than retail customers as outlined in Section 4.

 

20.       Expenses.  Except as otherwise expressly agreed herein, each party
will each bear their own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.

 

21.       Relationship of the Parties.   Vendor and Retailer are independent
contractors and neither shall represent itself as having any power to bind the
other or to assume or to create any obligation or responsibility, express or
implied, on behalf of the other party to this agreement. Nothing contained in
this Agreement shall be deemed to establish a relationship of principal and
agent between Vendor and Retailer, nor any of their agents or employees for any
purpose whatsoever. This Agreement shall not be construed as constituting Vendor
and Retailer as partners, or to create any other form of legal association or
arrangement which would impose liability upon one party for the act or failure
to act of any other party.

 

22.       Support of Mattress Firm Foundation.   From time to time, Retailer may
request that Vendor contribute a portion of the proceeds of Retailer’s Product
purchases to the Mattress Firm Foundation, a Texas 501(c)(3) corporation.  If
Vendor elects to make such contribution, the contribution shall be made directly
to the Mattress Firm Foundation and not paid to Retailer.  The portion of such
proceeds and any other donations that Vendor will make to the Mattress Firm
Foundation shall be specified in the applicable Annual Merchandising Program.

 

23.       Representations and Warranties.  Each party hereby represents and
warrants to the other party as follows:

 

a.              Such party is duly organized, validly exists and is in good
standing under the laws of its jurisdiction of organization.

 

b.              Such party is authorized to execute and perform this Agreement
and any applicable Annual Merchandising Program established hereunder.

 

c.               Such party has had the opportunity to retain independent
counsel regarding its obligations and commitments hereunder.

 

d.              The performance of this Agreement or any Annual Merchandising
Program established hereunder by such party will not conflict with or violate
any material agreement, arrangement or commitment, whether written or oral, with
any third party.

 

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24.       Confidentiality.  During the term of this Agreement and for a period
of three years after its expiration or termination, each party agrees to keep
confidential and not to use or to disclose to any third party the terms of this
Agreement and any Annual Merchandising Program established hereunder, any sales
information, documents, files, trademarks, contracts, drawings, data, computer
programs, specifications, processes, designs, formulas, techniques, methods,
creative ideas, inventions, confidential information, proprietary information
and trade secrets concerning the products or services of the other party, and
any other information which if not otherwise described above, is of such a
nature that a reasonable person would believe it to be confidential. 
Notwithstanding the foregoing, a party may disclose confidential information to
the extent required by applicable law, securities regulation or subpoena.

 

25.       Non-Solicitation.  Each party hereby covenants and agrees that during
the term of this Agreement, and for a period of one year thereafter, the parties
shall not directly or indirectly solicit, hire or otherwise retain or engage,
whether as an employee, independent contractor or otherwise, any employee or
other personnel of the other party without first gaining permission from the
other party. If either party hires an employee from the other, the hiring party
shall pay a fee of $10,000 to the other party.

 

26.       Notices.  All notices and other communications under this Agreement
must be delivered in writing and shall be deemed to have been given when
(i) delivered by hand or (ii) one (1) day after deposit thereof for overnight
delivery with a nationally recognized overnight delivery service (receipt
requested) to the appropriate address as set forth below (or to such other
address as a party may designate by notice to the other parties):

 

Retailer:

 

Mattress Firm, Inc.

 

 

5815 Gulf Freeway

 

 

Houston, Texas 77023

 

 

 

Vendor:

 

Sealy Mattress Company

 

 

27.       Governing Law.  This Agreement shall be governed by the laws of the
state of Texas without giving effect to the conflicts of laws principles
thereof.  Any dispute shall be litigated in the state or federal courts located
in the State of Texas to whose exclusive jurisdiction the parties hereby
consent. For purposes of establishing jurisdiction in Texas under this
Agreement, each party hereby waives, to the fullest extent permitted by
applicable law, any claim that:  (i) it is not personally subject to the
jurisdiction of such court; (ii) it is immune from any legal process with
respect to it or its property; and (iii) any such suit, action or proceeding is
brought in an inconvenient forum.

 

28.       Amendment; Assignment.  Except as expressly set forth herein, this
Agreement may be amended or modified only by written agreement signed by both
parties.  Neither party may assign this Agreement without the prior written
consent of the other party, except

 

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that either party may assign this Agreement to an affiliate without the other
party’s prior written consent.  The merger or change of control of either party
shall not constitute an assignment of this Agreement to the surviving entity or
successor in violation of this Section 25.

 

29.       Counterparts.  This Agreement may be executed in counterparts, each of
which is deemed an original, but all of which together shall constitute one and
the same agreement. This Agreement may be executed or delivered by electronic or
facsimile means, and electronic or facsimile copies of executed signature
pages shall be binding as originals.

 

30.       Waiver.  No waiver of any term or condition of this Agreement shall be
effective or binding unless such waiver is in writing and is signed by the
waiving party, nor shall this Agreement be changed, modified, discharged or
terminated other than in accordance with its terms, in whole or in part, except
by a writing signed by both parties. Waiver by any party of any term, provision
or condition of this Agreement shall not be construed to be a waiver of any
other term, provision or condition nor shall such waiver be deemed a subsequent
waiver of the same term, provision or condition.

 

31.       Severability.  The provisions of this Agreement are fully severable
and the invalidity or unenforceability of any provision of this Agreement shall
in no way affect the validity or enforceability of any other provision hereof.

 

32.       Entire Agreement.  This Agreement, the applicable Annual Merchandising
Program then in effect, if any, and any other policies or terms and conditions
referenced in the Agreement or an Annual Merchandising Program constitute the
entire agreement between the parties and sets forth all of the representations,
warranties, promises, covenants, agreements, conditions, and undertakings
between the parties hereto with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written.

 

[Remainder of Page Intentionally Left Blank.]

 

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first set forth above.

 

Sealy Mattress Company

 

Mattress Firm, Inc.

 

 

 

 

 

 

 

 

 

By:

/s/ Dale E. Williams

 

By:

/s/ Craig McAndrews

Name:

Dale E. Williams

 

Name:

Craig McAndrews

Title:

Executive Vice President and CFO

 

Title:

EVP Merchandising

Date:

July 11, 2014

 

Date:

July 10, 2014

 

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