<PAGE>   1


                                Exhibit 10.39
<PAGE>   2
                                 SIMMONS COMPANY

                               SECOND AMENDMENT TO
                        CREDIT AND GUARANTY AGREEMENT

           THIS SECOND AMENDMENT (this "AMENDMENT") dated as of March __, 2000
to the CREDIT AND GUARANTY AGREEMENT dated as of October 29, 1998 (as amended by
that certain First Amendment to Credit and Guaranty Agreement dated as of March
1, 1999, the "CREDIT AGREEMENT") is entered into by and among SIMMONS COMPANY, a
Delaware corporation (the "COMPANY"), SIMMONS HOLDINGS, INC., a Delaware
corporation ("HOLDINGS"), the CREDIT SUPPORT PARTY listed on the signature
papers hereto, CERTAIN FINANCIAL INSTITUTIONS listed on the signature pages
hereto, GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication Agent and UBS A.G.,
STAMFORD BRANCH, as Administrative Agent. Capitalized terms used herein without
definition shall have the same meanings herein as set forth in the Credit
Agreement and in the amendments contained in Section 1 hereof.


                               RECITALS

           WHEREAS, Company and Requisite Lenders desire to amend the Credit
Agreement to (i) permit certain incremental Tranche C Term Loans in an aggregate
principal amount not in excess of $50,000,000 and (ii) make certain adjustments
to the calculation of Consolidated Adjusted EBITDA.

           NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

SECTION 1. AMENDMENTS TO CREDIT AGREEMENT

1.1    AMENDMENTS TO SECTION 1: DEFINITIONS.

         A. Section 1.1 of the Credit Agreement is hereby amended by adding the
following definitions in proper alphabetical order:

                     "INCREMENTAL TRANCHE C TERM LOAN COMMITMENTS" as
              defined in Section 2.25(a).


<PAGE>   3

                     "INCREMENTAL TRANCHE C TERM LOANS" as defined in
              Section 2.25(b)(i).

                     "INCREMENTAL TRANCHE C TERM LOAN LENDER" as
              defined in Section 2.25(b)(ii).

                     "INCREMENTAL TRANCHE C TERM LOAN NOTICE" means an
              Incremental Tranche C Term Loan Notice substantially in
              the form of Exhibit A-4.

                     "INCREMENTAL TRANCHE C TERM LOAN SYNDICATION
              AGENT" as defined in Section 2.25(c).

                     "SECOND AMENDMENT" means that certain Second
              Amendment to Credit and Guaranty Agreement dated as of
              March __, 2000 among Company, Holdings, Syndication
              Agent, Administrative Agent and the financial
              institutions and the Credit Support Parties listed on
              the signature pages thereto.

                     "SECOND AMENDMENT EFFECTIVE DATE" means the date
              of satisfaction of the conditions referred to in Section
              2 of the Second Amendment.

       B. Section 1.1 of the Credit Agreement is hereby further
amended by amending the definition of "Agent" to read in its entirety
as follows:

                     "AGENT" means each of Syndication Agent, Joint
              Lead Arrangers, Administrative Agent and, if applicable,
              Incremental Tranche C Syndication Agent.

       C. Section 1.1 of the Credit Agreement is hereby further
amended by amending the definition of "Notice" to read in its entirety
as follows:

                     "NOTICE" means a Funding Notice, a Request for
              Issuance, a Conversion/Continuation Notice or an
              Incremental Tranche C Term Loan Notice.

       D. Section 1.1 of the Credit Agreement is hereby further
amended by amending the definition of "Tranche C Lender" to read in
its entirety as follows:




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<PAGE>   4

                     "TRANCHE C LENDER" means a Lender making a
              Tranche C Term Loan on the Closing Date or pursuant to
              Section 2.25.

1.2    AMENDMENTS TO SECTION 2: CREDIT EXTENSIONS.

       A. Section 2.5 of the Credit Agreement is hereby amended by
adding the following at the end thereto:

              "Notwithstanding the foregoing, the proceeds from any
              Incremental Tranche C Term Loans shall be applied by
              Company for acquisitions and general corporate
              purposes."

       B. Section 2.11 of the Credit Agreement is hereby amended by
adding the following Section 2.11(d) at the end thereto:

              "     (d) In the event any Incremental Tranche C Term
              Loans are made, such Incremental Tranche C Term Loans
              shall be repaid on each Installment Date occurring on or
              after the applicable Incremental Tranche C Term Loan
              Effective Date in an amount equal to (i) the aggregate
              principal amount of Incremental Tranche C Term Loans as
              of such Incremental Tranche C Term Loan Effective Date,
              times (ii) the ratio (expressed as a percentage) of (y)
              the amount of Tranche C Term Loans (without giving
              effect to the Incremental Tranche C Term Loans) being
              repaid on such Installment Date and (z) the total
              aggregate amount of Tranche C Term Loans (without giving
              effect to the Incremental Tranche C Term Loans)
              outstanding on such Incremental Tranche C Term Loan
              Effective Date."

       C. Section 2.13(e) of the Credit Agreement is hereby amended by
adding the following proviso at the end thereto:

              "PROVIDED FURTHER, that no such prepayment and/or
              reduction shall be required for Fiscal Year 1999 except
              to the extent Consolidated Excess Cash Flow for such
              Fiscal Year exceeds $6,100,000; PROVIDED FURTHER, that
              the amount added to Consolidated Net Income for purposes
              of determining Consolidated Adjusted EBITDA relating to
              severance charges during calendar years 1999 and 2000
              shall not be deducted for purposes of determining
              Consolidated Excess Cash Flow."

       D. Section 2 of the Credit Agreement is hereby amended by
adding the following Section 2.25 at the end thereto:




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<PAGE>   5

          "2.25 INCREMENTAL TRANCHE C TERM LOAN COMMITMENTS AND LOANS.

                  (a) INCREMENTAL TRANCHE C TERM LOAN COMMITMENTS. Company may
         elect to increase the Tranche C Term Loan Commitments by an aggregate
         amount not in excess of $50,000,000 and in minimum amounts of not less
         than $10,000,000 and in integral multiples of $5,000,000 (such
         increase, the "INCREMENTAL TRANCHE C TERM LOAN COMMITMENTS").

                  (b) INCREMENTAL TRANCHE C TERM LOAN MECHANICS. In order to
         make the election set forth in Section 2.25(a), Company shall deliver
         to the Incremental Tranche C Term Loan Syndication Agent an Incremental
         Tranche C Term Loan Notice setting forth the following:

                           (i) the date (each, an "INCREMENTAL TRANCHE C TERM
         LOAN EFFECTIVE DATE"), which shall be not less than ten (10) Business
         Days after the date on which the applicable Incremental Tranche C Term
         Loan Notice is delivered to the Incremental Tranche C Term Loan
         Syndication Agent, on which Company proposes that the applicable
         Incremental Tranche C Term Loan Commitment shall be effective and, if
         applicable, that the Loans to be made pursuant to the Incremental
         Tranche C Term Loan Commitments (THE "INCREMENTAL TRANCHE C TERM LOAN")
         shall be made;

                           (ii) the identity of each Lender or other Person that
         meets the requirements of an Eligible Assignee (each, an "INCREMENTAL
         TRANCHE C TERM LOAN LENDER") to whom Company proposes any portion of
         the applicable Incremental Tranche C Term Loan Credit Commitments be
         allocated and the amounts of such allocations; and

                           (iii) if applicable, the aggregate principal amount
         of Incremental Tranche C Term Loans to be made on the Incremental
         Tranche C Term Loan Effective Date.

                  (c) ARRANGEMENT AND SYNDICATION. The Incremental Tranche C
         Term Loan Commitments shall be arranged and syndicated by Syndication
         Agent in the capacity as lead arranger and syndication agent with
         respect thereto (in such capacities, "INCREMENTAL TRANCHE C TERM LOAN
         SYNDICATION AGENT"), and Company shall pay to Incremental Tranche C
         Term Loan Syndication Agent such customary fees and expenses in
         connection with arranging, syndicating and providing the Incremental
         Tranche C Term Loan Commitments as may be necessary, in the reasonable
         judgment of Incremental Tranche C Term Loan Syndication Agent, to
         achieve a successful syndication thereof and no portion of such fees
         shall be allocable to any persons other than Incremental Tranche C Term
         Loan Syndication Agent and those persons providing the Incremental
         Tranche C Term Loan Commitments. Notwithstanding anything in this
         Agreement to the contrary,



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         Incremental Tranche C Term Loan Syndication Agent shall be entitled to
         the benefits of Section 9 as if it were named therein. Any Lender given
         the option to participate in any Incremental Tranche C Term Loan
         Commitment may elect or decline, in its sole discretion, to provide
         such Incremental Tranche C Term Loan Commitment.

                  (d) CONDITIONS TO INCREMENTAL TRANCHE C TERM LOAN AMOUNTS. Any
         Incremental Tranche C Term Loan Commitments shall become effective and,
         if applicable, any Incremental Tranche C Term Loans shall be made as of
         the applicable Incremental Tranche C Term Loan Effective Date subject
         to the following conditions:

                           (i) no Default or Event of Default shall exist as of
         such date before or after giving effect to such Incremental Tranche C
         Term Loan Commitments;

                           (ii) Company and its Subsidiaries shall be in pro
         forma compliance with each of the covenants set forth in Section 6.6 as
         of the last day of the most recently ended fiscal quarter after giving
         effect, on a pro forma basis, to such Incremental Tranche C Term Loans;

                           (iii) both before and after giving effect to the
         making of any Incremental Tranche C Term Loans, each of the conditions
         set forth in Section 3.2 shall be satisfied;

                           (iv) each increase in the Tranche C Term Loan
         Commitments shall be effected pursuant to one or more joinder
         agreements, in each case in form and substance reasonably satisfactory
         to the Incremental Tranche C Term Loan Syndication Agent, and executed
         by each Credit Party and each Incremental Tranche C Term Loan Lender
         and delivered to Administrative Agent and recorded in the Register; and

                           (v) Company shall deliver or cause to be delivered
         any legal opinions or other documents reasonably requested by the
         Incremental Tranche C Term Loan Syndication Agent or Administrative
         Agent in connection with any such transaction.

                  (e) INCREMENTAL TRANCHE C TERM LOANS. On any Incremental
         Tranche C Term Loan Effective Date on which Incremental Tranche C Term
         Loan Commitments are effected, subject to the satisfaction of the
         foregoing terms and conditions:

                           (i) each Incremental Tranche C Term Loan Lender
         holding an Incremental Tranche C Term Loan Commitment shall make
         Tranche C Term Loans to Company in an amount equal to its allocated
         Incremental Tranche C Term Loan Commitment;



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<PAGE>   7

                           (ii) each such Loan shall be deemed and treated for
         all purposes as a Tranche C Term Loan; and

                           (iii) each Incremental Tranche C Term Loan Lender
         shall become a Lender hereunder with respect to the Incremental Tranche
         C Term Loan Commitments and for purposes of all other provisions of
         this Agreement shall be deemed a Tranche C Lender.

                  (f) NOTICE OF INCREMENTAL TRANCHE C AMOUNTS. Administrative
         Agent shall notify the Lenders promptly upon receipt of Company's
         notice of each Incremental Tranche C Effective Date and in respect
         thereof the Incremental Tranche C Commitments and the Incremental
         Tranche C Term Loans."

1.3    AMENDMENTS TO SECTION 6: NEGATIVE COVENANTS.

         A. Section 6.5(v)(b) of the Credit Agreement is hereby amended by
restating it in its entirety as follows:

         "(b) the aggregate amount of Restricted Junior Payments made pursuant
         to this clause (v) in any Fiscal Year shall not exceed $2,500,000 plus
         the cumulative unused portion, if any, of such $2,500,000 per year
         amount not so utilized during the preceding Fiscal Years."

         B. Section 6.6A of the Credit Agreement is hereby amended by deleting
the table set forth therein in its entirety and substituting therefor the
following:

                                                    MINIMUM FIXED CHARGE
           PERIOD                                      COVERAGE RATIO
           ------                                      --------------


The last day of Fiscal Year 1999 - the day imme-          1.55:1.00
diately preceding the end of 2(nd) Fiscal Quarter
2001

The last day of 2(nd) Fiscal Quarter 2001 - the day       1.65:1.00
immediately preceding the end of Fiscal Year
2001

The last day of Fiscal Year 2001 - the day imme-          1.75:1.00
diately preceding the end of 2(nd) Fiscal Quarter
2002



                                       6
<PAGE>   8


                                                  MINIMUM FIXED CHARGE
                 PERIOD                              COVERAGE RATIO
                 ------                              --------------

The last day of 2(nd) Fiscal Quarter 2002 -            1.95:1.00
thereafter

         C. Section 6.6B of the Credit Agreement is hereby amended by deleting
the table set forth therein in its entirety and substituting therefor the
following:

                                                 MINIMUM CASH INTEREST
                 PERIOD                             COVERAGE RATIO
                 ------                             --------------



The last day of Fiscal Year 1999 - the day imme-        1.90:1.00
diately preceding the end of 2(nd) Fiscal Quarter
2001

The last day of 2(nd) Fiscal Quarter 2001 - the day     2.10:1.00
immediately preceding the end of Fiscal Year
2001

The last day of Fiscal Year 2001 - the day imme-        2.30:1.00
diately preceding the end of 2(nd) Fiscal Quarter
2002

The last day of 2(nd) Fiscal Quarter 2002 -             2.50:1.00
thereafter

         D. Section 6.8 of the Credit Agreement is hereby amended by deleting
the reference to "$10,000,000" for the period ending 12/31/00 in the table set
forth therein and substituting "$12,500,000" therefor.

         E. Section 6.8 of the Credit Agreement is hereby further amended by
adding the following proviso at the end thereto:

         "PROVIDED FURTHER, in addition to the foregoing, Company and its
         Subsidiaries may incur additional Capital Expenditures in an amount
         not to exceed $1,700,000 in the aggregate with respect to the
         acquisition of United Sleep Products, as long as such Capital
         Expenditures are incurred within twelve months of the date of such
         acquisition and made with respect to United Sleep Products and its
         Subsidiaries."




                                       7
<PAGE>   9

1.4     AMENDMENTS TO SECTION 10: Miscellaneous. Section 10.5(d) of the Credit
Agreement is hereby amended by deleting the "." at the end thereto and adding
the following:

         "or of Section 2.25 as it relates to the Incremental Tranche C Term
         Loan Syndication Agent, in each case without the consent of such
         Agent."

1.5     AMENDMENTS TO EXHIBITS.

         A. The Credit Agreement is hereby amended by adding thereto a new
EXHIBIT A-4 (Incremental Tranche C Term Loan Notice) in the form of ANNEX A
attached hereto.

         B. The Credit Agreement is hereby amended by deleting the current
EXHIBIT M (Certain Adjustments to EBITDA) in its entirety and substituting
therefor a new EXHIBIT M in the form of ANNEX B attached hereto.

SECTION 2. CONDITIONS TO EFFECTIVENESS

         Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SECOND
AMENDMENT EFFECTIVE DATE"):

         A. EXECUTION. Credit Parties and Requisite Lenders shall have executed
this Amendment.

         B. AMENDMENT FEE. The Administrative Agent shall have received, for
distribution to all Lenders executing this Amendment, an amendment fee equal to
0.125% of such Lender's outstanding Loans and Commitments.

         C. OTHER FEES. The Agents shall have received all other fees and other
amounts due and payable on or prior to the Second Amendment Effective Date,
including, to the extent invoiced, reimbursement or other payment of all
out-of-pocket expenses required to be reimbursed or paid by the Company
hereunder or under any other Credit Document.

         D. NECESSARY CONSENTS. Each Credit Party shall have obtained all
material consents necessary or advisable in connection with the transactions
contemplated by this Amendment.

         E. OTHER DOCUMENTS. Administrative Agent and Lenders shall have
received such other documents and information regarding Credit Parties as
Administrative Agent may reasonably request.




                                       8
<PAGE>   10

SECTION 3. BORROWER'S REPRESENTATIONS AND WARRANTIES

         In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each of the Company
represents and warrants to each Lender that the following statements are true,
correct and complete in all material respects:

         A. CORPORATE POWER AND AUTHORITY. Each Credit Party which is party
hereto has all requisite corporate power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform its
obligations under, the Credit Agreement as amended by this Amendment (the
"Amended Agreement") and the other Credit Documents.

         B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Credit
Documents have been duly authorized by all necessary corporate action on the
part of each Credit Party.

         C. NO CONFLICT. The execution and delivery by each Credit Party of this
Amendment and the performance by each Credit Party of the Amended Agreement and
the other Credit Documents do not and will not (i) violate (A) any provision of
any law, statute, rule or regulation, or of the certificate or articles of
incorporation or partnership agreement, other constitutive documents or by-laws
of Holdings, the Company or any Subsidiary, (B) any applicable order of any
court or any rule, regulation or order of any Governmental Authority or (C) any
provision of any indenture, certificate of designation for preferred stock,
agreement or other instrument to which Holdings, the Company or any Subsidiary
is a party or by which any of them or any of their property is or may be bound,
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any such indenture, certificate
of designation for preferred stock, agreement or other instrument, where any
such conflict, violation, breach or default referred to in clause (i) or (ii) of
this Section 3.C., individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of each Credit Party
(other than any Liens created under any of the Credit Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
contractual obligation of each Credit Party, except for such approvals or
consents which will be obtained on or before the Second Amendment Effective
Date.

         D. GOVERNMENTAL CONSENTS. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the execution and delivery by each Credit
Party of this Amendment and the performance by Company and Holdings of the
Amended Agreement and the other Credit Documents, except for such actions,
consents and approvals the failure to obtain or make which could not reasonably
be expected to result in a Material Adverse Effect or which have been obtained
and are in full force and effect.




                                       9
<PAGE>   11

         E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by each of the Credit Parties party thereto and
each constitutes a legal, valid and binding obligation of such Credit Party to
the extent a party thereto enforceable against such Credit Party in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally and except as enforceability may be limited by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

         F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Amended Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.

         G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Default.

SECTION 4. ACKNOWLEDGMENT AND CONSENT

         Simmons International Holdings Company, Inc. referred to herein as the
"CREDIT SUPPORT PARTY", and the Credit Documents to which they are a party are
collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS".

         Credit Support Party hereby acknowledges that it has reviewed the terms
and provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guarantee or secure, as the case may be, to the fullest extent possible in
accordance with the Credit Support Documents the payment and performance of all
"Obligations" under each of the Credit Support Documents to which is a party (in
each case as such terms are defined in the applicable Credit Support Document).

         Credit Support Party acknowledges and agrees that any of the Credit
Support Documents to which it is a party or otherwise bound shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Credit Support Party represents and warrants
that all representations and warranties contained in the Amended Agreement and
the Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the Second Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations



                                       10
<PAGE>   12

and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.

         Credit Support Party acknowledges and agrees that (i) notwithstanding
the conditions to effectiveness set forth in this Amendment, Credit Support
Party is not required by the terms of the Credit Agreement or any other Credit
Support Document to consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Credit Support Document shall be deemed to require the
consent of Credit Support Party to any future amendments to the Credit
Agreement.

SECTION 5. MISCELLANEOUS

         A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.

                  (i) On and after the Second Amendment Effective Date, each
         reference in the Credit Agreement to "this Agreement", "hereunder",
         "hereof", "herein" or words of like import referring to the Credit
         Agreement, and each reference in the other Credit Documents to the
         "Credit Agreement", "thereunder", "thereof" or words of like import
         referring to the Credit Agreement shall mean and be a reference to the
         Credit Agreement as amended by this Amendment.

                  (ii) Except as specifically amended by this Amendment, the
         Credit Agreement and the other Credit Documents shall remain in full
         force and effect and are hereby ratified and confirmed.

                  (iii) The execution, delivery and performance of this
         Amendment shall not, except as expressly provided herein, constitute a
         waiver of any provision of, or operate as a waiver of any right, power
         or remedy of any Agent or Lender under, the Credit Agreement or any of
         the other Credit Documents.

         B. HEADINGS. Section and Subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.

         C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.




                                       11
<PAGE>   13

         D. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.

                  [Remainder of page intentionally left blank]





                                       12
<PAGE>   14

         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

       BORROWER:              SIMMONS COMPANY

                              By:    /s/ Roger W. Franklin
                                    --------------------------------------------
                                     Name: Roger W. Franklin
                                     Title: Vice-President-Finance, Treasurer

       HOLDINGS:              SIMMONS HOLDING, INC.

                              By:    /s/ Roger W. Franklin
                                    --------------------------------------------
                                     Name: Roger W. Franklin
                                     Title: Vice-President-Finance, Treasurer

       CREDIT SUPPORT         SIMMONS INTERNATIONAL HOLDINGS
       PARTIES:               COMPANY, INC.
                              (for the purposes of Section 4 only) as a Credit
                              Support Party

                              By:    /s/ Roger W. Franklin
                                    --------------------------------------------
                                     Name: Roger W. Franklin
                                     Title: Vice-President-Finance, Treasurer

         LENDERS              GOLDMAN SACHS CREDIT PARTNERS L.P.,
         AND AGENTS:

                              By:    /s/ Elizabeth Fischer
                                    --------------------------------------------
                                         Authorized Signatory

                              UBS AG, STAMFORD BRANCH

                              By:    /s/ Renata Jacobson
                                    --------------------------------------------
                                     Name: Renata Jacobson
                                     Title: Director

                              By:    /s/ David Barth
                                    --------------------------------------------
                                     Name: David Barth
                                     Title: Director



                                      S-1

<PAGE>   15
                              WACHOVIA BANK, N.A.,

                              By:    /s/ Howard Kim
                                    --------------------------------------------
                                     Name: Howard Kim
                                     Title: Senior Vice President

                              FLEET NATIONAL BANK

                              By:    /s/ Pauline So
                                    --------------------------------------------
                                     Name: Pauline So
                                     Title: Assistant Vice President

                              U.S. BANK NATIONAL ASSOCIATION

                              By:
                                    --------------------------------------------
                                     Name:
                                     Title:

                              BHF-BANK AKTIENGESELLSCHAFT
                              NEW YORK BRANCH

                              By:
                                    --------------------------------------------
                                     Name:
                                     Title:

                              By:
                                    --------------------------------------------
                                     Name:
                                     Title:


                                      S-2
<PAGE>   16

                                 SUNTRUST BANK, ATLANTA

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                                WELLS FARGO BANK, N.A.

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                                BAYERISCHE HYPO-UND VEREINSBANK, AG
                                NEW YORK BRANCH

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:




                                      S-3

<PAGE>   17
                                 THE BANK OF NEW YORK

                                 By:    /s/ David C. Siegel
                                        ----------------------------------------
                                        Name: David C. Siegel
                                        Title:  Vice President

                                 BANK AUSTRIA CREDITANSTALT
                                 CORPORATE FINANCE, INC.

                                 By:
                                        ----------------------------------------
                                        Name:
                                        Title:

                                 HELLER FINANCIAL, INC.

                                 By:    /s/ Robert M. Reeg
                                        ----------------------------------------
                                        Name: Robert M. Reeg
                                        Title: Assistant Vice President

                                 THE MITSUBISHI TRUST AND BANKING COR-
                                 PORATION

                                 By:    /s/ Toshihiro Hayashi
                                        ----------------------------------------
                                        Name: Toshihiro Hayashi
                                        Title: Senior Vice President

                                 THE PROVIDENT BANK

                                 By:    /s/ Thomas W. Doe
                                        ----------------------------------------
                                        Name: Thomas W. Doe
                                        Title: Vice President


                                      S-4
<PAGE>   18










                                      S-5
<PAGE>   19


                                 SCOTIABANC INC.

                                 By:
                                        ----------------------------------------
                                        Name:
                                        Title:








                                      S-6
<PAGE>   20

                                 ALLSTATE LIFE INSURANCE COMPANY

                                 By:    /s/ David Walsh
                                        ----------------------------------------
                                        Name: David Walsh
                                        Title: Authorized Signatory

                                 By:    /s/ Daniel C. Leimbach
                                        ----------------------------------------
                                        Name: Daniel C. Leimbach
                                        Title: Authorized Signatory








                                      S-7
<PAGE>   21
















                                      S-8
<PAGE>   22


                                 MERRILL LYNCH PRIME RATE PORTFOLIO

                                 By:    /s/ Andrew C. Liggio
                                       ----------------------------------------
                                        Name: Andrew C. Liggio
                                        Title: Authorized Signatory













                                      S-9
<PAGE>   23






                                 HSBC BANK USA

                                 By:    /s/ Paul M. Harrington
                                       ----------------------------------------
                                        Name: Paul M. Harrington
                                        Title: Authorized Signatory









                                      S-10
<PAGE>   24

                                 FREMONT INVESTMENT & LOAN

                                 By:
                                       ----------------------------------------
                                        Name:
                                        Title:






                                      S-11
<PAGE>   25


                                 ARCHIMEDES FUNDING III, LTD.
                                 BY: ING CAPITAL ADVISORS LLC,
                                 AS COLLATERAL MANAGER

                                 By:    /s/ Michael J. Campbell
                                       ----------------------------------------
                                        Name: Michael J. Campbell
                                        Title: Managing Director






                                      S-12
<PAGE>   26

                                 AERIES  2 FINANCE LTD.
                                 BY:    INVESCO SENIOR SECURED MANAGEMENT,
                                        INC, AS SUB-MANAGING AGENT

                                 By:    /s/ Gregory Stoeckle
                                       ----------------------------------------
                                        Name: Gregory Stoeckle
                                        Title: Authorized Signatory

                                 AMARA 1 FINANCE LTD.
                                 BY:   INVESCO SENIOR SECURED MANAGEMENT,
                                        INC., AS SUB-ADVISOR

                                 By:    /s/ Gregory Stoeckle
                                       ----------------------------------------
                                        Name: Gregory Stoeckle
                                        Title: Authorized Signatory

                                 AMARA 2 FINANCE LTD.
                                 BY:   INVESCO SENIOR SECURED MANAGMENT,
                                        INC., AS SUB ADVISOR

                                 By:    /s/ Gregory Stoeckle
                                       ----------------------------------------
                                        Name:  Gregory Stoeckle
                                        Title: Authorized Signatory








                                      S-13
<PAGE>   27


                                 NORTH AMERICAN SENIOR FLOATING RATE
                                 FUND
                                 BY:    CYPRESSTREE INVESTMENT MANAGEMENT
                                        COMPANY, INC. AS PORTFOLIO MANAGER

                                 By:    /s/ Catherine C. McDermott
                                       ----------------------------------------
                                        Name: Catherine C. McDermott
                                        Title: Principal

                                 CYPRESSTREE INSTITUTIONAL FUND, LLC
                                 By:    CYPRESSTREE INVESTMENT MANAGEMENT
                                        COMPANY, INC. ITS  MANAGING MEMBER

                                 By:    /s/ Catherine C. McDermott
                                       ----------------------------------------
                                        Name: Catherine C. McDermott
                                        Title: Principal













                                      S-14
<PAGE>   28

                                 KZH CYPRESSTREE - 1 LLC

                                 By:    /s/ Peter Chin
                                       ----------------------------------------
                                        Name: Peter Chin
                                        Title: Authorized Agent










                                      S-15
<PAGE>   29

                                 SENIOR DEBT PORTFOLIO
                                 By:   BOSTON MANAGEMENT AND RESEARCH
                                       AS INVESTMENT ADVISOR

                                 By:    /s/ Scott H. Page
                                       ----------------------------------------
                                        Name: Scott H. Page
                                        Title: Vice President

                                 EATON VANCE SENIOR INCOME TRUST
                                 By:    EATON VANCE MANAGEMENT
                                        AS INVESTMENT ADVISOR

                                 By:    /s/ Scott H. Page
                                       ----------------------------------------
                                        Name: Scott H. Page
                                        Title: Vice President

                                 EATON VANCE INSTITUTIONAL SENIOR
                                 LOAN FUND
                                 By:   EATON VANCE MANAGEMENT
                                       AS INVESTMENT ADVISOR

                                 By:    /s/ Scott H. Page
                                       ----------------------------------------
                                        Name: Scott H. Page
                                        Title: Vice President

                                 OXFORD STRATEGIC INCOME FUND
                                 By:   EATON VANCE MANAGEMENT
                                       AS INVESTMENT ADVISOR

                                 By:    /s/ Scott H. Page
                                       ----------------------------------------
                                        Name: Scott H. Page
                                        Title: Vice President



                                      S-16
<PAGE>   30


                                 MORGAN STANLEY DEAN WITTER
                                 PRIME INCOME TRUST

                                 By:    /s/ Sheila Finnerty
                                       ----------------------------------------
                                        Name: Sheila Finnerty
                                        Title: Senior Vice President







                                      S-17
<PAGE>   31

                                     ANNEX A

                                                                  EXHIBIT A-4 TO
                                                   CREDIT AND GUARANTY AGREEMENT

                     INCREMENTAL TRANCHE C TERM LOAN NOTICE

         Reference is made to the Credit and Guaranty Agreement, dated as of
October 29, 1998 (as it may be amended, supplemented or otherwise modified, the
"CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein
being used herein as therein defined), by and among SIMMONS COMPANY, A DELAWARE
CORPORATION ("COMPANY"), SIMMONS HOLDINGS, INC., A DELAWARE CORPORATION
("HOLDINGS"), certain Subsidiaries of Company, as Guarantors, the Lenders party
thereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication
Agent, and UBS A.G., STAMFORD BRANCH, as Administrative Agent.

         Pursuant to Section 2.25(a) of the Credit Agreement, Company [(i)]
elects to increase the Tranche C Term Loan Commitments in the following
aggregate amounts[, and (ii) requests that Lenders make the following Loans to
Company in accordance with the applicable terms and conditions of the Credit
Agreement, in each case] to be effective as of [date] the date (the "INCREMENTAL
TRANCHE C TERM LOAN EFFECTIVE DATE"):

              TRANCHE C TERM LOANS:

              INCREMENTAL TRANCHE C TERM LOAN COMMITMENTS:       $_____________

              [$[__,__,__]    Eurodollar Rate Loans        Initial Interest
                                                            Period of _________
                                                            month(s)
               $[__,__,__]    Base Rate Loans]

         Company hereby certifies that as of Incremental Tranche C Term Loan
Effective Date:

                  (i) no Default or Event of Default shall exist either before
         or after giving effect to the Incremental Tranche C Term Loan
         Commitments contemplated hereby;

                  (ii) Company and its Subsidiaries shall be in pro forma
         compliance with each of the covenants set forth in Section 6.6 as of
         the last day of the most recently ended fiscal quarter after giving
         effect to the Incremental Tranche C Term Loans contemplated hereby;





                                  Exhibit A-4-1
<PAGE>   32

                  (iii) both before and after giving effect to the making of any
         Incremental Tranche C Term Loans, each of the conditions set forth in
         Section 3.2 of the Credit Agreement shall have been satisfied;

                  (iv) the increase in the Tranche C Term Loan Commitments shall
         be effected pursuant to one or more joinder agreements, in each case in
         form and substance reasonably satisfactory to Administrative Agent, and
         shall be executed by each Credit Party and each Incremental Tranche C
         Term Loan Lender and delivered to Administrative Agent and recorded in
         the Register;

                  (v) Company has delivered or caused to be delivered any legal
         opinions or other documents reasonably requested by Administrative
         Agent in connection with the transactions contemplated hereby; and

                  (vii) attached as Annex A hereto is a list of each Incremental
         Tranche C Term Loan Lender and the amount of each Incremental Tranche C
         Term Loan Commitment applicable thereto.

Date: [date]                                    SIMMONS COMPANY




                                                By:____________________________
                                                Title:_________________________







                                  Exhibit A-4-2
<PAGE>   33

                                     ANNEX B

                                   [ATTACHED]







                                   Exhibit M-1

<PAGE>   34
<TABLE>
<CAPTION>
                                                                                    EXHIBIT M TO THE
                                                                       CREDIT AND GUARANTY AGREEMENT

                                              Simmons Company
                                         Historical Adjusted EBITDA
                                               ($ thousands)

                                              1997            1998            1999            2000
----------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>             <C>
EBITDA                                       53,325          58,682          52,612          ACTUAL
     Interest Income                            256             184             201          ACTUAL


Non-Recurring SWIFT/UNITE                     2,347           2,208              --
Management Strategic Initiatives
     Strategic Initiative #1                  1,363              --              --
     Strategic Initiative #2                    330              --              --
     Strategic Initiative #3                     --             418             444
Other

Discontinued Product Line                       799             772              --
Severance                                        --              --           6,600           3,800
H&H                                              --              --           6,883

EBITDA, as Adjusted                          58,420          62,264          66,740

</TABLE>

         The numbers set forth above under "EBITDA, as Adjusted" for periods
prior to Fiscal Year 2000 shall be used as "Consolidated Adjusted EBITDA" in
computing the covenants set forth in Section 6.6 of the Credit Agreement. EBITDA
for each Fiscal Quarter in 2000 shall use the actual numbers for such quarter
adjusted as provided under the heading "2000". The severance and H&H adjustments
for 1999 were incurred in the fourth Fiscal Quarter of 1999. It is estimated
that the adjustment provided under the Heading "2000" will be made in the first
Fiscal Quarter of 2000.