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                                                                   Exhibit 10.23

                                 LOAN AGREEMENT


                             executed by and between



                         SIMMONS CARIBBEAN BEDDING, INC.


                                       &


                           BANCO SANTANDER PUERTO RICO






                                December 12, 1997














                        GONZALEZ OLIVER, CORREA CALZADA,
                       COLLAZO SALAZAR, HERRERO & JIMENEZ
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                                 LOAN AGREEMENT
                                 --------------



         THIS AGREEMENT, made on the 12th day of December , 1997, by and
between SIMMONS CARIBBEAN BEDDING, INC. (hereinafter referred to as the
"BORROWER" or "Borrower") a corporation organized under the laws of the
Commonwealth of Puerto Rico, herein represented by its President and General
Manager Mister Hector M. Osorio, of legal age, married, executive and resident
of Guaynabo, Puerto Rico; and BANCO SANTANDER PUERTO RICO (hereinafter referred
to as the "LENDER" or "Lender"), a banking corporation organized and existing
under the laws of the Commonwealth of Puerto Rico, represented herein by its
Authorized Agents Ariel Lebron Lebron and Myrna Diaz Marrero both of legal age,
married and resident of Trujillo Alto and San Juan, Puerto Rico respectively.

                              W I T N E S S E T H:

         WHEREAS, the BORROWER is the owner and holder of fee simple title to
the property described in Exhibit "A" attached hereto and made a part hereof by
reference and hereinafter referred to as the "SECURITY" or "Security", and

         WHEREAS, the BORROWER has applied to the LENDER for a loan (hereinafter
referred to as "the LOAN" or "Loan"), of THREE MILLION TWO HUNDRED THOUSAND
DOLLARS ($3,200,000.00) for a term ending Fifteen (15) months from date, with
interest on its daily outstanding balance at a fluctuating annual rate equal to
Two Hundred (200) basis points over the London Interbank Offered Rate (LIBOR),
adjusted every Ninety (90) days, to partially finance the cost of
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construction and development of a commercial building to be used by Borrower as
a warehouse and office building (hereinafter referred to as the "BUILDING" or
"Building"), with an area of approximately 50,000 square feet, and Sixty Six
(66) parking spaces, to be constructed in a parcel of land located at Las Cuevas
Industrial Park, Trujillo Alto, Puerto Rico, more fully described in Exhibit "A"
attached hereto and made part hereof, and to partially finance the acquisition
of machinery and equipment to be installed in the "BUILDING". Such machinery and
equipment shall be hereinafter referred to as the "EQUIPMENT" or Equipment".

         The estimated cost of the BUILDING, the EQUIPMENT, and related expenses
for the construction of the building according to BORROWER'S figures, is the
amount of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND DOLLARS ($3,870,000.00)
of which amount Lender will provide in accordance with the terms of this Loan
Agreement the amount of THREE MILLION TWO HUNDRED THOUSAND DOLLARS
($3,200,000.00), and Borrower will provide from its own funds the difference
necessary to complete the improvements in the security.

         WHEREAS, the LOAN shall be advanced as hereinafter provided and said
advances shall be guaranteed by a Mortgage Promissory Note (hereinafter referred
to as the "MORTGAGE NOTE" or "Mortgage Note"), in the amount of THREE MILLION
TWO HUNDRED THOUSAND DOLLARS ($3,200,000.00), payable to Lender on Demand.

         WHEREAS, the abovementioned Mortgage Note shall be secured by a first
mortgage (hereinafter referred to as the "MORTGAGE" or "Mortgage") on the
SECURITY, and

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         WHEREAS, each loan advanced hereunder shall be evidenced by an
Acknowledgment Note (hereinafter the "ACKNOWLEDGMENT NOTE") or "Acknowledgment
Note"), to be issued by BORROWER to the order of LENDER, payable on demand, with
interest payable monthly at the same annual rate as the interest on the LOAN,
each in a principal amount equal to the amount of the LOAN advance it evidences,
in the form attached hereto and made a part hereof as Exhibit "G", with blanks
duly filled.

         WHEREAS, the BORROWER has represented to the LENDER that the SECURITY
is to be improved in the manner set forth in certain documents heretofore made
available to the LENDER by the BORROWER as described on Exhibit "B" attached
hereto; and

         WHEREAS, the BORROWER has represented to the LENDER that the LOAN funds
are to be used solely for the purposes set forth herein and for no other
purposes.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, it is stipulated as follows:

1.       MORTGAGE NOTE: The LENDER shall make to the BORROWER and the BORROWER
         shall accept from the LENDER a LOAN in the amount of THREE MILLION TWO
         HUNDRED THOUSAND DOLLARS ($3,200,000.00), which LOAN shall be evidenced
         by the BORROWER'S Acknowledgement Notes, as set forth hereinbefore, and
         shall be guaranteed by the Mortgage Note and Mortgage, as hereinbefore
         provided, which Mortgage Note and Mortgage are to be simultaneously
         executed with this LOAN Agreement. LENDER and BORROWER have agreed to
         consider this LOAN as an interim construction loan and LENDER has also
         agreed to convert the LOAN into a permanent loan upon completion of the
         Building and the



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         improvements and installation of the EQUIPMENT in accordance with the
         Plans and Specifications submitted to LENDER by BORROWER, provided such
         satisfactory completion of the construction of the BUILDING and the
         installation of the EQUIPMENT occurs within 450 days from the date of
         this Agreement and provided the BORROWER is not then in material
         default hereunder. At such time as the interim construction loan is
         converted into the permanent loan that the Mortgage Note shall no
         longer be payable on demand but that the permanent loan will mature
         FIFTEEN (15) years after its conversion to a permanent loan, will earn
         interest at the same annual rate as the interim construction loan,
         payable monthly, and its principal shall be payable as set forth
         hereinafter and that the Lender agrees to deliver to Borrower a letter
         at the time of conversion acknowledging that the Mortage Note is no
         longer payable on demand.

2.       SECURITY: The LOAN shall be secured by a Mortgage Note, which shall be
         secured by the Mortgage. The lien of the Mortgage shall be subject only
         to those encumbrances, limitations, restrictions, or easements which
         may be approved in writing by counsel designated by the LENDER. SIMMONS
         COMPANY, the Parent Company of Borrower (hereinafter called the
         "GUARANTOR"), shall guarantee the payment in full of the principal
         amount of the loan, plus interest and any other sums due under the
         terms of the Loan, Mortgage Note or Loan Agreement. Said guaranty shall
         continue until the Mortgage Note has been paid in full and the Mortgage
         has been satisfied of record.


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3.       DISBURSEMENT OF LOAN FUNDS: Upon presentation for recordation of the
         Mortgage and delivery to the LENDER of the Mortgage Note, and upon
         compliance by Borrower with all other requirements specified by the
         LENDER as set forth in this Agreement, the LENDER shall disburse the
         LOAN funds to the BORROWER at such times and in such amounts as set
         forth in the Disbursement Schedule attached hereto and made a part
         hereof as Exhibit "C". Prior to each disbursement of LOAN funds
         hereunder, BORROWER shall deliver to LENDER its Acknowledgment Note in
         a principal amount equal to the amount of such disbursement.

         The BORROWER shall, as a condition precedent to being entitled to
receive each LOAN advance hereunder, provide the LENDER, or its designee, with
such certificates of progress of construction of the BUILDING and/or acquisition
or installation of EQUIPMENT as the LENDER may require, describing the nature
and extent of all work done and/or EQUIPMENT acquired or installed, indicating
the stage to which construction has progressed, and certifying that all work has
been done and materials and EQUIPMENT have been installed in compliance with
plans and specifications. The BORROWER shall furnish proof as to payment of
construction bills and subcontracts, and provide lien waivers, inspection
reports, architects' and/or engineer's certificates of on-site and off-site
improvements, invoices, and such other proof as the LENDER may reasonably
require to establish the progress of construction of the BUILDING and of
acquisition and/or installation of EQUIPMENT. Lender acknowledges that the
Parent Company of Borrower, Simmons Company, has heretofore advanced to Borrower
the amounts shown on Exhibit "C -1" for certain design and construction costs
(the "Parent


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Company Advance") and that the Parent Company Advance shall be disbursed to
Borrower from the Loan funds from the initial or first disbursement request from
Borrower. The LENDER may require, prior to any LOAN disbursement hereunder,
statements from the general contractor or contractors and from any
subcontractors and/or materialmen and/or suppliers to whom payments are due, or
will become due, covering (i) all work done or to be done, together with waivers
of lien covering all work and materials and/or Equipment for which payments have
been made prior to the closing of the LOAN, (ii) the current status of accounts
of contractors, sub-contractors, materialmen, and laborers furnishing labor,
materials or services in the improvements of the Security, in the construction
of the BUILDING and in the supply and installation of the EQUIPMENT, and (iii)
compliance with all applicable laws. The BORROWER shall furnish insurance
policy(ies), with premiums prepaid, from such company(ies), in such form(s) and
amount(s), and with such coverage and for such terms as may be satisfactory to
the LENDER, insuring all improvements on the SECURITY or related thereto,
including the BUILDING and EQUIPMENT, against loss or damage by fire or other
casualty, and with extended coverage for such other hazards as may reasonably be
required by the LENDER. Said policy(ies) shall contain a "Mortgagee's Loss
Payable" clause(s) providing for payment to the LENDER to the extent of its
interest in the event of loss, said policy(ies) may, during construction, be in
"Builder's Risk" form, so far as the same relates to the improvements erected or
to be erected on the SECURITY. In the event any of said policy(ies) is (are)
cancelled, BORROWER shall notify LENDER in writing within five (5) days of
receipt of notice of such cancellation.

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         The LENDER shall not be obligated to make disbursements hereunder until
the BORROWER delivers to the LENDER the required requisitions, certifications
and other documents.

         All requests for LOAN advances hereunder shall be submitted to the
LENDER in the form specified in Exhibit "D" attached hereto and made a part
hereof, with all blanks duly filled.

         Each such request shall be submitted with sufficient time prior to the
date upon which the BORROWER requests that a LOAN advance be made hereunder, to
enable the LENDER to process such request. Loan funds shall be characterized as
disbursed to the BORROWER when disbursed by the LENDER, as herein before
provided.

         The Borrower understands and acknowledges that inspections of the
Project are to be conducted by an inspector designated by the Lender and all
Request for Payment shall be approved by said Inspector. Lender will designate a
qualified engineer to inspect and approve all certifications for work performed
related to the construction and development work. The expenses of such inspector
shall be paid by Borrower, said expenses to be reasonable within the costs
charged by other engineers for the same or similar services.

         From each amount approved for payment, there shall be withheld and
retained by the Lender a sum equivalent to ten percent (10%) of the gross
amount, and the amount so withheld and retained, hereinafter called "retainage",
will be subordinated by BORROWER, contractors and sub-contractors until the Loan
is converted to a permanent loan and until LENDER approve such retainage
disbursement.

         The BORROWER shall advance in cash or its equivalent any sums not
provided in Exhibit "C", to pay premiums on casualty and title


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insurance, taxes and assessments, recording expenses and filing fees or such
other sums as LENDER may judge to be necessary for the protection and
preservation of the Security, the BUILDING and the EQUIPMENT, and for the
payment of premiums for any insurance required by the LENDER during the life of
this LOAN, before and after its eventual conversion into a permanent LOAN. In
the event BORROWER does not make timely payment of any of the aforesaid sums and
if LENDER so elects, then LENDER may make such payments at BORROWER's expense or
deduct them from the loan funds, if available.

4.       CONSTRUCTION WORK:

         a.       CONSTRUCTION WORK CRITERIA: The construction of the BUILDING
                  and the supply and installation of the EQUIPMENT shall be in
                  accordance with the proposed plans and specifications
                  submitted as the basis for this LOAN, which plans and
                  specifications were prepared by Ivan A. HERNANDEZ & ASSOC.,
                  Architects and Engineers, copies of which are attached hereto
                  as Exhibits H & I, and such construction, upply, and
                  installation shall comply with all restrictions, conditions,
                  ordinances, codes, regulations and laws of governmental
                  departments and agencies having direction or jurisdiction over
                  or an interest in the SECURITY, its improvements, the BUILDING
                  and the EQUIPMENT. No extra work nor changes in plans and
                  specifications shall be authorized by the BORROWER without the
                  written consent of the LENDER, which consent shall not be
                  unreasonably withheld, delayed or conditioned. If Lender's
                  consent is given to any such extra work or change in plans and
                  specifications,



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                  the BORROWER shall immediately deposit the amount of the cost
                  thereof with the LENDER, such deposit to be disbursed by the
                  LENDER upon completion of such extras or changes. Copies of
                  such plans and specification are attached hereto and made
                  parts hereof as Exhibits "H" and "I", respectively.

         b.       COMMENCEMENT AND CONTINUITY OF WORK:
                  Construction work on the SECURITY shall commence within
                  FIFTEEN (15) business days from the date of this Agreement
                  and shall be carried on diligently and with dispatch until
                  completed. All construction work must be completed within four
                  hundred fifty (450) calendar days from the date of this
                  Agreement.

         c.       PROGRESS REPORTS: Upon request by the LENDER, the BORROWER
                  shall deliver to the LENDER a report of the progress of the
                  contemplated improvements to the SECURITY, the construction of
                  the BUILDING and the supply and installation of the EQUIPMENT,
                  the aforesaid costs compared to estimates, and/or contracts,
                  and any other data and information concerning the SECURITY as
                  may be reasonably required by the LENDER. Such reports shall
                  be required on a monthly basis unless circumstances dictate
                  more frequent reports.

5.       DEFICIENCY IN FUNDS: If and whenever the LENDER shall determine and
         notify the BORROWER that the amount of monies remaining undisbursed is
         less than the amount required fully to complete and pay for the
         improvements, the construction of the BUILDING and the acquisition and
         installation of the EQUIPMENT



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         contemplated under this LOAN AGREEMENT, and the LENDER shall demand
         that the BORROWER deposit with the LENDER an amount equal to such
         deficiency as determined by the LENDER, then and in that event the
         BORROWER shall comply with such demand within thirty (30) business days
         from the date thereof. The judgment and determination of the LENDER
         under this paragraph shall be final and conclusive.

6.       PRESENTATIONS AND WARRANTIES OF THE BORROWER:

         The BORROWER makes the following warranties and representations:

         a.       CORRECTNESS OF DOCUMENTS: The documents furnished in support
                  of the LOAN and listed in Exhibit "B" are true and correct and
                  accurately set out the facts contained therein in all material
                  respects.

         b.       FINANCIAL STATEMENTS AND CONDITION OF BORROWER: The financial
                  statements provided in support of the LOAN request and
                  referred to in Exhibit "B" were prepared in accordance with
                  generally accepted accounting principles and are correct and
                  complete in all material respects, and fairly present the
                  financial position of the person(s) or entity which each
                  purports to reflect, and the financial positions so reflected
                  have not suffered any material adverse changes to this date.

         c.       ABSENCE OF PROCEEDINGS AND ACTIONS: There are no actions,
                  suits or proceedings pending, or to the knowledge of the
                  BORROWER, threatened against or affecting the BORROWER, except
                  as set forth in Exhibit "E" hereto.

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         d.       BORROWER'S POWERS AND STATUS OF AUTHORITY:
                  Attached hereto is Exhibit "F" which is hereby incorporated by
                  reference as if fully set forth at length herein.

         e.       ABSENCE OF JUDGMENTS AND/OR AWARDS AND/OR ORDERS: There are no
                  outstanding and unpaid judgments or arbitration awards against
                  the BORROWER except as are set forth in Exhibit "E" attached
                  hereto. The BORROWER has not received any written notice that
                  it is in default with respect to any valid regulation, order,
                  writ, or decree of any court or governmental or municipal
                  department, commission, board, bureau, agency or
                  instrumentality pertaining to the Security, the Building or
                  the Equipment.

         f.       NON-DEFAULT OF THE BORROWER CONTRACTUALLY:
                  The BORROWER is not in default in any material respect under
                  any agreement or instrument to which it is a party or by which
                  it may be bound. The execution and delivery of this Agreement,
                  the Acknowledgment Notes, the Mortgage Note, and the Mortgage,
                  and the consummation of the other transactions contemplated by
                  this Agreement do not conflict with or result in breach of any
                  valid regulation, order, writ, injunction or decree of any
                  court or governmental or municipal instrumentality or in the
                  breach of or default under any indenture, contract, agreement
                  or other instrument to which the BORROWER is a party or by
                  which it is bound. The execution and delivery of this
                  Agreement, and of the Mortgage, and the issuance of the
                  Acknowledgment Notes, the Mortgage Note, and Mortgage will not
                  result in the


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                  creation or imposition of, or be any cause for imposing, any
                  lien, charge or encumbrance of any nature whatsoever upon any
                  of the SECURITY, the BUILDING, the EQUIPMENT, or other assets
                  of the BORROWER other than those created, imposed or required
                  by this Agreement or the Mortgage.

         g.       MARKETABLE TITLE IN BORROWER WITHOUT LIENS: The BORROWER has,
                  and at all times will have, good and marketable title in fee
                  simple to the SECURITY. The SECURITY is subject to no liens,
                  charges or encumbrances except as shown on the title policy of
                  Borrower obtained at the time Borrower acquired the Security,
                  or as approved in writing by Counsel designated by LENDER.

         h.       NON-COMMENCEMENT OF WORK. There is no visible commencement of
                  operations incident to the proposed improvements on the
                  SECURITY, or if commencement in any form has begun, the legal
                  effect of any liens will be negated by title insurance or by
                  surety bond.

         i.       USE OF PROCEEDS: The proceeds of this LOAN will be used solely
                  for the purposes specified herein and in the supporting
                  documents to each LOAN request hereunder.

         j.       REQUIRED APPROVALS: That the BORROWER has received and there
                  are in effect all required approvals for the uninterrupted
                  development and construction of the work subject of this
                  Agreement.

7.       INTEREST ON LOAN FUNDS: Although the Acknowledgement Notes evidencing
         the disbursements of the LENDER to the BORROWER hereunder may provide
         that they shall bear interest at


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         an specific rate therein, the parties herein agree that said
         Acknowledgment Note(s) and the LOAN shall bear interest at all times at
         the fluctuating annual rate set forth in this Agreement until full
         payment thereof.

8.       INSURANCE POLICIES AND CERTIFICATES: BORROWER shall furnish
         certificates from the insurance carrier(s) for the general contractor
         or contractors, and for the BORROWER, evidencing Workmen's Compensation
         Insurance in such from and amount as may be required by law, and public
         liability insurance (including contractual liability) is to be carried
         during the full course of construction work of the Building and
         installation of the Equipment, naming the LENDER as an additional
         insured, and with minimum limits of coverage for death of or injury to
         persons of not less than ONE MILLION DOLLARS ($1,000,000) and for
         damage to property of not less than ONE MILLION DOLLARS ($1,000,000)
         unless otherwise specified by LENDER.

9.       SURVEY: A survey of the subject SECURITY has been furnished to the
         LENDER by BORROWER. Such survey was prepared by a surveyor licensed in
         the Commonwealth of Puerto Rico, reflects any encroachments, easements
         and rights-of-way affecting the Security, and includes a certification
         from said surveyor as to the precise acreage contained in the SECURITY
         and the legal description thereof.

10.      REMOVAL OF LIENS: The BORROWER and/or GUARANTOR specifically agree to
         have any liens other than those approved by Lender, which may be filed
         against the SECURITY released or bonded within thirty (30) calendar
         days from the date the

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         BORROWER receives notice of the same, time being of the essence.
         Notwithstanding the obligations hereinbefore stated, Borrower will have
         the right to contest any lien on the SECURITY.

11.      PAYMENT OF TAXES: The BORROWER and/or GUARANTOR agree to promptly pay
         and discharge any taxes, assessments or indebtedness upon the SECURITY,
         the BUILDING and/or the EQUIPMENT which may become due or payable
         during the existence of this LOAN. At least ten (10) days before any
         related delinquency, the BORROWER shall furnish to the LENDER evidence
         satisfactory to the LENDER that such taxes and assessments have been
         paid after five (5) days prior written notice to Borrower. The LENDER
         may pay such sums as may become due out of undisbursed LOAN proceeds in
         the event BORROWER fails to promptly pay as aforesaid. Notwithstanding
         the obligations hereinbefore stated, Borrower will have the right to
         contest any taxes, assessment or indebtedness on the SECURITY.

12.      ACCESS TO THE BORROWER'S BOOKS AND RECORDS: The LENDER, or its agents
         shall, during normal business hours, have reasonable access to the
         records, accounting books, contracts, sub-contracts, bills and
         statements of the BORROWER, including any supporting or related
         vouchers, bills, or other instruments, and shall have the right to make
         copies of the same, but only to the extent such records, accounting
         books, contracts, sub-contracts, bills, statements, vouchers or other
         instruments relate to the Security, the Building and/or the Equipment.
         If the LENDER so requires, the records, books, vouchers, or other
         instruments shall be made available to an accountant of the LENDER's
         choice for


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         audit, examination, inspection, and photocopying or other type of
         duplication, such audit to be done at the BORROWER's office. Lender
         agrees to keep all information obtained during such audit, examination
         and/or inspection confidential and shall not disclose the same to any
         third party without the prior written consent of Borrower.

13.      FINANCIAL STATEMENTS: The BORROWER shall furnish to the LENDER a signed
         semi-annual unaudited statement of financial condition and profit and
         loss statement, and an annual financial condition statement, including
         profit and loss, audited by an independent certified public accountant
         acceptable to the LENDER. The semi-annual statements shall be
         delivered by the BORROWER to the LENDER within thirty (30) days after
         close of the fiscal period and the annual audited statements within
         ninety (90) days after close of the BORROWER'S fiscal year.

14.      EVENTS OF DEFAULT: The happening of any one or more of the following
         events shall constitute a default by BORROWER under this LOAN
         Agreement, the Acknowledgement Notes, the Mortgage Note, and the
         Mortgage:

         a.       NON-PAYMENT OF INTEREST: The BORROWER shall fail to make the
                  interest payments on the due dates.

         b.       Non-payment of Principal: The BORROWER shall fail to make any
                  required repayment of principal, or any portion thereof, on
                  the due date.

         c.       BREACH OF CONDITION, ETC.: If the BORROWER violates any term
                  or condition contained in this Agreement, and/or the
                  Acknowledgment Note(s), and/or the Mortgage Note, and/or


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                  the Mortgage or if the LENDER determines, in its sole
                  judgment, that the BORROWER and/or GUARANTOR misrepresented
                  facts in any material respect contained in any document
                  submitted in support of this LOAN.

         d.       BANKRUPTCY OR INSOLVENCY: Any action in bankruptcy,
                  receivership, or reorganization filed by or against the
                  BORROWER and/or any GUARANTOR; any assignment for the benefit
                  of creditors made by the BORROWER; any judgment or proceeding
                  entered or brought against the BORROWER and/or any GUARANTOR
                  or affecting the subject premises; the insolvency of the
                  BORROWER and/or any GUARANTOR. Borrower will have a sixty (60)
                  day period to cure any involuntary bankruptcy filing against
                  Borrower.

         e.       LIENS OR FORECLOSURES: The institution of foreclosure action
                  against the SECURITY, and/or the Building and/or the
                  Equipment, or the filing of a valid lien, other than liens
                  approved by Lender or permitted hereunder, against the
                  SECURITY, and/or the BUILDING, and/or the EQUIPMENT, which is
                  not removed of record, bonded or dismissed within thirty (30)
                  days after the BORROWER receives notice of such filing.

         f.       SUBSTANTIAL DISCONTINUANCE OF CONSTRUCTION OF BUILDING OR OF
                  INSTALLATION OF EQUIPMENT: The substantial discontinuance of
                  construction, development or installation work for a period of
                  thirty (30) calendar days which discontinuance is, in the sole
                  determination of the LENDER, without cause.



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         g.       TRANSFER OF SECURITY: The sale, assignment, pledge, transfer,
                  hypothecation or other disposition of the SECURITY, the
                  BUILDING and/or the EQUIPMENT by the BORROWER to some other
                  person or entity without the written consent of the LENDER,
                  other than the transfer to any affiliate, subsidiary or other
                  entity in common control with Borrower so long as the same
                  assumes the obligations of Borrower under these loan
                  documents.

         h.       ABILITY OF THE BORROWER TO PERFORM: The sale assignment,
                  pledge, transfer, hypothecation, or other disposition by
                  BORROWER of any proprietary or beneficial interest in the
                  Security, the Building and/or the Equipment, if in the
                  LENDER's reasonable judgment such sale, assignment, pledge,
                  transfer, hypothecation, other disposition, or change
                  materially and adversely affects the ability of the BORROWER
                  to perform in accordance with the terms of this Agreement.

         i.       IMPAIRMENT OF SECURITY: Any condition or situation which, in
                  the reasonable determination of the LENDER, constitutes a
                  danger or material impairment of the SECURITY and/or the
                  BUILDING, and/or the EQUIPMENT and such condition or situation
                  is not remedied within thirty (30) days after written notice
                  to the BORROWER to remedy such condition or situation, or
                  action has not been commenced to remedy such condition or
                  situation where it is not possible to fully remedy such
                  condition or situation within thirty (30) calendar days. The
                  LENDER agrees that it will not exercise this right in an
                  unreasonable manner.


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         j.       NON-COMPLETION: Subject to force majeure, if by the 450th
                  calendar day after the date of this Agreement, the BUILDING
                  and/or the improvements to the SECURITY are not completed
                  and/or the EQUIPMENT, or any part thereof is not acquired by
                  BORROWER and, if applicable, installed in the BUILDING.

15.      LENDER's REMEDIES: Upon the occurrence of any event of default
         hereunder, LENDER shall have the absolute right to refuse to disburse
         any LOAN funds provided in Exhibit "C" hereto, and should said default
         not be remedied by the BORROWER within thirty (30) days after notice
         thereof to the BORROWER by the LENDER, then the LENDER shall have the
         absolute right, at its option and election to:

         a.       CANCELLATION: Cancel this Agreement by written notice to the
                  BORROWER;

         b.       SPECIFIC PERFORMANCE: Institute appropriate proceedings to
                  specifically enforce performance hereof;

         c.       WITHHOLD ADVANCES: Withhold further LOAN advances hereunder;

         d.       TAKING OF POSSESSION: Take immediate possession of the
                  SECURITY, the BUILDING and the EQUIPMENT encumbered by the
                  Mortgage, as well as other property to which title is held by
                  the BORROWER which may be necessary or convenient to fully
                  complete all on-site and off-site improvement's construction
                  and installations contemplated to be developed and/or
                  constructed and/or installed under this Agreement.

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         e.       RECEIVERSHIP: Appoint a Receiver, as matter of strict right
                  without regard to the solvency of the BORROWER, for the
                  purpose of preserving the SECURITY, the BUILDING and the
                  EQUIPMENT, preventing waste, and to protect all rights
                  accruing to the LENDER by virtue of this Agreement, and of the
                  Mortgage and/or the Mortgage Note and/or the Acknowledgment
                  Note executed in connection with this Agreement, and expressly
                  to make any and all further improvements, construction and
                  installations, whether on-site or off-site, as may be
                  determined by the LENDER for the purpose of completing the
                  improvements, the construction of the BUILDING and the
                  acquisition and installation of the EQUIPMENT in accordance
                  with this Agreement. All expenses incurred in connection with
                  the appointment of said Receiver, or in protecting,
                  preserving, or improving the subject SECURITY, BUILDING and
                  EQUIPMENT, shall be chargeable against the BORROWER and shall
                  be enforced as a lien against the SECURITY, the BUILDING and
                  the EQUIPMENT.

         f.       ACCELERATION: Accelerate maturity of said Mortgage, Mortgage
                  Note and Acknowledgment Note(s) and demand payment of the
                  principal sums due thereunder, with interest, advances, and
                  costs, and in default of said payment or any part thereof, to
                  foreclosure and enforce collection of such payment by
                  foreclosure and/or other appropriate action in any court of
                  competent jurisdiction.

                                       19



<PAGE>   21

                  The said remedies and rights of the LENDER shall be cumulative
         and not exclusive. The LENDER shall be privileged and shall have the
         absolute right to resort to any one or more, or all of said remedies,
         neither to the limited exclusion of the other. In the event of any such
         default or breach of this Agreement, the Acknowledgment Note(s),
         Mortgage Note, or Mortgage by the BORROWER, the LENDER shall have the
         absolute right to refuse to disburse the balance of the LOAN funds, as
         aforesaid, and no other party, whether contractor, materialmen,
         laborer, sub-contractor, or supplier, shall have any interest in the
         LOAN funds so applied and shall not have any right to garnish, require,
         or compel payment hereof towards discharge or satisfaction of any claim
         or lien which they or any of them have or may have for work performed
         or materials or EQUIPMENT supplied for the development and/or
         construction work of the BUILDING and/or acquisition and/or
         installation of the EQUIPMENT. Any additional funds advanced by the
         LENDER to complete development and/or construction of the BUILDING
         and/or acquisition and/or installation of the EQUIPMENT shall be
         secured by the lien of the Mortgage, and shall be considered a part of
         the LOAN as though initially included therein.

16.      WAIVER OF DEFAULTS: The waiver by the LENDER of any breach or breaches
         hereof shall not be deemed, nor shall the same constitute, a waiver of
         any subsequent breach or breaches on the part of the BORROWER.

17.      LENDER's RIGHT TO APPEAR IN LITIGATION: The LENDER shall have the right
         to commence, to appear in, or to defend any action or proceeding
         purporting to affect the rights or duties of the parties


                                       20
<PAGE>   22

         hereunder and in connection therewith pay out of said LOAN funds all
         necessary expenses, employ counsel and pay his reasonable fees, all of
         which the BORROWER agrees to repay to the LENDER upon demand.

18.      THIS AGREEMENT PART OF ACKNOWLEDGEMENT NOTES: The Acknowledgment Notes
         provided for herein shall specifically incorporate this Agreement by
         reference and in the event that the Acknowledgement Notes, and/or the
         Mortgage Note, and/or the Mortgage are duly assigned, this Agreement
         shall be considered assigned in like manner.

19.      EXCLUSIVENESS OF AGREEMENT: This Agreement is made for the sole
         protection of the BORROWER, GUARANTOR, and the LENDER, its successors
         and assigns, and no other person shall have any right of action
         hereunder.

20.      CONDEMNATION: The BORROWER, for the BORROWER and the BORROWER's heirs,
         executors, administrators, successors and assigns, does hereby assign
         unto the LENDER, its successors and assigns, any and all awards hereto
         made and hereafter to be made by any Federal, State or Municipal
         authorities to the present and all subsequent owners of the SECURITY,
         the BUILDING and/or the EQUIPMENT, and the LENDER, for itself, its
         successors and assigns (at its or their option) is hereby authorized,
         directed and empowered to collect and receive the proceeds of any such
         award and awards from the authorities making the same and to give
         proper receipts and acquittances therefor, and to apply the same toward
         the payment of the amount owing on account of the LOAN and/or the
         Mortgage Note, the Acknowledgment Note(s) and/or the Mortgage.


                                       21
<PAGE>   23

         The BORROWER and the GUARANTOR heirs, executors, administrators,
         successors and assigns, hereby covenants and agrees to and with the
         LENDER, its successors and assigns, upon request; to make, execute and
         deliver any and all assignments and other instruments sufficient for
         the purpose of assigning the aforesaid award or awards to the holder(s)
         of the Mortgage Note, the Acknowledgment Note(s), and the Mortgage,
         free, clear and discharged of any and all encumbrances of any kind or
         nature whatsoever.

21.      DEFINITIONS: Wherever used herein, the following words are considered
         in the context of these definitions:

         a.       MORTGAGE: The Mortgage, Deed of Trust, Deed to Secure Debt, or
                  such other security instrument or instruments issued by
                  BORROWER used to establish the first lien upon the SECURITY
                  and the BUILDING and to secure the Mortgage Note.

         b.       MORTGAGE NOTE: The demand mortgage promissory note issued by
                  BORROWER in the principal amount of THREE MILLION TWO HUNDRED
                  THOUSAND DOLLARS ($3,200,000.00) secured by the Mortgage.

         c.       ACKNOWLEDGEMENT NOTE: The acknowledgement note or other notes
                  or evidence(s) of the indebtedness created by the LOAN, issued
                  by BORROWER to the order of LENDER, payable on demand.

         d.       LOAN: The LOAN which is the subject matter of this Agreement
                  and the other documents to which this Agreement refers.

                                       22
<PAGE>   24


         e.       LENDER: The named party to this Agreement, and any subsequent
                  owner and holder of the rights and obligations established
                  under this Agreement, the Acknowledgement Notes, the Mortgage
                  Note, and the Mortgage.


         f.       BORROWER: The named BORROWER in this Agreement, and any
                  successor in interest to the BORROWER permitted by the LENDER
                  as hereinbefore stated.

         g.       GUARANTOR: The name GUARANTOR in this Agreement, and any
                  successor in interest to the GUARANTOR.

         h.       SECURITY: The real and/or personal properties described in
                  Exhibit "A" upon which the Mortgage attaches, and all its
                  improvements.

         i.       LIBOR RATE: The rate of interest for offered quotations for
                  ninety (90) day deposits of United States Dollars in the
                  London Interbank Market, at 9:00 a.m. Eastern Standard Time on
                  such Pricing Date, as published by Telerate Systems, Inc.
                  currently on page 4833 of the financial information reporting
                  services furnished electronically by Telerate Systems, Inc. If
                  on a Pricing Date the Bank cannot determine the LIBOR Rate on
                  the basis of the foregoing procedure, the Bank shall utilize
                  the LIBOR Rate for the prior business day as set forth above.

         j.       PRIME OR BASE RATE: The annual interest rate, computed on a
                  360-days basis, charged by Citibank, N. A. or Chase Manhattan
                  Bank, N.A., at its main office in the Borough of Manhattan,
                  City of New York, whichever is lower, on


                                       23
<PAGE>   25

                  90 days unsecured commercial loans to its corporate borrowers
                  with the best credit rating.

         k.       REQUEST FOR PAYMENT: As indicated in Exhibit "D" attached
                  hereto and made part hereof.

22.      NOTICE TO PARTIES: All notices provided for herein shall be by
         certified mail addressed to the appropriate party at the address
         designated for such party underneath its signature, at the bottom of
         this Agreement, or such other address as the party who is to receive
         such notice may designate in writing. Notice shall be completed by
         depositing the same in a letter box or other means provided by the
         United States Post Office for the posting of mail addressed to the
         party with the proper amount of postage affixed thereto. Actual receipt
         of notices shall not be required to effect notice hereunder.

23.      LOAN FUNDS: The LENDER shall not be required to segregate the LOAN
         funds or to earmark such funds in any manner. The sole obligation of
         the LENDER shall be to disburse the funds as set forth herein, provided
         there exists no default under this Agreement, the LOAN, the Mortgage
         Note, the Acknowledgment Note(s), or the Mortgage at the time of each
         request for LOAN advances hereunder.

24.      UNLIMITED ACCESS TO PROPERTY: The LENDER and its agents shall at all
         times during the development and/or construction of the BUILDING and/or
         acquisition and/or installation of the EQUIPMENT have the right of
         entry and free access to the property which constitutes the SECURITY
         and to the BUILDING and the EQUIPMENT and the right to inspect all work
         done, labor


                                       24
<PAGE>   26

         performed, materials furnished and Equipment installed on or about the
         SECURITY.

25.      NON-ASSIGNABLE BY BORROWER: The BORROWER shall not assign this
         Agreement or any part of any advance to be made hereunder, nor convey,
         nor encumber the SECURITY, the BUILDING or the EQUIPMENT by mortgage or
         other liens without the written consent of the LENDER, except
         assignments to a subsidiary or affiliate under common control of
         Borrower. Any assignment, conveyance or encumbrance without such
         consent of the LENDER shall constitute an immediate default under this
         Agreement, the Acknowledgment Note(s), the Mortgage Note, and the
         Mortgage.

26.      NO AGENCY RELATIONSHIP: The BORROWER understands and agrees that the
         LENDER is not the agent or representative of the BORROWER, and this
         Agreement shall not be construed to make the LENDER liable to
         materialmen, suppliers, contractors, craftsmen, laborers or others for
         goods or services delivered to the SECURITY or to the BORROWER or
         services performed by them upon said premises, or for the BORROWER, or
         for debts or claims accruing to said parties against the BORROWER, and
         it is distinctly understood and agreed that there is no contractual
         relation, either expressed or implied, between the LENDER and any
         materialmen, suppliers, subcontractors, craftsmen, laborers, or any
         other person supplying any work, labor, goods, equipment, or materials
         in the improvement of the SECURITY, the construction of the BUILDING
         and/or the supply and/or installation of the EQUIPMENT.

27.      TITLE INSURANCE: The LENDER will procure, at BORROWER'S expense, a
         title insurance policy in the ALTA form, to be issued by


                                       25
<PAGE>   27

         a title insurance company acceptable to Lender through an authorized
         agent acceptable to Lender and its legal counsel. The title policy is
         to be issued without exceptions, except for customary standard
         exceptions and those exceptions which are acceptable to Counsel for the
         LENDER, insuring the LENDER's Mortgage as a valid and paramount lien
         upon the SECURITY and the BUILDING and insuring against loss or change
         in priority as a result of filing of any lien or special assessment for
         material or work under construction or completed.

         Designation by the OWNER of the title insurer shall be subject to the
         LENDER's approval of the financial ability of said insurer to pay the
         face amount of the aforesaid policy and all of its other policies
         insuring the LENDER in the event of loss.

         Prior to making any disbursement under the LOAN, the LENDER shall
         receive evidence, satisfactory to it, that the title insurance company
         is prepared to issue its title insurance binder, in ALTA form, covering
         the date of the disbursement and insuring the Mortgage, as of said
         date, as a first, valid and subsisting lien on the subject premises,
         free and clear of any and all liens, except those approved by Lender or
         permitted hereunder, and subject only to such exception as the LENDER
         may approve.


28.      MISCELLANEOUS PROVISIONS: All inspections and other services rendered
         by the LENDER or its agent, whether or not paid for by the BORROWER or
         its successors in title, shall be rendered solely for the protection
         and the benefit of the LENDER; and the BORROWER shall not be entitled
         to claim any loss or damage against the


                                       26
<PAGE>   28

         LENDER or its agent or employees for failure to properly discharge
         their duties to the LENDER.

         This Agreement, the Mortgage Note, the Acknowledgment Note(s), and the
         Mortgage, are or will be executed and delivered in the Commonwealth of
         Puerto Rico, and the Laws of the Commonwealth of Puerto Rico shall
         govern in the interpretation, enforcement, and all other aspects of the
         obligations and duties created under this Agreement.

         Nothing contained in this Agreement, the Mortgage Note, the
         Acknowledgment Note(s), and the Mortgage shall impose upon the LENDER
         any obligation to see to the proper application of advances under the
         LOAN. No provision of this Agreement shall be amended, waived or
         modified except by an instrument in writing signed by the parties
         hereto.

         The Borrower shall protect, indemnify and save harmless the Lender from
         and against all liabilities, obligations, damages, penalties, claims,
         causes of action, costs, charges and expenses (including without
         limiting the generality of the foregoing, court costs, reasonable
         attorneys' and consultants' fees, environmental cleanup costs, natural
         resources damages, fines, penalties and damages to persons, personal
         property, real property and business enterprises, including any and all
         past, present and future claims and liability arising out of or
         relating to the environmental condition of the Security, the
         existence of any environmental hazard on the Security and any release
         or threat of release of any Hazardous Substance (as hereinafter
         defined) of any kind in, on, under or from the Security at any time,
         regardless of whether caused by or within the control


                                       27
<PAGE>   29

         of the Borrower which may be imposed upon or incurred by or asserted
         against the Lender by reason of (i) any accident, injury or damage to
         any person or property occurring on or about the Security or any part
         thereof, (ii) any use, non-use or condition of the Security or any part
         thereof, (iii) any failure on the part of the Borrower to perform or
         comply with any of the provisions hereof, or (iv) any necessity to
         defend any of the rights, title or interest conveyed or created by this
         Contract, except to the extent any of the foregoing results from the
         gross negligence and/or willful misconduct of Lender. Any amounts
         payable to the Lender under this paragraph which are not paid within
         ten (10) days after written demand therefor by the Lender shall bear
         interest from the date of such demand until full payment thereof at a
         fluctuating annual rate (computed on the basis of a
         three-hundred-sixty-day (360-day) year and the actual number of days
         elapsed) equal to four percent (4%) over and above the Prime Rate, such
         fluctuating rate to change simultaneously with the changes in such
         Prime Rate, and such amounts, together with such interest, shall be
         deemed to be indebtedness secured by this Agreement. In no event shall
         the interest rate to be charged hereunder exceed the maximum
         permissible legal rate. In case any action, suit or proceeding is
         brought against the Lender by reason of any such occurrence, the
         Borrower upon request by the Lender, will at the Borrower's expenses
         resist and defend such action, suit or proceeding or cause the same to
         be resisted or defended, either by counsel designated by the Borrower
         and approved by the Lender or, where such occurrence is covered by
         liability insurance, by counsel designated


                                       28
<PAGE>   30

         by the insurer. Notwithstanding anything to the contrary in this
         Agreement, the provisions of this indemnity and all other
         representations, warranties and covenants contained in this Agreement
         shall survive the payment and satisfaction or termination of this
         Agreement. As used in this Agreement the term Hazardous Substance has
         the following meaning:

         HAZARDOUS SUBSTANCE: (i) any "hazardous substance", "pollutant" or
         "contaminant" as said terms are defined in clauses fourteen (14) and
         thirty-three (33) of Section one hundred one (101) of the Comprehensive
         Environmental Response, Compensation and Liability Act (CERCLA) [Title
         Forty-Two (42) United States Code (U.S.C.) Section nine thousand six
         hundred one (9,601), clauses fourteen (14) and thirty-three (33)], or
         Title Forty (40) Code of Federal Regulations (C.F.R.) Part three
         hundred two (302), as said act and regulation may be amended from time
         to time; (ii) any "hazardous waste" as said term is defined in the
         Puerto Rico Environmental Quality Board Regulation for the Control of
         Hazardous and Non-Hazardous Solid Wastes, as said regulation may be
         amended from time to time; (iii) any toxic or hazardous substance,
         material or waste (whether solid, liquid or gaseous) (iv) any substance
         containing "petroleum", as that term is defined in Section nine
         thousand one (9001), clause eight (8) of the Resource Conservation and
         Recovery Act (RCRA), as amended (Title Forty-Two (42) U.S.C. Section
         six thousand nine hundred ninety-one (6,991), clause eight (8)], or
         Title Forty (40) C.F.R. Part two hundred eighty point one (280.1)], as
         said act and regulation may be amended from time to time or (v) any
         other substance for




                                       29
<PAGE>   31


         which any governmental entity now or hereafter requires special
         handling in its collection, storage, treatment or disposal.

         All covenants, agreements, representations and warranties made herein
and in documents delivered in support of the LOAN request shall be deemed to
have been material and relied on by the LENDER and shall survive the execution
and delivery to the LENDER of the Acknowledgment Note(s) and disbursements
thereunder. Such documents are identified in Exhibit "B".

         All sections and descriptive headings are inserted for convenience
only, and shall not affect any construction or interpretation hereof.

         Unenforceability for any reason of any provision of this Agreement
shall not limit or impair the operation or validity of any other provision of
this Agreement.

         This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be an original, but such counterparts
shall together constitute one and the same instrument.

         This Agreement makes no provision for advances with respect to
materials on site. Nevertheless, Lender, at its option, will make advances
and/or loans for materials on site if requested by Borrower, for no more than
Fifty Thousand Dollars ($50,000.00), and providing further that said amount
shall be a part of the maximum amounts outstanding hereinbefore specified for
development and/or construction. Any and all such materials on site shall be
properly kept at a safe place separate and aside from any and all other
materials, and shall be duly identified as required by Lender; in form and
manner acceptable to the Lender and its counsel.

29.      COMMITMENT FEE: BORROWER shall pay to LENDER a commitment fee of
         SIXTEEN THOUSAND DOLLARS ($16,000.00)


                                       30
<PAGE>   32

         for the granting of the interim and permanent loan, of which amount
         BORROWER has already paid to LENDER the amount of Eight Thousand
         Dollars ($8,000.00) and the remaining amount shall be paid to LENDER
         simultaneously with the execution of this Agreement.

30.      LONG TERM FINANCING: Provided that if by the 450th calendar day after
         the date of this Agreement, (i) there is no default by BORROWER that
         remains uncured under this Agreement, the Mortgage, the Mortgage Note
         and/or the Acknowledgement Notes; (ii) the Building has then been
         constructed and finished substantially in accordance with the plans and
         specifications; (iii) all the Equipment has then been acquired by the
         BORROWER and, when applicable, installed in the Building; (iv) The
         Administration of Regulations and Permits ("ARPE") of the Commonwealth
         of Puerto Rico has then issued a Use Permit (the "Use Permit") for the
         Building; then and if the aforesaid conditions are met, LENDER
         irrevocably covenants and agrees that it will convert the LOAN into a
         permanent loan for the SECURITY, the Building and the Equipment. The
         LOAN (a) shall then continue to be secured as provided hereinbefore and
         as provided in the Mortgage, the Acknowledgment Notes and the Mortgage
         Note; (b) shall bear interest at a fluctuating annual rate equivalent
         to TWO HUNDRED (200) basis points over LIBOR; and (c) shall mature and
         be payable as set forth in paragraph 31 of this Agreement.

31.      MATURITY AND FORM OF PAYMENT OF PRINCIPAL OF AND INTEREST ON THE LOAN:

         A.       PERMANENT FINANCING PERIOD: If the BORROWER complies with


                                       31
<PAGE>   33

                  all conditions required under this Agreement for the
                  conversion of the LOAN into a permanent financing as set forth
                  in paragraph 30 of this Agreement, then, and in such event,
                  the LOAN will be payable as follows, except if accelerated by
                  LENDER as a result of any default(s) by BORROWER hereunder not
                  cured within the period permitted hereunder in this Agreement.

                  1) One Hundred Eighty (180) consecutive monthly installments
                  of $17,778.00 each for principal, plus interest, beginning
                  thirty (30) days after conversion of the interim loan into a
                  permanent loan.

         If the improvements are completed before the date hereinbefore
         indicated, the monthly payments of principal and interest will start
         thirty (30) days after the Use Permit is issued by ARPE. All payments
         made by Borrower to be credited to the permanent loan will be applied
         first to interest and thereafter they will be applied to reduce the
         outstanding principal balance.

32.      COMMISSION FEE TO LENDER FOR CONVERSION TO PERMANENT FINANCING: The
         commission fee for the conversion of the Interim Loan into a Permanent
         Loan will be paid by Borrower to Lender as indicated in Paragraph 29 of
         this Loan Agreement.

33.      PREPAYMENT: This Loan may be prepaid in whole or in part before
         maturity subject to ---at Lender's option--- the prepayment fee
         hereinafter specified.

         (i) If the payment is made within the first year from the conversion of
         the interim loan into a permanent loan, the prepayment fee will


                                       32
<PAGE>   34

         be equal to Three Percent (3%) of the outstanding balance of the Loan;

         (ii) If the payment is made after the first (1st) anniversary of said
         conversion but before the third (3rd) anniversary, the prepayment fee
         will be Two Percent (2%) of the outstanding balance;

         (iii) If the payment is made after the third (3rd) anniversary of said
         conversion but before the fifth (5th) anniversary, the prepayment fee
         will be one percent (1 %) of the outstanding balance.

         Notwithstanding the aforegoing, Borrower may prepay the outstanding
         balance due under the loan without any prepayment penalty provided that
         the funds used therefore have not been obtained by Borrower from the
         refinancing of the properties given as security for the Loan with
         another financial institution.

34.      BONDED CONTRACTORS: All development and construction work to be
         financed with the proceeds of the LOAN shall be done by independent
         third party contractors acceptable to Lender under contracts which
         shall be bonded as to payment and performance by corporate surety
         acceptable to Lender. Copies of the contracts shall be furnished to the
         LENDER when executed together with copy(ies) of the applicable bond(s)
         showing the LENDER as a joint obligee thereunder.

35.      ASSIGNMENT: It is understood and agreed that in the event that the
         LENDER, on account of a default by BORROWER, or by Agreement with
         BORROWER, becomes the owner of the SECURITY, and/or the Building,
         and/or the Equipment, then and in such event, any and all approvals,
         plans and specifications, servitudes and in general everything required
         in connection with the


                                       33
<PAGE>   35

         SECURITY, the Building and the Equipment, including but not limited to
         lease contracts, if any, covering the SECURITY and/or the Building
         and/or the Equipment and/or parts thereof, shall be of the exclusive
         ownership of the LENDER, with full authority and power to make
         whatsoever changes or amendments LENDER may deem advisable in
         connection therewith, and whoever contracts with the BORROWER shall
         have no right of any kind whatsoever to claim or allege against the
         LENDER in connection with any of the documents, instruments, approvals
         or otherwise covered by such assignment which is given as an integral
         part of the collateral or security of the LENDER.

36.      SIGN ON THE PREMISES: During the construction period and until the
         Building is occupied, a sign shall be posted on the premises indicating
         that Banco Santander Puerto Rico is providing the interim and permanent
         financing for the project. The sign will be furnished by Borrower, at
         Borrower's expense. In any publicity or advertising of this project,
         regardless of the media, mention also shall be made that Banco
         Santander is providing the financing for the Building.

37.      OTHER CONDITIONS OF LENDING:

         a.       Borrower will maintain its deposit accounts with Lender.

         b.       [text represented as strike through]

         c.       Borrower will not dispose of its current assets without the
                  prior written approval of Lender.

                                       34
<PAGE>   36

         d.       The Loan will not exceed Eighty Percent (80%) of the appraised
                  value of the Property.

         e.       The Parent Company will retain 100% percent of the stocks of
                  Simmons Caribbean Bedding, Inc.


         f.       [text represented as strike through]

         Anyone of the following persons are authorized to request payment of
certifications for works performed and to sign any and all documents, checks,
drafts, contracts, releases and any other document related to this Loan Program:

   Name                                       Signature
----------                                    ----------

Jonathan C. Daiker                     /s/ Jonathan C. Daiker
                                       -----------------------
Roger W. Franklin                       /s/ Roger W. Franklin
                                       -----------------------
Hector M. Osorio                        /s/ Hector M. Osorio
                                       -----------------------



         IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year first above written.


BANCO STANDER PUERTO                           SIMMONS CARIBBEAN BEDDING,
RICO                                           INC.

/s/                                             /s/ Hector M. Osorio
--------------------------                     ---------------------------------
                                               /s/ Hector M. Osorio, President
/s/
--------------------------



Address:                                       Address:

P.0. Box 362589                                One Concourse Parkway
San Juan, P.R. 00936-2589                      Suite 600
                                               Atlanta, GA 30328

Affidavit Number 25,159 (copy)
                --------

         Subscribed and acknowledged to before me by Mister Hector M.
Osorio, as President and General Manager of Simmons Caribbean


                                       35
<PAGE>   37

Bedding, Inc., of legal age, married, executive and resident of Guaynabo Puerto
Rico; and by Ariel Lebron Lebron and Myrna Diaz Marrero


-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

as Authorized Agents of Banco Santander Puerto Rico, of the personal
circumstances above stated, personally known to me, at San Juan, Puerto Rico,
this 12th day of December , 1997.

                                            MANUEL CORREA CALZADA
                                            NOTARY PUBLIC


<PAGE>   38
EXHIBIT "A"


TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.



         URBANA: Parcela deterreno radicada en el Barrio Las Cuevas de Trujillo
         Alto, Puerto Rico, identificada como solar Numero Seis (6) del Parque
         Industrial Las Cuevas, con una cabida superficial de Diez Mil
         Seiscientos Ochenta y Siete punto Setenta (10687.70) metros cuadrados,
         equivalentes a dos cuerdas con setecientos diecinueve (2.719)
         cienmilesimas de otra, en lindes por el Norte, con el solar numero
         Cinco (5) y con el area de viraje de la Calle "C" de la misma area
         industrial; por el Sur, con la Calle "A" del Parque Industrial; por el
         Este, con el area de uso publico del area industrial, solar Diecisiete
         (17) y con el area de viraje de la Calle "A" de la misma area
         industrial; y por el Oeste, con la Calle "C" de la misma area
         industrial.

         The above described property was segregated from a property formed by
         the grouping of certain properties as it appears from Deed Number
         Twenty (20), executed on December Four (4), Nineteen Hundred Ninety Two
         (1992), before Notary Edgardo L. Martinez, pending recordation. The
         properties that were grouped are the following: Properties Number Six
         Thousand Four Hundred Thirty Six (6,436), Property Number Eleven
         Thousand Seven Hundred Seventy Eight (11,778) and Four Thousand Three
         (4003), recorded at Pages Eighty Two (82), Seventy Eight (78) and One
         Hundred Twenty Nine (129) of Volumes One Hundred Twenty Eight (128),
         Two Hundred Thirty Eight (238) and Ninety (80) of Trujillo Alto,
         respectively.



<PAGE>   39
                                   EXHIBIT "B"


TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.


         The following items were furnished by or on behalf of Borrower to
support the Loan, which is the subject of this Agreement. Lender, in agreeing to
make this Loan has relied upon said items and any material misrepresentation
shall be considered a default in the Loan.



1.   Financial Statements of Borrower as of
     _________,199__.
2.   Corporate Resolution of Borrower.
3.   Statement of property taxes.
4.   Appraisal
5.   ARPE Approval
6.   Final Construction Plans and Specifications.
7.   Survey of Property.
8.   Construction Contract.
9.   Construction Permit.
10.  Subordination of the Parent Company of all outstanding loans of
     Borrower with the Parent Company.







<PAGE>   40
                                  EXHIBIT "C"


TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.



                  PAYMENT BREAKDOWN SCHEDULE
Reserve for construction                    $2,977,916.00

Reserve for payment of appraisal
report                                           4,500.00

Reserve for payment of legal
fees, Internal Revenue Stamps,
recording fees and title policy                41 ,872.00

* Reserve for payment of interest
during construction                             45,000.00

Reserve for payment of Bank
inspector                                        5,200.00

Reserve for contingencies                       32,512.00

Reserve for payment of commitment
fee                                              8,000.00

Reserve for payment of bonds and
insurance premiums                              25,000.00

Reserve for payment of consultant
expenses                                        60,000.00
                                            -------------

         TOTAL ............................ $3,200,000.00
                                            =============



         Of the Loan Amount, the sum of TWO MILLION NINE HUNDRED SEVENTY SEVEN
THOUSAND NINE HUNDRED SIXTEEN DOLLARS ($2,977,916.00) is reserved for the
construction as required by all governmental authorities of a commercial
building of approximately 50,000 square feet and 66 parking spaces, as indicated
in the Plans and Specifications submitted to Lender by Borrower.

<PAGE>   41

Exhibit C

Page two



         The Borrower shall request disbursement by supplying to the Lender a
Request in the form attached to Exhibit "D", which shall be completed and
certified as indicated therein, together with a promissory note to the order of
Banco Santander Puerto Rico indicating the amount to be disbursed properly
signed by an authorized agent of the Borrower as identified in Exhibit "G"
attached herein.

         From each amount approved for payment, there shall be withheld and
retained by the Lender a sum equivalent to ten percent (10%) of the gross
amount, and the amount so withheld and retained, hereinafter called "retainage",
will be subordinated by BORROWER, contractors and sub-contractors until the Loan
is converted to a permanent loan and until LENDER approve such retainage
disbursement.

         In the event that any one of the budgeted amounts indicated herein
exceeds its actual cost, the budgeted amount and the total amount of the
loan will be adjusted accordingly.

         All closing costs to be disbursed at closing directly to Gonzalez
Oliver, Correa Calzada, Collazo Salazar, Herrero & Jimenez.


--------------

* During the term of this loan, provided there is no default under this Contract
that accelerates the due date of this Loan, Lender will charge this reserve each
month the interest payment due as indicated in the Loan Agreement.
<PAGE>   42


                                  EXHIBIT "C-1"



TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.



                      Please refer to attached statement.


<PAGE>   43

<TABLE>
<CAPTION>

                                  Exhibit C-1
                                  -----------

                                Simmons Company
                       Advances to SCBI for New Facility

                                            Reference          Design            Construction
                                              Number            Fee                   Cost             Total
                                          ----------------------------------------------------------------------

<S>                                            <C>      <C>                    <C>                 <C>
Contract amount                                             $141,130.00        $2,836,786.00       $2,977,916.00

Amounts advanced to SCBI:
    For Ivan Hernandez                                       $34,860.00
                                               144           $26,965.00
                                               159           $28,975.00
                                               182           $17,065.00
                                               212            $9,285.00
    For Caribbean Industrial Construction       1                                $134,964.00
                                                2                                 $72,418.50
                                                3                                $177,933.60
                                                4                                $592,256.70
                                                        --------------------------------------------------------
         Total advances to SCBI                             $117,150:00          $977,572.80       $1,094,722.80

         Balance remaining                                   $23,980.00        $1,859,213.20       $1,883,193.20


Advances exclude amounts for initial land purchase.

</TABLE>

CIC.wk4                                           A                  09-Dec-97





<PAGE>   44

                                  EXHIBIT "D"


TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.




                        Please refer to attached request.


<PAGE>   45
                                                                         Exhibit

CONTINUATION SHEET                  AIA DOCUMENT G702A        PAGE    OF   PAGES
--------------------------------------------------------------------------------

<TABLE>

AIA Document G702, APPLICATION AND CERTIFICATE FOR PAYMENT, containing                  APPLICATION NUMBER:
CONTRACTOR'S signed Certification is attached.
In tabulations below, amounts are stated to the nearest dollar.
Use Column 1 on contracts where variable retainage for  line items may apply.           ARCHITECT'S PROJECT NO.

-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                               WORK COMPLETED
ITEM       DESCRIPTION      SCHEDULED       Previous       This          STORES        TOTAL COMPLETED       BALANCED      RETAINAGE
 No.         OF WORK          VALUE        Application   Application     MATERIALS    AND STORED TO DATE     TO FINISH
 A             B                C              D              E             F              G(D+E+F)     %      H(C-G)        I
------------------------------------------------------------------------------------------------------------------------------------
<S>         <C>               <C>           <C>           <C>            <C>             <C>           <C>       <C>        <C>








------------------------------------------------------------------------------------------------------------------------------------
        SUB TOTAL OR TOTAL
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>



<PAGE>   46

                                           Exhibit D to Loan Agreement executed
                                           by and between Banco Santander Puerto
                                           Rico and
<TABLE>
<CAPTION>

APPLICATION AND CERTIFICATE FOR PAYMENT                       AIA DOCUMENT G702                     PAGE ONE OF           PAGES
-------------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>
PROJECT:                                              ARCHITECT:

(name, address)                                       ARCHITECT'S PROJECT NO:

                                                      CONTRACTOR:

TO (Owner)                                            CONTRACT FOR:

                                                      APPLICATION DATE:                  APPLICATION NO:

ATTN:                                                 PERIOD FROM:                       TO:
------------------------------------------------------------------------------------------------------------------------------
CHANGE ORDER SUMMARY                                  Application is made for Payment, as shown below, in connection with the
---------------------------------------------------   Contract. Continuation Sheet, AIA Document G702A, is attached.
Change Orders approved    ADDITIONS $  DEDUCTIONS $
in previous months by                                 The present status of the account for this Contract is as follows:
Owner-
                   TOTAL
===================================================   ORIGINAL CONTRACT SUM...................................$_______________
Subsequent Change Orders
------------------------
 Number      Approved
              (date)                                   Net change by Change Orders............................$_______________
---------------------------------------------------

                                                      CONTRACT SUM TO DATE....................................$_______________
                                                      ------------------------------------------------------------------------

                                                      TOTAL COMPLETED & STORED TO DATE........................$_______________
                                                       (Column G on G702A)
===================================================
        TOTALS                                        RETAINAGE____________%..................................$_______________
Net change by Change Orders  $_____________________    or as noted in Column I on G702A
---------------------------------------------------
                                                      TOTAL EARNED LESS RETAINAGE.............................$________________
State of:                    County of:

The undersigned Contractor certifies that the Work    LESS PREVIOUS CERTIFICATES FOR PAYMENT..................$________________
covered by this Application for Payment has been
completed in accordance with the Contract Documents,
that all amounts have been paid by him for Work for
which previous Certificates for Payment were issued   CURRENT PAYMENT DUE.....................................$________________
and payments received from the Owner, and that the
current payment shown herein is now due.              ------------------------------------------------------------------------

Contractor:                                           Subscribed and sworn to before me this         day of          ,19
                                                      Notary Public:
                                                      My Commission expires:
By:                          Date:
==============================================================================================================================
In accordance with the Contract and this Application for Payment the Contractor is entitled to                [ ] OWNER
payment in the amount shown above.                                                                            [ ] ARCHITECT
                                                                                                              [ ] CONTRACTOR
Architect:                                                                                                    [ ]
                                                                                                              [ ]
By:

This Certificate is not negotiable. It is payable only to the payee named herein and its issuance, payment and acceptance are
without prejudice to any rights of the Owner or Contractor under their Contract.
-------------------------------------------------------------------------------------------------------------------------------

</TABLE>


<PAGE>   47

                                  EXHIBIT "E"

TO LOAN AGREEMENT executed by and between BANCO SANTANDER PUERTO RICO and
SIMMONS CARIBBEAN BEDDING, INC., dated December 12, 1997.



         The following is a complete list of all outstanding and unpaid judgment
and/or arbitration awards against the Borrower.




                                      NONE




<PAGE>   48


                                  EXHIBIT "F"

TO LOAN AGREEMENT executed by and between BANCO SANTANDER
PUERTO RICO and SIMMONS CARIBBEAN BEDDING, INC., dated
December 12, 1997.






         See attached Corporate Resolution of Borrower.

<PAGE>   49

                                  EXHIBIT "G"

TO LOAN AGREEMENT executed by and between BANCO SANTANDER
PUERTO RICO and SIMMONS CARIBBEAN BEDDING, INC., dated
December 12, 1997.


                              ACKNOWLEDGEMENT NOTE

VALUE:                                          DUE DATE: ON DEMAND

         FOR VALUE RECEIVED, the undersigned jointly and severally promises to
pay to the order of Banco Santander Puerto Rico, on demand, the principal sum of

plus interest until full payment hereof, at a fluctuating annual rate equivalent
to Two Hundred (200) basis points over the London Interbank Offered Rate
(LIBOR), adjusted every Ninety (90) days. Principal will be paid on demand and
interest will be payable monthly in arrears.

         In case judicial proceedings be filed by the holder for the collection
of any sum under this Promissory Note, undersigned hereby expressly submit to
the jurisdiction and venue of the Courts of Puerto Rico or the United States
sitting in the City of San Juan, Puerto Rico, which may have competent
jurisdiction by virtue of the subject matter and/or amount in controversy and we
expressly agree to pay all costs, expenses and disbursements, including
attorneys fees, incurred by holder in the collection of this obligation in a
liquidated sum equal to Ten Percent (10%) of the principal amount of this
Promissory Note even in, but not limited to the case where proceedings are
carried by default or in bankruptcy, and said sums to be due, and owing by the
mere filing, through or by an attorney, of the proof of claim in bankruptcy,
complaint or any other judicial claim, or placing in the hans of an attorney for
collection. Upon non compliance with any of the above or non-payment of any
installment of principal and/or interest when due, any obligations subscribed by
us in favor or in possession of the holder of this Promissory Note, shall, at
the option of the holder and without notice or demand, become immediately due
and payable together with interest, collection charges and attorney's fees. The
makers, endorsers, and all parties to this Promissory Note hereby waive
presentment for payment, demand, protest, notice of dishonor hereof, and further
hereby waive all benefit of valuation, appraisement, and exemption laws. The
holder may extend the time of payment of this Promissory Note, postpone the
enforcement hereof, grant any other indulgence and add or release any party
primarily or secondarily liable hereon without affecting or diminishing the
holder's right of recourse against the makers, endorsers and all parties to this
Promissory Note which right is hereby expressly reserved.

         This Note is one of a series of notes of like tenor issued pursuant to
and entitled to the benefits and security provided for by a Loan Agreement dated
         ,1997, between SIMMONS CARIBBEAN BEDDING, INC. (Borrower) and BANCO
SANTANDER PUERTO RICO (Lender) a Puerto Rico banking corporation, and the sum
constitutes a portion of the principal of the Mortgage Note(s) identified in the
Loan Agreement which guarantees all such advances.

         This Note is subject to acceleration as provided in said Loan
Agreement.

<PAGE>   50
Exhibit G
Page two

         This Note is issued and accepted as acknowledgement of
Certification Number _______, but not in payment of same.

         San Juan, Puerto Rico, this

                                       SIMMONS CARIBBEAN BEDDING,
                                       INC.

                                       __________________________

<PAGE>   51


                                  EXHIBIT "H"

TO LOAN AGREEMENT executed by and between BANCO SANTANDER
PUERTO RICO, and SIMMONS CARIBBEAN BEDDING, INC., dated
December 12, 1997.





                        Please refer to attached Plans.

<PAGE>   52


                                  EXHIBIT "I"


TO LOAN AGREEMENT executed by and between BANCO SANTANDER
PUERTO RICO and SIMMONS CARIBBEAN BEDDING, INC., dated
December 12, 1997.





                    Please refer to attached Specifications.

<PAGE>   53


   DEED NUMBER: SIXTY SEVEN (67)

                                DEED OF MORTGAGE

   In San Juan, Puerto Rico this twelfth (12th) day of December, Nineteen
Hundred Ninety Seven


                                    BEFORE ME

   MANUEL CORREA CALZADA


   Attorney at Law and Notary Public for Puerto Rico, with offices and residence
in San Juan, Puerto Rico.

                                     APPEAR

   AS THE FIRST PART: SIMMONS CARIBBEAN BEDDING, INC. (Employer's Identification
Number 66-0431881), a corporation organized and existing under the laws of the
Commonwealth of Puerto Rico, herein represented by its President and General
Manager Mister Hector M. Osorio, of legal age, married and resident of Guaynabo
, Puerto Rico, who represents and assures that he has been duly authorized to
appear herein on behalf of Mortgagor.

   AS THE SECOND PART: BANCO SANTANDER PUERTO RICO (Employer Identification
Number 66-0312389), a banking corporation duly organized under the laws of the
Commonwealth of Puerto Rico, represented herein by its Authorized Agents Ariel
Lebron and Myrna Diaz Marrero both of legal age, married and resident of
Trujillo Alto and San Juan, Puerto Rico respectively


                                       1

<PAGE>   54

duly authorized by Banco Santander Puerto Rico to appear herein on its behalf.

   The appearing parties assure me that they are in the full enjoyment and
exercise of their civil rights, nothing to the contrary being known to me, and
being in my judgement legally competent to execute this instrument, they freely
and voluntarily__________________________________________.

                                      STATE

   FIRST: That Mortgagor is the owner of record, with valid, good, legal,
recordable, insurable and marketable fee simple title ("pleno dominio") of the
property (at times hereinafter referred to as the "property" or "the mortgaged
property") described in paragraph TWENTY SEVENTH of this deed.

   SECOND: On this date the Mortgagor has issued a mortgage note in the
principal amount of THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000.00)
(hereinafter called the "Mortgage Note"), bearing interest at the rate
hereinafter indicated in Paragraph TWENTY SIXTH , until full and complete
payment of same, with principal and interest payable to the order of Banco
Santander Puerto Rico on demand, in lawful money of the United States of
America, at such place as the owner and/or holder of the aforesaid Mortgage Note
may from time to time in writing specify, which Mortgage Note is literally
transcribed in Paragraph TWENTY SIXTH of this deed.

                                       2
<PAGE>   55

   THIRD: In order to guarantee and secure (i) the full and complete payment of
the principal and interest of the Mortgage Note; (ii) the performance of each of
the terms therein and herein contained; (iii) an additional credit in an amount
corresponding to five annual interest payment to secure interest in addition to
those secured by law; (iv) an additional credit in the amount of THREE HUNDRED
TWENTY THOUSAND DOLLARS ($320,000.00) to cover the costs and expenses (including
attorney's fees) incurred by the owner and/or holder of the Mortgage Note in the
event that said owner and/or holder shall take recourse to the courts or any
other governmental agency in order to collect all or any part of the principal
thereof or any interest thereon (by foreclosure or other proceedings or action
including proceedings under the Bankruptcy Act); (v) an additional credit in the
amount of THREE HUNDRED TWENTY THOUSAND DOLLARS ($320,000.00) to cover any
amounts that may be paid or advanced by the owner and/or holder of the Mortgage
Note, together with interest thereon; and (vi) the full and punctual performance
and compliance by the Mortgagor of all its obligations of any nature whatsoever
to the owner and/or holder of the Mortgage Note, Mortgagor hereby constitutes
and creates a VOLUNTARY FIRST MORTGAGE (hereinafter referred to as the
"Mortgage"), in favor of the owner and/or holder of the Mortgage Note
(hereinafter also called "Mortgagee"),

                                       3
<PAGE>   56

encumbering the following properties (hereinafter also called the "Mortgaged
Property".

   (a) the properties mentioned and described in Paragraphs FIRST and TWENTY
SEVENTH respectively of this deed;

   (b) All of the buildings, structures, improvements and facilities now or
hereafter located thereon;

   (c) All of the rights of way or use, easements, servitudes, licenses,
tenements, hereditaments and other appurtenances now or hereafter belonging or
appertaining to the properties mentioned in this Paragraph THIRD of this deed;

   (d) all renewals and replacements of, substitutions for and additions to the
property described in Articles (a) and (b) above, and all other property, real
or personal, or mixed, now owned or hereafter acquired by Mortgagor and enjoyed
in common with or in any way appertaining to such property described in Articles
(a) and (b) above (other than the inventory, machinery and other equipment of
Mortgagor that is not a fixture to the real property), as well as all lands
which may be consolidated or grouped with the other property(ies) mentioned in
this paragraph THIRD of this deed;

   (e) all awards, compensations, and payment in respect of any taking by
condemnation or eminent domain or any of the foregoing; and

   (f) all rents, earnings, revenues, issues and profits of all the foregoing.

                                       4
<PAGE>   57

   FOURTH: The Mortgagor represents and warrants to the Mortgagee as follows:

   (a) That the Mortgaged Property is free and clear of all liens, restrictions
or encumbrances whatsoever, except for those matters shown on the loan and the
insurance policy obtained by Mortgagee in connection to the loan evidenced by
the Mortgage Note;

   (b) That it has good right and lawful authority to convey, mortgage and
pledge the Mortgaged Property in the manner and form hereby conveyed, mortgaged
and pledged;

   (c) That all taxes and assessments that are presently due and payable on the
Mortgaged Property have been fully paid and satisfied and that said Mortgaged
Property is free from unpaid taxes and assessments;

   (d) That it will warrant and defend said Mortgaged Property against all and
every person or persons claiming the same or any part thereof.

   FIFTH: Mortgagor will promptly pay the principal of and accrued interest on
the Mortgage Note on demand by its owner and/or holder, except as otherwise
provided in the Loan Agreement of even date herewith, and will maintain its
existence and the lien of the Mortgage as a valid, direct first and senior
mortgage lien of record on the Mortgaged Property and every part thereof,
whether now owned or hereafter acquired, subject to no prior or equal lien,
charge or encumbrance.

                                       5
<PAGE>   58

   SIXTH: Subject to ARTICLE NINTH relating to contests, Mortgagor will pay and
discharge any and all imposition(s) within such time as the same shall be
payable without penalty, fine or interest and will furnish to Mortgagee from
time to time, upon request, official receipts or other satisfactory proof
evidencing such payment(s).

   SEVENTH: Subject to Paragraph NINTH relating to contests, Mortgagor at its
expense will promptly comply with all legal requirements and insurance
requirements, whether or not compliance therewith shall require structural
changes in the Mortgaged Property, and will procure, maintain and comply with
all permits, licenses and other authorizations required for any use of the
Mortgaged Property or any part thereof then being made and for the proper
erection, installation, operation and maintenance of the Mortgaged Property or
any part thereof and will comply with any instruments of record affecting the
Mortgaged Property or any part thereof at the time in force.

   EIGHTH: Subject to Paragraph NINTH relating to contests, Mortgagor will not
create or permit to be created or to remain, and will discharge, any mortgage
lien, encumbrance, or charge upon the Mortgaged Property, or any part thereof,
other than (a) this Mortgage, (b) mortgages junior in lien or subordinated to
this Mortgage, as may be approved in writing by the owner and/or holder of the
Mortgage Note,

                                       6
<PAGE>   59

(C) mechanics', laborers', materialmen, suppliers', or vendors' liens not filed
for record for charges not delinquent, incident to then current construction of
improvements on the Mortgaged Property; (d) easements or reservations with
respect to the Mortgaged Property for rights of way for electric transmission
and distribution lines, telephone and telegraph lines, fuel, water, sewage and
drainage pipelines and channels and all other similar purposes, provided that
such easements and reservations do not, either in any case or in the aggregate,
materially interfere with the occupancy or use of the Mortgaged Property, and
(e) any restrictive covenants which may be required by any governmental
authority, agency or entity having jurisdiction, in connection with any
improvements and/or construction that Mortgagor might do or cause to be done on
the Mortgaged Property, with the prior written approval of the owner and/or
holder of the Mortgage Note.

   NINTH: Mortgagor, at its expense, may contest in good faith, after prior
written notice to Mortgagee, by appropriate proceedings promptly initiated and
conducted with due diligence, the amount and/or validity and/or application, in
whole or in part, of any imposition and/or legal requirement or of any lien,
encumbrance, charge or claim upon the Mortgaged Property or the application of
any instrument of record referred to in Paragraph SEVENTH of this deed and may
defer payment thereof, provided that (a) in the case of any such



                                       7



<PAGE>   60
unpaid imposition, lien, encumbrance, charge or claim, such proceedings shall
suspend the collection thereof from Mortgagor or the Mortgaged Property, (b)
neither the Mortgaged Property nor any part thereof or interest thereon would be
in danger of being sold, forfeited, or lost, (c) in the case of a legal
requirement, neither Mortgagor nor Mortgagee would be subject to civil or
criminal liability for failure to comply therewith; (d) Mortgagor shall have
furnished such security, if any, as may be required in the proceedings or as may
be reasonably requested by Mortgagee, and (e) Mortgagor shall pay the amount
thereof finally determined and shall hold Mortgagee harmless of and from any
loss by reason of deferment.

   TENTH: The Mortgagee agrees to execute at Mortgagor's expense, all deeds
which shall be required for the creation of restrictive covenants and easements
and for the conveyance of part of the Mortgaged Property for public use as
required by the Planning Board and/or the Permits and Regulations Administration
of the Commonwealth of Puerto Rico in connection with the development by
Mortgagor of any housing or other type of project in the Mortgaged Property
provided, however, that no such development may be commenced without the prior
written approval of the Mortgagee and that such deeds shall be in form and
substance satisfactory to the Mortgagee.

   ELEVENTH: Nothing contained in this Mortgage shall constitute any consent or
request by Mortgagee,

                                       8
<PAGE>   61

expressed or implied, for the performance of any labor or services, or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, nor as giving Mortgagor any right, power of
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Mortgagee in respect thereof or any claim
that any lien based on the performance of such labor or services, or the
furnishing of any such materials or other property is or may be prior to the
lien of this Mortgage.

   TWELFTH: The Mortgagor shall protect, indemnify and save harmless the
Mortgagee from and against all liabilities, obligations, damages, penalties,
claims, causes of action, costs, charges and expenses (including without
limiting the generality of the foregoing, court costs, attorneys' and
consultants' fees, environmental cleanup costs, natural resources damages,
fines, penalties and damages to persons, personal property, real property and
business enterprises, including any and all past, present and future claims and
liability arising out of or relating to the environmental condition of the
Mortgaged Property, the existence of any environmental hazard on the Mortgaged
Property and any release or threat of release of any Hazardous Substance (as
hereinafter defined) of any kind in, on, under or from the Mortgaged Property at
any time, regardless of whether caused by or within the control

                                       9

<PAGE>   62


of the Mortgagor which may be imposed upon or incurred by or asserted against
the Mortgagee by reason of (i) any accident, injury or damage to any person or
property occurring on or about the Mortgaged Property or any part thereof, (ii)
any use, non-use or condition of the Mortgaged Property or any part thereof,
(iii) any failure on the part of the Mortgagor to perform or comply with any of
the provisions hereof, or (iv) any necessity to defend any of the rights, title
or interest conveyed or created by this Mortgage, except to the extent any of
the foregoing results from the gross negligence or willful misconduct of lender
or its agents, employees or contractors. Any amounts payable to the Mortgagee
under this paragraph which are not paid within ten (10) days after written
demand therefor by the Mortgagee shall bear interest from the date of such
demand until full payment thereof at a fluctuating annual rate (computed on the
basis of three-hundred-sixty-day (360-day) year and the actual number of days
elapsed) equal to four percent (4%) over and above the "prime rate" publicly
announced by Citibank, N.A. in New York, New York, as its reference, base or
prime rate (herein the "prime rate" such fluctuating rate to change
simultaneously with the changes in the prime rate, and such amounts, together
with such interest, shall be deemed to be indebtedness secured by this Mortgage.
In no event shall the interest rate to be charged hereunder exceed the maximum
permissible legal rate. In case any action, suit or

                                       10
<PAGE>   63

proceeding is brought against the Mortgagee by reason of any such occurrence,
the Mortgagor upon request by the Mortgagee, will at the Mortgagor's expenses
resist and defend such action, suit or proceeding or cause the same to be
resisted or defended, either by counsel designated by the Mortgagor and
reasonably approved by the Mortgagee or, where such occurrence is covered by
liability insurance, by counsel designated by the insurer. Notwithstanding
anything to the contrary in this Mortgage, the provisions of this indemnity and
all other representations, warranties and covenants contained in this Deed shall
survive the payment and satisfaction or termination of this Mortgage. As used in
this Mortgage the term Hazardous Substance has the following meaning:

   HAZARDOUS SUBSTANCE: (i) any "hazardous substance", "pollutant" or
"contaminant" as said terms are defined in clauses fourteen (14) and
thirty-three (33) of Section one hundred one (101) of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA) [ Title
Forty-Two (42) United States Code (U.S.C.) Section nine thousand six hundred one
(9,601), clauses fourteen (14) and thirty-three (33)], or Title Forty (40) Code
of Federal Regulations (C.F.R.) Part three hundred two (302), as said act and
regulation may be amended from time to time; (ii) any "hazardous waste" as said
term is defined in the Puerto Rico Environmental Quality Board Regulation for
the Control of Hazardous and Non-Hazardous Solid Wastes,


                                       11
<PAGE>   64

as said regulation may be amended from time to time; (iii) any toxic or
hazardous substance, material or waste (whether solid, liquid or gaseous); (iv)
any substance containing "petroleum", as that term is defined in Section nine
thousand one (9001), clause eight (8) of the Resource Conservation and Recovery
Act (RCRA), as amended [Title Forty-Two (42) U.S.C. Section six thousand nine
hundred ninety-one (6,991), clause eight (8)], or Title Forty (40) C.F.R. Part
two hundred eighty point one (280.1)], as said act and regulation may be amended
from time to time; or (v) any other substance for which any governmental entity
now or hereafter requires special handling in its collection, storage, treatment
or disposal.

   THIRTEENTH: In the event of Taking(s) of all or any part of the Mortgaged
Property, Mortgagee shall be entitled to receive all awards and payments on
account of such Taking(s). Subject to such provision, Mortgagor hereby
irrevocably authorizes and empowers Mortgagee in the name of Mortgagor or
otherwise by Mortgagors' claim to collect any such award(s) or payment(s) and to
collect, issue receipt for and retain the same. Mortgagor will pay all costs and
expenses (including without limitation, attorney's fees and expenses) of
Mortgagee in connection with any such Taking(s) and seeking, obtaining and
receiving any award or payment in respect therefor.

   In the event of any Taking of the fee or of a perpetual easement upon the
Mortgaged Property, or in the event

                                       12
<PAGE>   65

of a Taking of such a substantial part of the Mortgaged Property that, in the
good faith judgment of Mortgagor of which written notice must be given to
Mortgagee within twenty five (25) days after such Taking, the remaining part of
the Mortgaged Property is insufficient for the use for which the Mortgaged
Property is being used or developed, (such Taking being hereinafter called a
"Total Taking") all awards and payments collected by Mortgagee after the payment
of costs and expenses (including without limitation, attorney's fees and
expenses incurred in the seeking, obtaining and receiving thereof, shall be
applied by Mortgagee to the payment of any notes or obligations of Mortgagor
evidenced by the Mortgage Note or for which the Mortgage Note is assigned or
pledged as security.

   In the event of any Taking of the Mortgaged Property other than a Total
Taking, Mortgagor shall, at its expense and whether or not the awards and
payments on accounts of such Taking shall be sufficient for the purpose,
promptly effect the restoration of the Mortgaged Property to as nearly as
possible its value, condition and character immediately prior to such Taking,
except for any reduction in land area caused thereby. All awards and payments
collected by Mortgagee on account of any such Taking, after the payment of costs
and expenses (including without limitation attorney's fees and expenses)
incurred in the seeking, obtaining and receiving thereof; shall be held by

                                       13
<PAGE>   66

Mortgagee and applied and paid over toward the cost of such restoration.

   FOURTEENTH: In case Mortgagor shall fail to pay any principal of or accrued
interest on the Mortgage Note on demand by its owner and/or holder within ten
(10) days after written notice from Mortgagee or shall fail duly and punctually
to perform any of the other terms of the Mortgage Note or this Mortgage or of
any obligation which the Mortgage Note and this Mortgage secure within thirty
(30) days after written notice from Mortgagee, then at any time thereafter
Mortgagee may, at its election:

   (a) proceed to enforce the payment of the Mortgage Note and/or to foreclosure
of the lien of this Mortgage as against all or any part of the Mortgaged
Property (by summary proceedings or otherwise) and to have the same sold under
the judgment or decree of a court of competent jurisdiction, or;

   (b) enter upon and take possession of the Mortgaged Property or any part
thereof by force, summary proceedings, ejectment or otherwise and remove
Mortgagor and all other persons and any and all properties therefrom, and may
hold, operate and manage the same and receive all earnings, income, rents,
issues, and proceeds, accruing with respect thereto or any part thereof. In
connection with any of the foregoing, Mortgagee shall, as a matter of right and
without regard to the solvency of the Mortgagor or the adequacy of the security
for the

                                       14


<PAGE>   67

indebtedness from Mortgagor to Mortgagee, be entitled to the appointment of a
receiver for all or any part of the Mortgaged Property, whether such
receivership be incidental to a proposed sale of the Mortgaged Property or
otherwise, and Mortgagor hereby consents to the appointment of such a receiver
and will not oppose any such appointment.

   FIFTEENTH: The proceeds of any foreclosure sale hereunder of the Mortgaged
Property or any part thereof, and the proceeds of any possession, holding,
operating and management of the Mortgaged Property or any part thereof by
Mortgagee or a receiver hereunder, shall be applied to pay:

   First: All reasonable and actual costs and expenses (including without
limitation, attorney's fees and expenses) of such sale or the entering upon,
taking of possession or holding, operating and managing the Mortgaged Property,
as the case may be, and any taxes, assessments or other charges prior to the
lien of this Mortgage that Mortgagee may consider it necessary or desirable to
pay;

   Second: All amounts of interest and principal due and unpaid on all
indebtedness and/or obligations of Mortgagor secured by this Mortgage, other
than the Mortgage Note;

   Third: All amounts of interest and principal at the time due and payable on
the Mortgage Note; and

                                       15
<PAGE>   68

   Fourth: The balance, if any, to Mortgagor.

   SIXTEENTH: Each right, power or remedy of Mortgagee provided for in this
Mortgage shall be cumulative and concurrent and shall be in addition to every
other right, power or remedy provided for in this Mortgage or now or hereafter
existing at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by Mortgagee of any one or more of the rights, powers
or remedies provided for in this Mortgage or now or hereafter existing at law or
in equity or by statute or otherwise shall not preclude the simultaneous or
later exercise by Mortgagee of any or all such other rights, powers or remedies.
All rights, powers and remedies provided herein may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law, and are intended to be limited to the extent necessary so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law. If any
provision(s) of this Mortgage shall be determined to be invalid, illegal or
unenforceable, the validity of other provisions of this Mortgage shall in no
way be affected by such determination.

   SEVENTEENTH: No failure by Mortgagee to insist upon the strict performance of
any term hereof or to exercise any right, power or remedy consequent upon a
breach hereof, shall constitute a waiver of any such term


                                       16
<PAGE>   69

or of any such breach. No waiver of any breach shall affect or alter this
Mortgage, which shall continue in full force and effect with respect to any
other then existing or subsequent breach of any nature whatsoever under this
Mortgage and/or the Mortgage Note.

   EIGHTEENTH: If Mortgagor shall fail to make any payment or perform any act
required to be made or performed hereunder beyond the expiration of any
applicable notice and cure periods, Mortgagee, without further notice to or
demand upon Mortgagor, and without waiving or releasing any obligation or
default of Mortgagor, may (but shall be under no obligation to) at any time
thereafter make such payment or perform such act for the account and at the
expense of Mortgagor, and may enter upon the Mortgaged Property for such purpose
and take all such action as it may consider necessary or appropriate for such
purpose. All sums so paid by Mortgagee and all reasonable and actual costs and
expenses (including without limitation, attorney's fees and expenses) so
incurred, together with interest at the rate hereinafter set forth in Paragraph
TWENTY SIXTH of this deed, from the date of payment or incurring until the date
of reimbursement to Mortgagee, shall constitute additional indebtedness secured
by this Mortgage and shall be paid by Mortgagor to Mortgagee on demand.

   NINETEENTH: At the written request of Mortgagee, Mortgagor at its expense
will execute, acknowledge and

                                       17


<PAGE>   70
deliver all such instruments, including but not limited to additional and/or
aclaratory deeds, substitute notes, explanatory documents and/or any other
document(s) or instrument(s) which might be reasonably necessary, and take all
such actions as may be reasonably required and/or as Mortgagee may from time to
time request for (a) the better assuring to Mortgagee of the validity and
enforceability of the property rights hereby mortgaged and assigned or intended
so to be, and (b) to cause the Mortgage to be properly recorded without defects,
as a first lien of record encumbering the Mortgaged Property, in the appropriate
Section of the Registry of Property of Puerto Rico, with all stamps duly paid
and, in the event Mortgagor fails to pay any amount(s) required to comply with
its obligations under this paragraph NINETEENTH, Mortgagee may (but shall not be
obligated to) without notice to Mortgagor make any such payment(s), which would
then be guaranteed and secured by the Mortgage. Without notice to or consent of
Mortgagor, and without impairment of the lien and rights under this Mortgage,
Mortgagee may take (but Mortgagor shall not be obligated to furnish) from
Mortgagor or from any other person or persons, additional security for the
Mortgage Note. Neither the giving of this Mortgage nor the acceptance of any
such additional security shall prevent Mortgagee from resorting first to such
additional security, or first to the security created by this Mortgage, in

                                       18

<PAGE>   71

either case without affecting Mortgagee's lien and rights under this Mortgage.

   TWENTIETH: In compliance with Article ONE HUNDRED SEVENTY NINE (179) of the
Mortgage Law of Puerto Rico, as amended, and only for the purpose of determining
the minimum allowable bid on the first auction in the event of foreclosure of
the Mortgage, Mortgagor hereby declares and agrees that the value of the
Mortgaged Property is THREE MILLION TWO HUNDRED THOUSAND DOLLARS
($3,200,000.00).

   TWENTY FIRST: The Mortgagor warrants that it will cause the Mortgage created
by this deed to be recorded in due course as a first mortgage encumbering the
hereinabove described Mortgaged Property in the appropriate Section of the
Registry of the Property of Puerto Rico and, in connection with such obligation,
to comply with the provisions of Paragraph NINETEENTH of this deed.

   TWENTY SECOND: All notices to and demands and requests upon Mortgagor under
this Mortgage shall be in writing and shall be deemed to have been properly
given or made if sent by United States registered or certified mail, postage
prepaid, addressed to Mortgagor at such place as Mortgagor may have notified
Mortgagee in writing.

   TWENTY THIRD: The Mortgagor will cause the buildings on the premises and the
fixtures and all articles of personal property which are included in the
Mortgaged Property covered by this Mortgage to be insured against

                                       19
<PAGE>   72

loss by fire, casualty and other hazards specified by the Mortgagee and against
loss by such other hazards as may be reasonably required by the Mortgagee for
the benefit of the Mortgagee. Such insurance shall be written by such companies,
in such amounts and in forms satisfactory to the Mortgagee, and the Mortgagor
will deliver the certificates of insurance evidencing such insurance to the
Mortgagee and will reimburse the Mortgagee for any premiums paid for insurance
procured by the Mortgagee or deemed necessary by it in the event that after
written notice from Mortgagee, Mortgagor fails to obtain such insurance within
thirty (30) days.

   TWENTY FOURTH: As used in this Mortgage, the following terms have the
following respective meanings:

   Imposition(s): All real estate and other taxes or assessments (including
without limitation), all assessments for public improvements or benefits,
whether or not commenced or completed prior to the date hereof or during the
remaining in force hereof, water, sewer, or other rents, rates and charges,
excises, levies, license fees, permit fees, inspection fees and other,
authorization fees and other charges, in each case whether general or special,
ordinary or extraordinary, or foreseen or unforseen, of every character
(including all penalties or interests thereon), which at any time may be
assessed, levied, confirmed or imposed on or in respect of, or be or become a
lien upon

                                       20
<PAGE>   73

(a) the Mortgaged Property or any part thereof or any rents, issues, income,
profits, or earnings therefrom, or any estate right or interest therein, or (b)
any occupancy, use or possession of or sales from the Mortgaged Property or any
part thereof.

   Legal Requirements: All laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, direction and requirement of all governments, departments,
commissions, boards, courts, authorities, agencies, officials and/or officers
having jurisdiction over the Mortgaged Property, Mortgagor or any tenant
occupying all or any part of the Mortgaged Property, whether foreseen or
unforeseen, ordinary or extraordinary, which now or at any time thereafter may
be applicable to the Mortgaged Property or any part thereof, or any of the
streets, roads, alleys, passageways, sidewalks, curbs, malls, gutters, vaults,
or vault spaces adjoining the Mortgaged Property or any part thereof, or any use
or condition of the Mortgaged Property or any part thereof.

   Mortgage: This instrument, as the same may be supplemented and amended from
time to time.

   Mortgage Note(s): As defined in Paragraph SECOND of this deed.

   Mortgagee: Banco Santander Puerto Rico, or the holder and/or owner (whether
by way of pledge, endorsement,

                                       21
<PAGE>   74

assignment for security or otherwise) of the Mortgage Note.

                   Mortgagor: SIMMONS CARIBBEAN BEDDING, INC.

   Mortgaged Property: As defined in Paragraph FIRST, THIRD AND TWENTY SEVENTH
of this deed.

   Taking: A taking of all or part of the Mortgaged Property as a result of or
in lieu, or in anticipation of the exercise of the rights of condemnation or
eminent domain, or a change of grade adversely affecting the Mortgaged Property.

   Total Taking: As defined in Paragraph THIRTEENTH of this deed.

   TWENTY FIFTH: Miscellaneous: All of the terms of this Mortgage shall apply to
and be binding upon the successors and assigns of Mortgagor or subsequent each
successor or assign and shall inure to the benefit of the owner and/or holder
from time to time of the Mortgage Note. Neither this Mortgage nor any term
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the holder and/or owner of the Mortgage Note,
notice of which must be written as a legend in the Mortgage Note. All of the
costs, expenses, notarial and recordation fees and/or stamps related to the
execution of the Mortgage Note, to the execution and recordation of this
Mortgage and to any action of Mortgagor and/or Mortgagee required in this deed
shall be for the account of and payable by Mortgagor.

                                       22


<PAGE>   75

   TWENTY SIXTH: The Mortgage Note referred to in Paragraph SECOND hereof,
literally transcribed reads as follows:

                                  MORTGAGE NOTE
FOR: $3,200,000.00                                    MATURITY: ON DEMAND

   FOR VALUE RECEIVED, SIMMONS CARIBBEAN BEDDING, INC., a Puerto Rico
corporation ("Borrower"), promises to pay to the order of Banco Santander Puerto
Rico, on demand, at such place as the holder of this Mortgage Note may specify
in writing from time to time, in lawful money of the United States of America,
the principal sum of THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000.00),
together with interest thereon from the date of this Mortgage Note until full
payment hereof, payable on the first day of each and every month following the
date hereof, at a fluctuating annual rate equivalent to Two Hundred (200) basis
points over the London Interbank Offered Rate (LIBOR), adjusted every Ninety
(90) days.

   In case the owner and/or holder of this Mortgage Note shall take recourse to
foreclosure or other judicial proceedings, including any proceedings under the
Bankruptcy Act, for the collection of all or any part of the principal hereunder
or any interest thereon, the Borrower hereby agrees to pay an additional amount
equal to ten percent (10%) of the principal of this Mortgage Note, as liquidated
amount, without necessity of further liquidation or approval by the Court, to
cover costs and expenses (including attorney's fees and expenses) of such
foreclosure or judicial proceedings.

   The undersigned hereby waives presentment, protest, demand and notice of
nonpayment.

   This Note is guaranteed and secured by a First Mortgage upon certain
Mortgaged Property constituted as per Deed Number--67-- of this date before the
subscribing Notary.

   In San Juan, Puerto Rico, this 12th day of December, 1997.


SIMMONS CARIBBEAN BEDDING, INC.

By: (Signed) Hector M. Osoria
             President and General Manager

                                       23
<PAGE>   76

Affidavit No. 25,160 Subscribed and acknowledged to before me by Mister Hector
M. Osorio, as President and General Manager of Simmons Caribbean Bedding, Inc.,
of legal age, married, executive and resident of Guaynabo Puerto Rico,
personally known to me, at San Juan, Puerto Rico, this 12th day of December,
1997.

(SIGNED) MANUEL CORREA CALZADA
Notary Public."


   There appears the seal of the Notary.

   TWENTY SEVENTH: The Mortgaged Property referred to in Paragraphs FIRST and
THIRD of this deed, is described in the Spanish language as follows:

   URBANA: Parcela de terreno radicada en el Barrio Las Cuevas de Trujillo Alto,
Puerto Rico, identificada como solar Numero Seis (6) del Parque Industrial Las
Cuevas, con una cabida superficial de Diez Mil Seiscientos Ochenta y Siete punto
Setenta (10687.70) metros cuadrados, equivalentes a dos cuerdas con setecientos
diecinueve (2.719) cienmilesimas de otra, en lindes por el Norte, con el solar
numero Cinco (5) y con el area de viraje de la Calle "C" de la misma area
industrial; por el Sur, con la Calle "A" del Parque Industrial; por el Este, con
el area de uso publico del area industrial, solar Diecisiete (17) y con el area
de viraje de la Calle "A" de la misma area industrial; y por el Oeste, con la
Calle "C" de la misma area industrial.

   The above described property was segregated from a property formed by the
grouping of certain properties as it appears from Deed Number Twenty (20),
executed on December Four (4), Nineteen Hundred Ninety Two (1992), before Notary
Edgardo L. Martinez, pending recordation. The properties that were grouped are
the following: Properties Number Six Thousand Four Hundred Thirty Six (6,436),
Property Number Eleven Thousand Seven Hundred Seventy Eight (11,778) and Four
Thousand Three (4003), recorded at Pages Eighty Two (82), Seventy Eight (78) and
One Hundred Twenty Nine (129) of Volumes One Hundred Twenty Eight (128), Two
Hundred Thirty Eight (238) and Ninety (80) of Trujillo Alto, respectively.

   Mortgagor acquired the above described property as it appears from Deed
Number Fourteen (14), executed at San Juan, Puerto Rico, on the second (2nd) day
of June, Nineteen Hundred Ninety Seven (1997), before Notary Edgardo L. Martinez
Nazario, pending recordation.

                                       24
<PAGE>   77

   TWENTY EIGHTH: It is understood and agreed that in the event that the
Mortgagee, on account of a default by Mortgagor, or by Agreement with Mortgagor,
becomes the owner of the Mortgaged Property, then and in such event, any and all
approvals, plans and specifications, servitudes, lease contracts, and in general
everything required and or related to development, use and disposition of the
Mortgaged Property, shall be of the exclusive ownership of the Mortgagee, with
full authority and power to make whatsoever changes or amendments Mortgagee may
deem advisable in connection therewith, and whoever contracts with the Mortgagor
shall have no right of any kind whatsoever to claim or allege against the
Mortgagee in connection with any of the documents, instruments, approvals or
otherwise, which documents are given as an integral part of the collateral
security of the Mortgage.

   The appearing parties ratify, confirm and accept this Mortgage because the
same has been drawn in accordance with their instructions.

   I, the Notary Public, do hereby CERTIFY that this document was read by the
appearing parties, that I, the Notary, and the said appearing parties can read
and understand the English language, that I, the Notary, advised the appearing
parties of the legal effects of this document, that the said parties signed this
Mortgage, that the said appearing parties initialed every page

                                       25
<PAGE>   78


hereof in my presence and that the said appearing parties waived their right to
request the presence of witnesses of which right I appraised them.

   And I, the Notary, do hereby also certify as to my personal knowledge of the
appearing parties and as to their personal circumstances, in accordance with
their statements, as well as to all other things herein contained.

   FIRMADO: HECTOR M. OSORIO, ARIEL LEBRON LEBRON Y MYRNA DIAZ MARRERO

                                       26
<PAGE>   79

                                 MORTGAGE NOTE


FOR: $3,200,000.00                                     MATURITY: ON DEMAND

         FOR VALUE RECEIVED, SIMMONS CARIBBEAN BEDDING, INC., a Puerto Rico
corporation ("Borrower"), promises to pay to the order of Banco Santander Puerto
Rico, on demand, at such place as the holder of this Mortgage Note may specify
in writing from time to time, in lawful money of the United States of America,
the principal sum of THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000.00),
together with interest thereon from the date of this Mortgage Note until full
payment hereof, payable on the first day of each and every month following the
date hereof, at a fluctuating annual rate equal to Two Hundred (200) basis
points over the London Interbank Offered Rate (LIBOR), adjusted every Ninety
(90) days.

         In case the owner and/or holder of this Mortgage Note shall take
recourse to foreclosure or other judicial proceedings, including any proceedings
under the Bankruptcy Act, for the collection of all or any part of the principal
hereunder or any interest thereon, the Borrower hereby agrees to pay an
additional amount equal to ten percent (10%) of the principal of this Mortgage
Note, as liquidated amount, without necessity of further liquidation or approval
by the Court, to cover costs and expenses (including attorney's fees and
expenses) of such foreclosure or judicial proceedings.

         The undersigned hereby waives presentment, protest, demand and notice
of nonpayment.

         This Note is guaranteed and secured by a First Mortgage upon certain
Mortgaged Property constituted as per Deed Number -67- of this date before the
subscribing Notary.

         In San Juan, Puerto Rico, this 12th day of December, 1997


                                      SIMMONS CARIBBEAN BEDDING, INC.

                                      /s/ Hector M. Osorio
                                      -------------------------------
                                      Hector M. Osorio
                                      President and General Manager

Affidavit No. 25,160
             -------

         Subscribed and acknowledged to before me by Mister Hector M. Osorio, as
President and General Manager of Simmons Caribbean Bedding, Inc., of legal age,
married, executive and resident of Guaynabo, Puerto Rico, personally known to me
at San Juan, Puerto Rico, this 12th day of December, 1997.

[SEAL]

                                      /s/ Manuel Correa Calzada
                                      -------------------------------
                                      Notary Public
<PAGE>   80

                           IVAN A. HERNANDEZ & ASSOC.
                            ARCHITECTS AND ENGINEERS



                                        December 12, 1997

Banco Santander Puerto Rico
San Juan, Puerto Rico

Gentlemen:

         The undersigned acknowledges and consents to the use, at no cost to
you, of all plans, specifications, drawings, renderings, and models by you or
your successors or assignees, if necessary, for the development and construction
of a commercial building at Las Cuevas Ward, Trujillo Alto, Puerto Rico. (Case
Number 97-19-A-977-OPA) which were prepared by us for Simmons Caribbean Bedding,
Inc.

         You should have all the rights of Simmons Caribbean Bedding, Inc. in
said plans, drawings, renderings and models and without limiting the generality
of the foregoing, may use such material to complete the project to which they
pertain.

                                         Very truly yours,

                                         /s/ Ivan A. Hernandez
                                         -----------------------------
                                         Arch. Ivan A. Hernandez, AIA
                                         Lic. 8391

Assignment of the Borrower:

All rights, title and interest of Simmons Caribbean Bedding, Inc,. on the above
referred plans, drawings, renderings and models are also hereby assigned to
Banco Santander Puerto Rico by Simmons Caribbean Bedding. Inc.

SIMMONS CARIBBEAN BEDDING, INC.

By: Hector M. Osorio
  -----------------------------
        Hector M. Osorio
  President and General Manager
<PAGE>   81

                                      ,1997

Banco Santander Puerto Rico
San Juan, Puerto Rico

Re: Borrower: Simmons Caribbean
              Bedding, Inc.
    Loan amount: $3,200,000,000
    Project: Warehouse and Office
             Building at Las Cuevas
             Ward, Trujillo Alto, P.R.

Gentlemen:

         We are the contractor in the above project.

         In consideration of your making the loan to Simmons Caribbean Bedding,
Inc. (hereinafter referred to as the Borrower) to finance said construction, we
agree that in the event of default by Borrower, under any of the loan documents,
we shall, if requested by you or your assignee within a period of Ninety (90)
days after default, continue performance in your behalf under the existing
agreement with Borrower in accordance with the terms thereof, provided we shall
be reimbursed in accordance with said Agreement for all work, labor, and
materials rendered.

         We further agree that we shall not perform work pursuant to any change
order which will result in a change of the contract price unless we shall have
received your written approval of such change order. In the event such approval
is not obtained, our agreement with the Borrower to continue performance
thereunder for your benefit shall be deemed not to have been modified by such
change order.

         We further agree that from each amount approved for payment, you will
disburse to Borrower 90% of the work certified and approved for payment. The
remaining 10% is hereby subordinated by us to any amounts due by Borrower to you
under the Loan until the Loan is converted to a permanent loan and until you
approve such disbursement.

         The officer executing this instrument on behalf of the undersigned
hereby personally certifies that the undersigned has full authority to perform
all of its obligations under the aforementioned agreement in accordance with the
terms thereof.

                                  Very truly yours,

                                    CARIBBEAN INDUSTRIAL CONSTRUCTION, S.P.

                                     /S/ Gustano A. Hermida
                                     ------------------------
                                     Gustano A. Hermida

<PAGE>   82


                                SIMMONS COMPANY

                                            December 12, 1997

Banco Santander Puerto Rico
G.P.O. Box 362589
San Juan, Puerto Rico 00936

Gentlemen:

         The undersigned refers to the Loan Agreement of December 12 , 1997 (the
"Loan Agreement") between Banco Santander Puerto Rico (hereinafter referred to
as the "Bank") and Simmons Caribbean Bedding, Inc., a corporation organized and
existing under the laws of the Commonwealth of Puerto Rico (hereinafter referred
to as the "Borrower"), whereby the Bank has agreed to make loans, advances and
provide credit to the Borrower for a maximum amount of U.S. THREE MILLION TWO
HUNDRED THOUSAND DOLLARS ($3,200,000.00).

         To induce the Bank, at its option, from time to time, to make loans or
advances at the request and/or for the account of the Borrower, the undersigned
hereby guarantees jointly and severally with the Borrower the punctual payment,
at maturity to you, of each and all loans, advances, and other obligations
herein referred to, and also all other indebtedness which is now, or may
hereinafter become due and owing by Borrower under the Loan Agreement ("the
indebtedness") including any and all instruments hereinbefore mentioned,
together with any and all reasonable and actual expenses which might be actually
incurred by the Bank in collecting all or any of indebtedness and/or enforcing
any rights hereto, provided, however, that the total liability of the
undersigned hereunder ("the guaranteed liabilities") shall not exceed the amount
of U.S. THREE MILLION TWO HUNDRED THOUSAND DOLLARS ($3,200,000.00) in lawful
money of the United States of America, plus such interest as might be accrued

<PAGE>   83

                                       2

thereunder under the Loan Agreement, either before or after maturity date and
such expenses as might be incurred by the Bank as referred to above. The
undersigned hereby waives notice of acceptance of this guaranty and also
presentment, demand, protest, and notice of dishonor for non-acceptance, or
non-payment of any and all instruments herein before referred to and likewise
waives demand for non-payment and notice of non-payment of any and all the
indebtedness, provided that a written statement of a Manager or Acting Manager
of a branch of the Bank at which an account of the Borrower is kept or of a
General Manager of the Bank as to the amount remaining unpaid to the Bank at any
time by the Borrower shall, if agreed to by the Borrower, be conclusive evidence
and shall, in any event be prima facie evidence against the undersigned as to
the amount remaining unpaid to the Bank at such time by the Borrower.

         The undersigned hereby consents and agrees that the Bank may at any
time, or from time to time, in your discretion, extend or change the time of
payment, and/or the manner, place or terms of payments of all or any
indebtedness, or any part or parts thereof
or of any renewal or renewals thereof.

         No delay on your part in exercising or enforcing any rights or lien
hereunder or in taking any action to collect or enforce any of the indebtedness
or other obligation hereby guaranteed, shall operate as a waiver of any such
rights or prejudice in any manner the right of the Bank hereunder, as against
the undersigned.

         In case of insolvency or bankruptcy in the affairs of the Borrower, or
of the undersigned, or in case a petition in bankruptcy or for the appointment
of a receiver should be filed in any court by or against the Borrower or by or
against the undersigned, or application should be made for the attachment of any
properties, then all of the indebtedness shall be deemed for the purpose of this
guaranty immediately due and payable, and the responsibility of the undersigned
in this document shall be demandable, all without demand or notice.

<PAGE>   84

                                       3

         This guaranty shall remain valid and in full force and effect with
respect to all indebtedness incurred by Borrower, plus interest at the rate
provided for in the Loan Agreement on all amounts due until total payment of
same, and the aforesaid expenses incurred
by the Bank in collecting such Indebtedness.

         This guaranty shall be binding upon the undersigned as soon as any loan
or advance is made by the Bank under the Loan Agreement in reliance upon this
guaranty, the undersigned hereby consenting and agreeing that all loans which
the Bank may hereafter make, shall be deemed to be made at the request of the
undersigned and in reliance upon this guaranty, it being understood that, until
such time as all obligations to the Bank of the Borrower shall have been paid in
full, the undersigned agree that it will not exercise any rights to proceed
against the Borrower, either under section 1742 of the Civil Code of Puerto
Rico (1930 ed.) or otherwise, nor shall assert against you or Borrower,
judicially or otherwise, any claim or right to be subrogated with respect to any
amounts which may have been paid to the Bank by the undersigned, under the
provisions of this guaranty, it being the intention of the undersigned, that,
irrespective of the amounts which may at any time be owing to the Bank by the
Borrower the obligations of the undersigned hereunder, up to the limit above
stated, shall not be diminished until such time as the Bank shall have been paid
in full for all loans or advances made by the Bank under the Loan Agreement.

         The undersigned, a corporation organized under the laws of Delaware,
United States of America, represents that it expects to derive advantages from
the financial accommodations given by the Bank to Borrower.

         The undersigned expressly waives and renounces any and all rights that
undersigned may have to claim jointly and/or severally against Borrower for any
payments made to the Bank by undersigned under the provisions of this Guaranty.

<PAGE>   85

                                       4

         Intending to be legally bound, this Letter of Guaranty is executed as
of this December 12, 1997, at



                                            SIMMONS COMPANY

                                         By: /s/ Roger Franklin
                                            -----------------------
                                            Vice President-Finance, Treasurer


Affidavit No. 25,161
             -------

         Acknowledged and subscribed to before me by Mister Roger W. Franklin,
as Vice-President Finance and Treasurer of Simmons Company, of legal age,
married, executive and resident of the State of Georgia, temporarily in San
Juan, Puerto Rico, personally known to me, at San Juan, Puerto Rico, this 12th
day of December, 1997.


                                         /s/
                                         --------------------------

[SEAL]                                   NOTARY PUBLIC
<PAGE>   86

                      CERTIFICATE OF CORPORATE RESOLUTION

         The undersigned, Assistant Secretary of Equus Management Company, a
Delaware corporation (the "Corporation"), does hereby certify that at a Meeting
of the Board of Directors of the Corporation duly held on the 9th day of
December, 1997 the following resolution were unanimiously approved and adopted:

         "RESOLVED: that Gretchen Gronau, acting in her capacity as Vice
         President of the Corporation, as general managing partner of Equus
         Gaming Company L.P. ("Equus"), as managing partner of Housing
         Development Associates S.E. ("HDA") is hereby authorized and directed
         to execute in the name and on behalf of HDA all the necessary documents
         and agreements in connection with a ONE MILLION DOLLARS ($1 000,000.00)
         loan from Banco Santander Puerto Rico under the terms and conditions
         setforth in the letter dated December 4,1997, included herewith as
         Exhibit A, and

         FURTHER RESOLVED, that such Officer, is also hereby authorized and
         directed to execute in the name and on behalf of HDA the necessary
         documents to grant Banco Santander the assignment of certain funds to
         be received from its subsidiary Equus Gaming de Panama, S.A. in excess
         of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00), and

         FURTHER RESOLVED, that such Officer, acting in her capacity as Vice
         President of the Corporation, as general managing partner of Equus, is
         also hereby authorized and directed to execute in the name and on
         behalf of Equus the necessary documents to grant Banco Santander the
         guaranty of ONE MILLION DOLLARS ($1,000,000.00) under the loan with HDA
         and the assignment of quarterly cash distributions from HDA, up to
         $250,000 per quarter.


         Said Resolution has not been modified or rescinded and is in full
         effect.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Corporation in San Juan, Puerto Rico, this 11th day of December, 1997.


[SEAL]                        EQUUS MANAGEMENT COMPANY


                              By: /s/
                                ------------------------
                                  Assistant Secretary
<PAGE>   87


                      CERTIFICATE OF CORPORATE RESOLUTION


         The undersigned, Assistant Secretary of Equus Entertainment
Corporation, a Puerto Rico corporation (the "Corporation"), does hereby certify
that at a Meeting of the Board of Directors of the Corporation duly held on the
9th day of December, 1997 the following resolution was unanimiously approved and
adopted:

         "RESOLVED: that Gretchen Gronau, acting in her capacity as Vice
         President of the Corporation, is hereby authorized and directed to
         execute in the name and on behalf of the Corporation the necessary
         documents to grant Banco Santander the guaranty of ONE MILLION DOLLARS
         ($1,000,000.00) under a loan with Housing Development Associates S.E.
         ("HDA") and the assignment of quarterly cash distributions from HDA, up
         to $250,000 per quarter.


         Said Resolution has not been modified or rescinded and is in full
effect.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Corporation in San Juan, Puerto Rico, this 11 h day of December, 1997.

                          EQUUS ENTERTAINMENT COMPANY

                          By:/s/
                            -----------------------
                             Assistant Secretary

<PAGE>   88

                           CERTIFICATE OF RESOLUTION
                           -------------------------


         I, Roger W. Franklin Assistant Secretary of SIMMONS CARIBBEAN BEDDING,
INC., a corporation organized and existing under the Laws of the Commonwealth of
Puerto Rico, do hereby CERTIFY:

         That the Board of Directors of said corporation duly adopted on
December 9, 1997, the following Resolution by unanimous written consent of all
Directors, and that said Resolution as of the date of this Certificate Continue
in full force and effect and has not been altered, amended or revoked.

         "BE IT RESOLVED: that Mr. Hector M. Osorio is hereby authorized and
         directed, on behalf of this Corporation, to obtain from Banco Santander
         Puerto Rico an interim construction loan in the principal amount of
         Three Million Two Hundred Thousand Dollars ($3,200,000.00), which loan
         will be converted into a Permanent Loan for a period of Fifteen (15)
         years under the terms and conditions that he deems proper.

         In connection thereof, and in order to accomplish the stated purpose,
         the aforementioned officer is authorized to execute loan agreements,
         promissory notes, deeds of mortgages, deeds of purchases, cancellation
         of mortgages, contracts of pledge, loan documents, and any other
         document evidencing said loan or related therewith, in a firm as such
         officer shall approve, with his execution thereof to be conclusive
         evidence of such approval."

IN WITNESS WHEREOF, I sign this document this 12 day of December, 1997.

                                           /s/
                                           --------------------------
                                           Assistant Secretary

Affidavit No. 25,162
             ---------

Sworn and subscribed to before me by:   Mister Roger W. Franklin, as Assistant
                                        Secretary of Simmons Caribbean Bedding,
                                        Inc. of legal age, married executive and
------------------------------          resident of the State of Georgia,
[SEAL] Notary Public                    temporarily in San Juan, Puerto Rico,
                                        personally known to me at San Juan,
                                        Puerto Rico, this 12th day of December,
                                        1997.
<PAGE>   89

                            CERTIFICATE OF RESOLUTION

         I, John P. Peterken, Assistant Secretary of SIMMONS COMPANY, a
corporation organized and existing under the Laws of Delaware, United States of
America, do hereby CERTIFY:

         That at a meeting of the Board of Directors of said corporation duly
convened and held on March 25, 1997, at which a quorum was present and voting at
all times, the following Resolution was duly adopted by the unanimous vote of
all Directors, and that said Resolution as of the date of this Certificate
continue in full force and effect and has not been altered, amended or revoked.

         Resolved, that the purchase of land and the construction of a
manufacturing facility in Trujillo Alto, Puerto Rico by Simmons Caribbean
Bedding Inc. (SCBI) (a wholly owned subsidiary of Simmons Company (the Company),
and SCBI's borrowing of sufficient long term funds to complete such facilities
in Puerto Rico on the general terms and conditions as presented to the Board,
for a total cost not to exceed $4 million (collectively the Puerto Rico
Project), is hereby authorized and approved; and that the Executive Vice
President and Chief Financial Officer and the Vice President-Finance, Treasurer
and Assistant Secretary (the Authorized Officers) of the Company be, and each of
them hereby is, authorized and directed, in the name and on behalf of the
Company and SCBI under their corporate seal or otherwise, to execute and deliver
such agreements, instruments, documents, powers of attorney or certificates in
connection therewith or contemplated thereby with such amendments, changes,
additions and deletions as any of them, with the advice of the Company's
counsel, may deem to be in the best interest of, and approved on behalf of the
Company, such approval to be conclusively evidenced by the signature of the
Authorized Officers thereon, and to take any and all further actions, in the
name and on behalf of the Company or SCBI, as may be necessary or desirable to
consummate the transactions contemplated;

         Further Resolved, that the Authorized Officers be, and each of them
hereby is, authorized to execute and deliver in the name and on behalf of the
Company or SCBI under its corporate seal or otherwise, all other agreements,
instruments and documents necessary or desirable to reflect the consummation of
the transactions contemplated by the Puerto Rico Project and to do and perform
any and all such further acts and deeds and to pay all such expenses as they or
any of them deem necessary or advisable to carry out the foregoing resolutions
and the transactions contemplated thereby; and
<PAGE>   90
         FURTHER RESOLVED, that any and all actions heretofore or hereafter
taken by any Authorized Officer of the Company with respect to or in
contemplation of the Puerto Rico Project are hereby ratified and
approved.


         I DO HEREBY CERTIFY, that Mr. Roger W. Franklin is presently a duly
elected or designated Vice President-Finance, Treasurer of this
Corporation.


IN WITNESS WHEREOF, I sign this document and affixed the Seal of this
Corporation, at Atlanta Ga, this 10th day of December, 1997


                                             /s/ ILLEGIBLE
                                             ---------------------------------
                                             ASSISTANT SECRETARY


<PAGE>   91

                             ACTUALIZACION DE ESTUD

CASO: SIMMONS CARIBBEAN (COMPANIA DE FOMENTO INDUSTRIAL)

CASO NUMERO:               1222.6270

FINCAS NUMEROS 6436, 11778 y 4003 INSCRITAS A LOS FOLIOS 82,78 y 129 TOMOS 128,
238 y 90 DE TRUJILLO ALTO SECCION CUARTA DE SAN--
JUAN----------------------------------------------------------------------------

FUERON AGRUPADAS CON UNA CABIDA DE 48.42 CUERDAS DICHA AGRUPA-
CION AL ASIENTO 87 DIARIO 96 (VEA ESTUDIO ORIGINAL)


POSTERIOR AL ESTUDIO ORIGINAL Y CON FECHA 6 DE NOVIEMBRE 1997 Y
AL ASIENTO 17 DIARIO 155 SE PRESENTO ESCRITURA # 14 OTORGADA EN
SAN JUAN 2 JUN10 1997 ANTE NOTARIO EDGARDO R. MARTINEZ NAZARIO-
(SEGREGACION Y COMPRAVENTA)-----------------------------------------------------

SEGREGA Y VENDE....... THE PUERTO RICO INDUSTRIAL DEVELOPMENT----
                       COMPANY EL SOLAR # 6 DEL PARQUE INDUSTRIAL
                       LAS CUEVAS (VEA DESCRIPCION MAS ADELANTE)

COMPRA................ SIMMONS CARIBBEAN BEDDING INC. REPRESENTADA
                       POR HECTOR OSORIO MAYOR EDAD CASADO CON----
                       LYDIA LARTIGUE ENRIQUEZ (NO SE ACOMPANA LA
                       ACREDITACION DE LAS FACULTADES PARA REPRE-
                       SENTAR A LA COMPRADORA)
PRECIO................ $ 447,250.00

DESCRIPCION:

URBANA" PARCELA DE TERRENO RADICADA EN EL BARRIO LAS CUEVAS DE TRUJILLO ALTO
PUERTO RICO IDENTIFICADA COMO SOLAR NUMERO 6 DEL PARQUE INDUSTRIAL LAS CUEVAS
CON UNA CABIDA SUPERFICIAL DE __ 10,687.70 METROS CUADRADOS EQUIVALENTES A 2.719
CUERDAS Y EN --- LINDES POR EL NORTE CON EL SOLAR NUMERO 5 Y CON EL AREA DE
VIRAJE DE LA CALLE C DE LA MISMA AREA INDUSTRIAL; POR EL SUR CON LA ---- CALLE A
DEL PARQUE INDUSTRIAL; POR EL ESTE CON EL AREA DE USO --- PUBLICO DEL AREA
INDUSTRIAL, SOLAR 17 Y CON EL AREA DE VIRAJE DE LA CALLE A DE LA MISMA AREA
INDUSTRIAL Y POR EL OESTE CON LA CALLE C DE LA MISMA AREA INDUSTRIAL.-----------

SE ACOMPANA CERTIFICACION DE ARPE Y PLANO APROBANDO EL PROYECTO 96-19-B-210 CGT
BAJO AFF. 3392 DEL 24 ABRIL 1997 ANTE NOTARIA OLGA IRIS MARCANO BENITEZ Y ACTA
DE ACLARACION # 15 OTORGADA SAN JUAN 3 JUN10 1997 ANTE NOTARIO EDGARDO L.
MARTINEZ NAZARIO ACLARANDO--- EL REMANENTE DESPUES DE LA SEGREGACION Y QUEDA LA
FINCA PRINCIPAL CON CABIDA DE 40.921 CDAS EQUIVALENTES A 159,634.2308 M/C-------

NOTA: LA SEGREGACION QUEDA CON LAS CONDICIONES DE VENTA QUE SURGE DE LA CITADA
ESCRITURA # 14 Y ENTRE ELLAS NO PODRA VENDER, ARRENDAR CEDER 0 TRASPASAR LA
PROPIEDAD AL E.L.A DE P.R. POR UN TERMINO DE 10 ANOS. NI PODRA VENDER, HIPOTECAR
0 ARRENDAR SIN CONSENTIMIENTO ESCRITO DE LA COMPANIA.

RESTO ESTUDIO ORIGINAL QUEDA TAL COMO SE HICIERA ORIGINALMENTE,

FUERON BUSCADOS LIBROS DE EMBARGOS HASTA FOLIO 59 # 26., FEDERALES HASTA
FOLIO(53 A-) DIGO 108 A-3 Y SENTENCIA FOLIO 53 # 145 Y LA BITACORA # 13 HASTA
ASIENTO 264 DIARIO 157----------------------------------------------------------




9 de diciembre 1997


/s/ C. Arroyo
C. Arroyo
<PAGE>   92

                               ESTUDIO DE TITULO


CASO:             SIMMONS CARIBBEAN ( C0MPANIA DE FOMENTO INDUSTRIAL DE P.R.)

CASO NUMERO:               1222.6270

FINCAS NUMERO 6436, 11,778 y 4003 INSCRITAS A LOS FOLIOS 82, 78 y 129
TOMOS 128, 238 y 90 DE TRUJILLO ALTO SECCION CUARTA DE SAN JUAN-----------------

DESCRIPCION:

         RUSTICA: PORCION DE TERRENO SITADA EN EL BARRIO DENOMINADO-- LAS CUEVAS
         DEL TERMINO MUNICIPAL DE TRUJILLO ALTO COMPUESTA-- DE 5.00 CUERDAS
         EQUIVALENTES A 1 HECTAREA, 96 AREAS, 51 CENTI- AREAS Y 59 MILIAREAS y
         EN LINDES POR EL NORTE Y OESTE CON UN- CAMINO VECINAL QUE LO SEPARA DE
         TERRENOS DE DIAZLITE INC. Y - LINDES POR EL SUR Y ESTE CON LA FINCA
         PRINCIPAL DE LA CUAL--- ESTA SE SEGREGA PROPIEDAD DE FAUSTINO
         BETANCOURT.------------------------------------------------------------

         ESTA ES FINCA 6436 AL FOLIO 82 TOMO 128 TRUJILLO ALTO------------------

ORIGEN:

         SE SEGREGA DE LA FINCA 1803 AL FOLIO 250 y 181 TOMOS 27 y 29-

         RUSTICA: PORCION DE TERRENO SITUADA EN EL BARRIO DENOMINADO LAS CUEVAS
         DEL TERMINO MUNICIPAL DE TRUJILLO ALTO COMPUESTO- DE 8.08 CUERDAS
         EQUIVALENTES A 31,757.5445 METROS CUADRADOS- y EN LINDES POR EL NORTE
         CON TERRENOS PROPIEDAD DE ANTONIO R. DIAZ; POR EL SUR CON EL RIO GRANDE
         DE LOIZA, POR EL ESTE CON TERRENOS PROPIEDAD DE METROPOL DEVELOPMENT
         CORP. Y ANTONIO R. DIAZ Y POR EL OESTE CON TERRENOS DE DIAZLITE INC.---

         ESTA ES FINCA 11,778 INSC RITA AL FOLIO 78 TOMO 238 T. ALTO.

         SE SEGREGA DE LA FINCA 46 AL FOLIO 154 TOMO 50 DE TRUJILLO-- ALTO.

         RUSTICA: SITUADO EN EL BARRIO CUEVAS DE TRUJILLO ALTO CON UN AREA
         SUPERFICIAL DE 35.35 CUERDAS EQUIVALENTES A 13 HECTAREAS 89 AREAS, 64
         CENTIAREAS Y 79 MILIAREAS Y EN LINDES POR EL --- NORTE CON CAMINO
         MUNICIPAL QUE SEPARA DE DANIEL VAZQUEZ, JOSE FERNANDEZ Y TERRENOS DE
         HIPOLITO O'FARRIL; POR EL SUR CON EL CAMINO VECINAL TERRENOS DE
         FRANCISCO BETANCOURT Y RIO GRANDE DE LOIZA; POR EL ESTE CON TERRENOS DE
         EMILIO TORRES E HIPOLITO O'FARRIL Y POR EL OESTE CON CAMINO MUNICIPAL
         SEPARADO DE ---- DANIEL VELAZQUEZ Y JOSE FERNANDEZ Y CAMINO VECINAL QUE
         COMIENZA CON EL CAMINO MUNICIPAL Y TRANSCURRE AL SURESTE Y TERRENOS DE
         FAUSTINO BETANCOURT.

         ESTA ES LA FINCA 4003 AL FOLIO 129 TOMO 90 DEL TOMO TRUJILLO ALTO.-----

         ESTA TIENE LAS SIGUIENTES EDIFICACIONES: EDIFICIO DE ALMACEN- DE
         MATERIA PRIMA, DE ARMAZON DE ACERO CON TECHO DE DUROTEX Y PISO DE
         TIERRA. CASETA PARA OFICINA Y SHOP DE CONCRETO DE--- CASETA DE SWITCHES
         Y EDIFICIO DE CONCRETO PARA COMEDOR. EN-- ESTAS EDIFICACIONES Y EN EL
         INMUEBLE ANTES DESCRITO TENIAN SUS PROPIETARIOS FABRICAS PARA LA
         MANUFACTURA DE AGREGADOS LIVIANOS Y MAQUINARIAS.

         ADEMAS SE DESCRIBEN LAS SIGUIENTES EDIFICACIONES: UNA CHIMENEA DE
         LADRILLOS, EDIFICACION DE ACERO CON TECHO Y PAREDES DE DUROTEX LAS
         PAREDES Y EL TECHO HAN SIDO VANDALIZADOS, EDIFICIO DE ACERO CON PAREDES
         Y TECHO DE DUROTEX, ESTRUCTURA DE ACERO PARA CONDUC- TORES EN CORREA
         (CONVEYORS), RAW CLAY FEEDLER, ESTRUCTURA DE --- ACERO QUE SOPORTA A LA
         PARTE SUPERIOR UN CONDUCTOR DE CORREA --- (BELT CONVEYOR) LA CUAL
         CONTIENE UN EQUIPO ADHERIDO A LA MISMA CONOCIDO COMO "APRON FEEDER",
         SEIS AROS DE ACERO QUE FORMAN PARTE DEL HORNO ROTATIVO CCN
         REVESTIMIENTO INTERIOR DE BARRO REFRACTARIO UTILIZADO PARA EL
         COCIMIENTO DE LOS AGREGADOS LIVIANOS.----------------------------------

         ESTA SE FORMA POR AGRUPACION FINCAS 2493 y 1802 INSCRITAS A FOLIOS 170
         v to. 247 DE LOS TOMOS 57 y 27 DE TRUJILLO ALTO.-----------------------


                                  sigue......

<PAGE>   93

PAGINA # 2:                CASO:    1222.6270 (SIMMONS CARIBEAN)



TODOS LAS FINCAS CONSTA INSCRITAS A FAVOR DE COMPANIA DE FOMENTO
INDUSTRIAL DE PUERTO RICO-------------------------------------------------------

ADQUIERE LAS DOS PRIMERAS 6436 y 11778 POR CESION DE ANTONIO R.- DIAZ -SOLTERO
CON VALOR DE $ 175,000.00 y $ 121,000.00 RESPECTIVA- MENTE SEGUN ESCRITURA # 4
OTORGADA SAN JUAN 26 DE MARZO 1975 ANTE NOTARIO GILBERTO ALFARO BERRIOS
INSCRITAS AL FOLIO 82 v to. 78 DE LOS TOMOS 128 y 238 DE TRUJILLO ALTO POR LAS
INSCRIPCIONES 2 y -- ULTIMAS Y PRIMERA Y UNICA.---------------------------------

LA FINCA 4003 LA ADQUIERE POR(AGRUPACION) DIGO POR COMPRA A DIAZ- LITE INC. POR
EL PRECIO DE $ 1,299,000.00 MEDIANTE ESCRITURA # 3 -- OTORGADA SAN JUAN 26 MARZO
1975 ANTE NOTARIO GILBERTO ALFARO BERRIOS POR INSCRIPCION 6a AL FOLIO 135 TOMO
90 TRUJILLO ALTO.---------------------------------------------------------------

Y LAS EDIFICACIONES LAS ADQUIERE POR COMPRA EN PUBLICA SUBASTA POR PRECIO DE $
1,000.00 MEDIANTE ESCRITURA # 6 OTORGADA SAN JUAN 21 DE NOVIEMBRE DE 1984 ANTE
NOTARIO RAMON SIACA POUPART POR INSCRIPCION 8va ULTIMA AL FOLIO 85 VTO. TOMO 284
TRUJILLO ALTO.------------------------------------------------------------------

CARGAS Y GRAVAMENES:

FINCA 6436: SERVIDUMBRE DE PASO, ARRENDAMIENTO VENCIDO (SOBRE UNA PARCELA DE
1000 CUERDA) A FAVOR DE MANUEL QUINONES CASADO CON --- CARMEN RIVERA Y DE MANUEL
PEREZ CASDO CON GUILLERMINA RODRIGUEZ POR EL TERMINO DE 7 ANOS CON UN CANON DE
$45.00 MENSUALES. TAMBIEN SE LE CONCEDE A LOS ARRENDATARIOS EL DERECHO DE
EXTRACCION DE GRAVA ARENA SEGUN ESCRITURA # 9 OTORGADA SAN JUAN 11 DE ENERO DE
1955 ANTE NOTARIO VICENTE HITA JR. SEGUN INSCRIPCION 4a. AL FOLIO 180 TOMO 29 DE
TRUJILLO ALTO. (FUE POR SU PROCEDENCIA FINCA 1803)------------------------------

FINCA:   11,778: LIBRE DE CARGAS

FINCA:   4003: POR SU PROCEDENCIA: SERVIDUMBRE DE PASO A FAVOR DE CENTRAL
         VICTORIA INC.

POR SI:  HIPOTECA GARANTIZANDO PAGARE A FAVOR DE GOVERMENT--
         DEVELOPMENT BANK FOR P.R. POR LA SUMA DE $ 200,000.00 INTERESES AL 6% Y
         VENCE 1 DE FEBRERO 1979 SEGUN LA--- ESCRITURA # 56 OTORGADA SAN JUAN 7
         FEBRERO 1964 ANTE NOTARIO JORGE M. MORALES POR INSCRIPCION I AL FOLIO--
         129 TOMO 90 TRUJILLO ALTO.

CANCELACION DE HIPOTECA ARRIBA RELACIONADA PRESENTADA AL ASIENTO 86 DIARIO 96
(VEA MAS ADELANTE)--------------------------------------------------------------

LAS FINCAS CITADAS SE AGRUPAN CON CABIDA DE 48.42 CDAS. VEA PRESENTA- CION
ASIENTO 87 DIARIO 96.-----------------------------------------------------------

BITACORA:

ASIENTO 86 DIARIO 96 Y CON FECHA 8 DE MAYO DE 1995 SE PRESENTO --- INSTANCIA
SUSCRITA 28 DICIEMBRE 1992, POR ANTONIO MALDONADO LOPEZ --- PRESIDENTE Y GERENTE
GENERAL DE LA COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO MEDIANTE LA CUAL SE
SOLICITA LA CANCELACION DE HIPOTECA DE $ 200,000.00 (QUE GRAVA LA FINCA 4003) Y
POR HABERLO ORDENADO EL-- TRIBUNAL SUPERIOR DE P.R. SALA DE SAN JUAN EN
SENTENCIA CON FECHA 6 OCTUBRE 1992 CASO CIVIL # KCD-91-0703(803) "PAGARE
EXTRAVIADO"---------------------------------------------------------------------

ASIENTO 87 DIARIO 96 Y CON FECHA 8 MAYO 1995 SE PRESENTO ESCRITURA -- # 20
OTORGADA SAN JUAN 4 DICIEMBRE 1992 ANTE NOTARIO EDGARDO L. --- MARTINEZ ROSARIO
(AGRUPACION)--------------------------------------------------------------------

COMPA RECE: COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO Y COMO --- DUENOS DE
LAS FINCAS 6436, 11778 y 4003 AGRUPA LAS MISMAS CON UN VALOR DE $ 1,600,000.00 y
SE DESCRIBE ASI:----------------------------------------------------------------

RUSTICA: PREDIO DE TERRENO LOCALIZADO EN EL BARRIO LAS CUEVAS DE ---- TRUJILLO
ALTO PUERTO RICO CON UN AREA SUPERFICIAL DE 48.42 CUERDAS --- EQUIVALENTES A
190,349.059 METROS CUADRADOS Y EN LINDES POR EL NORTE-- CON CAMINO MUNICIPAL
ANTES CARRETERA ESTATAL NUMERO 8860 AHORA CON---- PROPIEDAD DE HIPOLITO O'FARRIL
Y CON TERRENOS PROPIEDAD DE ANTONIO R. DIAZ; POR EL SUR CON TERRENOS PROPIEDAD
DE FAUSTINO BETANCOURT POMALES Y CON EL RIO GRANDE DE LOIZA Y POR EL ESTE CON
TERRENOS PROPIEDAD DE

                                   sigue.....


<PAGE>   94

PAGINA # 3: CASO:                    1222.6270 (SIMMONS CARIBEAN)



DE METROPOL DEVELOPMENT CORPORATION Y TERRENOS PROPIEDAD DE ANTONIO R. DIAZ Y
POR EL OESTE CON CAMINO MUNICIPAL ANTES CARRETERA ESTATAL NUMERO 8860 AHORA.----

SE ACOMPANA ESCRITURA DE ACTA ACLARATORIA # 6 OTORGADA SAN JUAN 27 DE FEBRERO
1997 ANTE NOTARIO EDGARDO L. MARTINEZ MEDIANTE LA CUAL-- LA COMPANIA DE FOMENTO
INDUSTRIAL DE PUERTO RICO ACLARA QUE LA --- - CABIDA CORRECTA ES 48.11 CUERDAS
EQUIVALENTES A 189,111.92 METROS-- CUADRADOS Y NO LA QUE SE EXPRESA EN EL
DOCUMENTO DE AGRUPACION ANTES RELACIONADA.--------------------------------------

ASIENTO 359 DIARIO 84 Y CON FECHA 11 DE AGOSTO 1994 SE PRESENTO LA
ESCRITURA #11 OTORGADA SAN JUAN 5 AGOSTO 1994 ANTE NOTARIO EDGARDO
L. MARTINEZ NAZARIO (SEGREGACION Y COMPRAVENTA)---------------------------------

VENDE....... COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO SEGREGA
             DE LA PARCELA AGRUPADA SOLAR #7 (VEA DESCRIPCION MAS ADELANTE)

COMPRA...... INTER AMERICAN INDUSTRIAL DEVELOPMENT INC.
PRECIO...... $ 309,709.93

RUSTICA: SOLAR NUMERO 7 LOCALIZADO EN EL AREA INDUSTRIAL LAS ---- CUEVAS EN EL
BARRIO LAS CUEVAS DEL TERMINO MUNICIPAL DE TRUJILLO--- ALTO PUERTO RICO CON UNA
CABIDA SUPERFICIAL DE 9385.832 METROS ---- CUADRADOS EQUIVALENTES A 2.388
CUERDAS Y EN LINDES POR EL NORTE CON EL SOLAR NUMERO 3; POR EL SUR CON LA CALLE
N; POR EL ESTE CON CALLE C Y POR EL OESTE CON EL SOLAR NUMERO 8."---------------

SE EXPRESA EN EL DOCUMENTO QUE LA SEGREGACION FUE APROBADA MEDIANTE RESOLUCION
DE ARPE FECHA 14 JULIO 1992 PROYECTO # 92-19-A-263 CGT LA CUAL SE ACOMPANA------

DESPUES DE LA SEGREGACION QUEDA REMANENTE DE 46.032 CDAS. EQUIVALEN- TES A
179,725.360 M/C-----------------------------------------------------------------

SE ACOMPANA:

1.   ESCRITURA # 5 DE ACTA ACLARATORIA OTORGADA SAN JUAN 27 FEBRERO DE 1997 ANTE
     EDGARDO L. MARTINEZ NAZARIO MEDIANTE LA CUAL SE ACLARA CABIDA DE REMANENTE.

2.   ESCRITURA # 20 DE ACTA DE RECTIFICACION OTORGADA SAN JUAN 7 DE MARZO 1997
     ANTE NOTARIO MANUEL L. CORREA MARQUEZ MEDIANTE LA CUAL SE VUELVE ACLARAR LA
     CABIDA DEL REMANENTE Y DEBE LEERSE-- 48.11 CDAS. EQUIVALENTES A 189,111.192
     M/C------------------------------------------------------------------------

3.   SE ACOMPANA RESOLUCION CORPORATIVA DE LA CORPORACION ADQUIRIEN- TE
     AUTORIZANDO A OTORGAR ACTA DE RECTIFICACION.-------------------------------

ASIENTO 320 DIARIO 84 Y CON FECHA 10 DE AGOSTO 1994 SE PRESENTO LA ESCRITURA # 6
OTORGADA SAN JUAN 5 AGOSTO 1994 ANTE NOTARIO NOEL -- GONZALEZ MIRANDA MEDIANTE
LA CUAL INTER-AMERICAN INDUSTRIAL DEVELOPMENT INC. CONSTITUYE HIPOTECA SOBRE
SOLAR # 7 ARRIBA SEGREGADO-- GARANTIZANDO PAGARE PORTADOR $ 1,830,000.00
INTERESES 1% SOBRE EL PREFERENCIAL PREVALECIENTE EN CITIBANK DE N.Y. VENCE A LA
PRESENTA- CION.-----------------------------------------------------------------

ASIENTO 276 DIARIO 139 Y CON FECHA 7 MAYO 1997 SE PRESENTO ESCRITURA # 7
OTORGADA SAN JUAN 7 MARZO 1997 ANTE NOTARIO EDGARDO L. MARTINEZ NAZARIO
(SEGREGACION Y COMPRA)

VENDE..........   LA COMPANIA DE FOMENTO INDUSTRIAL DE P.R. Y DE LA AGRUPACION
                  SEGREGA EL SOLAR # 8 (VEA DESCRIPCION MAS ADELANTE) Y LO VENDE
                  A:
COMPRA.........   INTER AMERICAN INDUSTRIAL DEVELOPMENT CORP. REPRE PRESENTADA
                  POR MANUEL QIUNTANA PUENTE MAYOR EDAD, CASADO CON CARMEN RITA
                  SOLER GARCIA SEGUN RESOLUCION 5 MARZO 1997 AFF.14258 NOTARIO
                  MANUEL L.---- CORREA MARQUEZ (SE ACOMPANA )



                                  SIGUE......
<PAGE>   95

         PAGINA # 4: CASO:          1222.6270 (SIMMONS CARIBEAN)

         PRECIO........... $ 319,621.00

         "RUSTICA" PREDIO DE TERRENO SOLAR NUMERO 8 LOCALIZADO EN EL AREA
         INDUSTRIAL LAS CUEVAS EN EL BARRIO CUEVAS TERMINO MUNICIPAL DE TRUJILLO
         ALTO PUERTO RICO Y EN LINDES POR NORTE CON LOS SOLARES 2 Y 3 DE LA
         MISMA AREA INDUSTRIAL; POR EL SUR--- CON LA CALLE A DE LA MISMA AREA
         INDUSTRIAL; POR EL ESTE CON EL SOLAR NUMERO 7 DE LA MISMA AREA
         INDUSTRIAL Y POR EL OESTE CON LA CALLE B DE LA MISMA AREA INDUSTRIAL.
         TIENE CABIDA DE 9403.4292 METROS CUADRADOS EQUIVALENTES A 2.392
         CUERDAS.

         QUEDANDO REMANENTE DE 43.330 CDAS.-------------------------------------

         SE ACOMPANA ACTA NOTARIAL # 20 OTORGADA SAN JUAN 22 DE AGOSTO 1997 ANTE
         NOTARIO EDGARDO L. MARTINEZ NAZARIO ACLARANDO EL -- REMANENTE.

         ASIENTO 277 DIARIO 139 Y CON FECHA 7 MAYO 1997 SE PRESENTO LA ESCRITURA
         # 19 OTORGADA SAN JUAN 7 MARZO 1997 NOTARIO MANUEL CORREA MARQUEZ
         HIPOTECA SOBRE EL S LAR SEGREGADO # 8 GARANTI- ZANDO PAGARE A LA ORDEN
         BANCO SANTANDER P.R. POR LA SUMA DE-- $ 250,000.00 INTERESES
         PREFERENCIAL FLUCTANTE CITIBANK N.Y 0 THE CHASE MANHATTAN BANK VENCE A
         LA PRESENTACION. CONSTITUIDA POR INTER AMERICAN INDUSTRIAL DEVELOPMENT
         INC.-------------------------------------------------------------------

         SE ACOMPANA ACTA ACLARATORIA # 8 OTORGADA SAN JUAN 7 MARZO 1997 NOTARIO
         EDGARDO L. MARTINEZ NAZARIO EN LA QUE SE ACLARA- QUE EN LA ESCRITURA DE
         SEGREGACION Y COMPRA SE AUTORIZA A LA COMPRADORA CONSTITUIR HIPOTECA AL
         BANCO SANTANDER P.R.

         ASIENTO 91 DIARIO 152 Y CON FECHA 7 DE OCTUBRE 1997 SE PRESENTO
         ESCRITURA # 21 OTORGADA SAN JUAN 27 DE AGOSTO 1997 ANTE NOTARIO EDGARDO
         L. MARTINEZ (SEGREGACION Y COMPRA)

         VENDE....... P.R. INDUSTRIAL DEVELOPMENT CO. SOLAR # 5 (VEA DESCRIPCION
                      MAS ADELANTE)

         COMPRA...... CARIBBEAN PAPER CO. INC. REPRESENTADA POR ADRIAN SILVA
                      REOLLANO MAYOR EDAD CASADO CON GAIL SILVA FACULTADES SEGUN
                      RESOLUCION CON FECHA 4 JUNIO DE 1996 AFF 2869 NOTARIO JOSE
                      VLADIMIR DIAZ TEJERA (SE ACOMPANA)

         PRECIO...... $ 443,090.00

         SE ACOMPANA RESOLUCION ARRIBA CITADA Y SE AUTORIZA A LA COMPRA- DORA
         CONSTITUIR HIPOTECA BANCO POPULAR $ 1,944.800

         RUSTICA; PRECIO DE TERRENO SOLAR NUMERO 5 LOCALIZADO EN EL --- AREA
         INDUSTRIAL LAS CUEVAS DE TRUJILLO ALTO PUERTO RICO CON UNA CABIDA
         SUPERFICIAL DE 13,032.036 METROS CUADRADOS EQUIVALENTE A 3.316 CUERDAS
         Y EN LINDES POR EL NORTE CON EL SOLAR 4 DE LA AREA INDUSTRIAL Y CON EL
         AREA DE VIRAJE DE LA CALLE C DE LA MISMA AREA INDUSTRIAL; POR EL SUR
         CON EL SOLAR NUMERO 17, AREA DE USO PUBLI- CO DE LA MISMA AREA
         INDUSTRIAL; POR EL ESTE CON TERRENOS DEL E.L.A Y POR EL OESTE CON EL
         SOLAR NUMERO 6 DE LA MISMA AREA INDUSTRIAL.

         QUEDA REMANENTE DE 37.605 CDAS EQUIVALENTES A 146,602.1948 M/C.

         ASIENTO 92 ASIENTO 152 Y CON FECHA 7 OCTUBRE 1997 SE PRESENTO LA
         ESCRITURA # 379 OTORGADA SAN JUAN 27 DE AGOSTO 1997 ANTE NOTARIO JOSE
         DAVID MEDINA RIVERA HIPOTECA GARANTIZANDO PAGARE A LA ORDEN BANCO
         POPULAR DE P.R. POR $ 1,944.800 INTERESES 1 1/2% SOBRE EL PREFERENCIAL
         FLUCTANTE THE WALL STREET JOURNAL Y FUE CONSTITUIDA POR CARIBBEAN PAPER
         CO. INC. REPRESENTADA POR ADRIAN SILVA RIOLLANO Y SE ACOMPANA
         RESOLUCION PARA SUS FACULTADES.

LEA..... TODAS LAS SEGREGACION TIENE CONDICIONES DE VENTA Y ENTRE ELLAS --- LA
         COMPRADORA NO PODRA VENDER ARRENDAR, ENAJENAR NI HIPOTECAR SIN
         CONSENTIMIENTO ESCRITO DE LA COMPANIA DE FOMENTO DURANTE TERMINO DE 10
         ANOS.

         TODAS LAS SEGREGACIONES POR SU PROCEDENCIA QUEDAN AFECTAS A SERVI-
         DUMBRE A FAVOR CENTRAL VICTORIA INC. Y AL ARRENDAMIENTO VENCIDO PERO NO
         CANCELADO ANTES RELACIONADO.


<PAGE>   96

PAGINA# 5: CASO:         1222.6270 (SIMMONS CARIBEAN)


OBSERVACION:   SEGUN BUSQUEDA BITACORA NO CONSTA NADA PRESENTADO
               PARA SIMMONS CARIBBEAN.------------------------------------------




FUERON REVISADOS LIBROS DE EMBARGOS HASTA FOLIO 59 # 237; FEDERALES HASTA
ASIENTO 105 A-2 Y SENTENCIA HASTA FOLIO 50 # 136 Y LA BITACORA # 13 DE T.ALTO
HASTA ASIENTO 286 DIARIO 153.


NOTA:  PARTE DE ESTA BITACORA FUE PASADA

28 de octubre 1997

/s/ C. Arroyo
C. Arroyo


<PAGE>   97

                               ESTUDIO DE TITULO
                                 ACTUALIZACION

CASO: COMPANIA DE FOMENTO INDUSTRIAL
RE : #1222.6270 / Simmons Caribbean Bedding Inc. - Parcela de 8.42 cuerdas.

FINCA #4003, inscrita al folio 129 del tomo 90 de Trujillo Alto, inscripcion la.
Seccion IV de San Juan.

DESCRIPCION: Tomada de la inscripcion la.

RUSTICA: Situada en el Barrio Las Cuevas de Trujillo Alto, con un area
superficial de 35.35 cuerdas, equivalentes a 13 hectareas, 89 areas, 64
centiareas y 79 miliareas, en lindes en la actualidad con camino municipal que
separa de Daniel Vazquez, de Jose Fernandez y terrenos de Hipolito O'Farril.
SUR, con camino vecinal, terrenos de Faustino Betancourt y Rio Grande de Loiza.
ESTE, con terrenos de Emilio Torres e Hipolito O'Farril. OESTE, con camino
municipal separado de Daniel Velazquez y Jose Fernandez y camino vecinal que
comienza en el camino municipal y transcurre al Sureste y terrenos de Faustino
Betancout.

OBSERVACION: No se expresa colindancia Norte.

EDIFICACIONES: Edificio de almacen de materia prima, de armazon de acero con
techo de durotex y piso de tierra. Caseta para oficina y shop de concreto,
caseta de switches y edificio de concreto para comedor. En estas edificaciones y
en el inmueble antes descrito tenian sus propietarios fabricas para la
manufactura de agregados livianos y maquinarias, etc.

Por la inscripcion 7ma., subsiguiente se describen las siguientes edificaciones:

a) Una chimenea de ladrillos.
b) Edificacion de acero con techo y paredes de durotex. Las paredes y el techo
   han sido vandalizados.
c) Edificio de acero con paredes y techo de durotex.
d) Estructura de acero para conductores en correa (conveyors).
e) "Raw-Clay Feeder".
f) Estructura de acero que soporta a la parte superior un conductor de correa
   (belt conveyor) la cual contiene un equipo adherido a la misma conocido como
   "apron Feeder".
g) Seis aros de acero que forman parte del horno rotativo con revestimiento
interior de barro refractario utilizado para el cocimiento de los agregados
livianos.

ORIGEN: Se forma por agrupacion de las fincas:
1- #2493, inscrita al folio 170 vto. del tomo 57 de Trujillo Alto.
2- # 1802, inscrita al folio 247 del tomo 27 de Trujillo Alto.

PROPIETARIO REGISTRAL: COMPANIA DE FOMENTO INDUSTRIAL, quien
adquirio de la siguiente forma:

a) El terreno: por compra a Diazlite Inc., por el precio de $1,299,000.00,
mediante la cual escritura #3, otorgada en San Juan, el 26 de marzo de 1975,
ante Gilberto Alfaro Berrios, inscrita al folio l 35 del tomo 90 de Trujillo
Alto, inscripcion 6ta.

b) Y las edificaciones (relacionadas en la inscripcion 7ma.) por compra en
publica subasta, por el precio de $ 1,000.00. Segun la escritura #6, otorgada en
Carolina, el 21 de noviembre de 1984, ante Ramon Siaca Poupart, inscrita al
folio 85 vto. del tomo 284 de Trujillo Alto, inscripcion 8va. y Ultima.

CARGAS Y GRAVAMENES:

E Por su procedencia:


Servidumbre de paso a favor de la finca propiedad de Central Victoria Inc.



<PAGE>   98

Pag.#2
Finca #4003 de Trujillo Alto

Por si:

1- HIIPOTECA: Por la suma de $200,000.00, con intereses al 6% anual y al 7% en
caso de incumplimiento, en garantia de un pagare a favor de Government
Development Bank for Puerto Rico, o a su orden, que vence el lro. de febrero de
1979. Segun la escritura #56, otorgada en San Juan el 7 de febrero de 1964, ante
Jorge M. Morales, inscrita al folio 129 del tomo 90 de Trujillo Alto,
inscripcion lra.

BITACORA:

ASIENTO 86 DIARIO 96, DE FECHA 8 DE MAYO DE 1995: PRESENTADA Y PENDIENTE DE
DESPACHO: Instancia suscrita el dia 28 de diciembre de 1992, por Antonio
Maldonado Lopez, Presidente y Gerente General de la Compania de Fomento
Industrial de Puerto Rico, mediante la cual se solicita la cancelacion de la
hipoteca por la suma de $200,000.00 que grava esta finca por haberlo ordenado el
Tribunal Superior de San Juan, segun Sentencia de fecha 6 de octubre de 1992,
dada en el Caso Civil KCD-91-0703 (808) sobre Cancelacion de Pagare Extraviado.

Se acompana copia certificada de la sentencia, copia certificada de affidavit de
El Nuevo Dia "sobre publicacion de Edictos".

ASIENTO 87 DIARIO 96, DE FECHA 8 DE MAYO DE 1995: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #20 de Agrupacion, otorgada en San Juan, el 4 de diciembre
de 1992, ante Edgardo L. Martinez Rosario, mediante la cual Compania de Fomento
Industrial de Puerto Rico como duena de las fincas #11778, #6436 y #4003 de
Trujillo Alto, agrupa las mismas con un valor de $ 1,600,000.00, describiendose
la finca agrupada de la siguiente forma:

RUSTICA: Predio de terreno localizado en el Barrio Las Cuevas de Trujillo Alto,
Puerto Rico, con un area superficial de (cuarenta y ocho punto cuarenta y TRES
(48.42) cuerdas equivalentes a 190,349.059 metros cuadrados. Esta en lindes por
el NORTE, con camino municipal, antes Carretera Estatal #8860 ahora con
propiedad de Hipolito OFarril y con terrenos propiedad de Antonio R. Diaz, por
el SUR, con terrenos propiedad de Faustino Betancourt Pomales y con el Rio
Grande de Loiza, por el ESTE, con terrenos propiedad de Metropol Development
Corporation y terrenos propiedad de Antonio R. Diaz y por el OESTE, con camino
municipal antes, Carretera Estatal #8860, ahora.

NOTA: Se adjunta escritura de Acta Aclaratoria #6, otorgada en San Juan, el 27
de febrero de 1997, ante Edgardo L. Martinez mediante la cual Compania de
Fomento Industrial de Puerto Rico, expone y aclara que la cabida correcta es
48.11 cuerdas equivalentes a 189,111.92 metros cuadrados y no la que se expresa
en el documento de agrupacion antes relacionado.

ASIENTO 359 DIARIO 84, DE FECHA 11 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura # 11, de Segregacion y Compraventa, otorgada en San Juan, el
5 de agosto de 1994, ante Edgardo L. Martinez Nazario, mediante la la cual la
Compania de Fomento Industrial de Puerto Rico, como duena de la finca agrupada
con cabida superficial de 48.42 CUERDAS, segrega y vende a favor de
Inter-American Industrial Development Inc., por el precio de $309,709.93 el
siguiente solar:

RUSTICA: Parcela radicada en el Barrio Las Cuevas del Termino Municipal de
Trujillo Alto, con una cabida superficial de 9385.832 metros cuadrados,
equivalentes a 2.388 cuerdas, en lindes por el NORTE, con el solar #3. SUR, con
la Calle N. ESTE, Calle C y por el OESTE, con el solar #8

Segun expresa el documento dicha segregacion fue aprobada mediante Resolucion de
ARPE de fecha 14 de julio de 1992, Proyecto #92-19-A-263 CGT, la cual se adjunta
a la escritura.

Que despues de efectuada la citada segregacion la finca principal queda con un
remanente de 46.032 cuerdas, equivalentes a 180,963.227 metros cuadrados.


<PAGE>   99

Pagina #3
Finca:            #4003 de Trujillo Alto

Son condiciones de esta Compraventa que la compradora y/o entidades subsidiarias
y/o afiliadas utilizaran la propiedad para fines de manufactura y distribucion y
para aquellos otros usos relacionados a su operacion que apruebe la Junta de
Planificacion por un termino de 10 anos a partir del otorgamiento de esta
escritura. No se podra vender, arrendar, ceder o traspasar la propiedad al
Estado Libre Asociado de Puerto Rico por un termino de 10 anos sin el
consentimiento de la Compania. Tampoco podra vender, arrendar o hipotecar por el
citado termino sin el consentimiento escrito de la Compania.

OBSERVACION: Segun la Resolucion de ARPE que se adjunta se autoriza la
segregacion de los solares 7 y 8 con cabida superficial de 9385.832 metros
cuadrados y 9,403.429 metros cuadrados.

NOTA:

Tambien se acompanan las siguientes escrituras.

a) Escritura #5 de Acta Aclaratoria, otorgada en San Juan, el 27 de febrero de
1997, ante Edgardo L. Martinez Nazario mediante la cual la Compania de Fomento
Industrial de Puerto Rico, aclara la escritura #11, relacionada en este asiento
en
cuanto a la cabida de la finca
principal y la cual debe leer: 48.11 cuerdas equivalentes al
89,111.192 metros cuadrados.

Que una vez segregado el SOLAR #7 el remanente de la finca principal debe leer:
46.032 cuerdas equivalentes al 79,725.360 metros cuadrados.

b) Escritura #20 de Acta de Rectificacion. otorgada en San Juan, el 7 de marzo
de 1997, ante Manuel L. Correa Marquez, mediante la cual se aclara la escritura
#6 de hipoteca (ver asiento 320 diario 84) en cuanto a la cabida de la finca
principal de donde se segrego el solar que se hipoteca, cuya finca se expresa
debe leer 48.11 CUERDAS equivalentes a 189,111.192 metros cuadrados.

Se acompana Resolucion Corporativa de la Corporacion adquiriente
autorizando a otorgar esta Acta de Rectificacion.

ASIENTO 320 DIARIO 84, DE FECHA 10 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #6, otorgada en San Juan, el 5 de agosto de 1994, ante Noel
Gonzalez Miranda, mediante la cual Inter-American Industrial Development Inc.
como duena del solar #7 del Parque Industrial Las Cuevas, segregado de las
fincas # 11778. #6436 y #4003 agrupadas, constituye hipoteca sobre dicho solar
por la suma de $1,830,000.00, con intereses al 1% anual, sobre el interes
preferencial prevaleciente en el Citibank, N.A. de New York, en garantia de un
pagare a favor del Portador, que vence en la Presentacion.

NOTA I: Se acompana Resolucion Corporativa de la citada corporacion autorizando
la Compraventa e Hipoteca del citado solar.

NOTA II: Favor Referirse al Acta Aclaratoria que se ha unido al documento
relacionado en el asiento anterior.

OBSERVACION: Lo anterior no comprende una calificacion de estos documentos ni
presupone que los mismos seran inscritos.

REVISADOS: Embargos por Contribuciones, Embargos Federales, Sentencias y
Bitacora hasta el Asiento 42 del Diario 149.

San Juan, Puerto Rico, a 4 de septiembre de 1997.

JUSTO GARCIA INIGUEZ, INC. JGI/mvd Cotejado por 4003.S4T


<PAGE>   100

                               ESTUDIO DE TITULO
                                 ACTUALIZACION

CASO: COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO
RE : # 1222.6270 / Simmons Caribbean Bedding Inc. - Parcela de 48.42 cuerdas.

FINCA #11778, inscrita al folio 78 del tomo 238 de Trujillo Alto, inscripcion
la. Seccion IV de San Juan.

DESCRIPCION:

RUSTICA: Porcion de terreno situada en el Barrio denominado Las Cuevas del
Termino Municipal de Trujillo Alto, compuesto de 8.08 cuerdas, equivalentes a
31,757.5445 metros cuadrados, en lindes por el NORTE, terrenos propiedad de
Antonio R. Diaz. SUR, con el Rio Grande de Loiza. ESTE, con terrenos propiedad
de Metropol Development Corp. y Antonio R. Diaz. OESTE, con terrenos de Diazlite
Inc.


ORIGEN: Se segrega de la finca #46, inscrita al folio 154 del tomo 50 de
Trujillo Alto.

PROPIETARIO REGISTRAL: COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO, quien
adquirio por cesion a su favor por Antonio R. Diaz, mayor de edad, soltero, en
pago de deuda. Se valora esta finca en $121,000.00. Segun consta de la escritura
#4, otorgada en San Juan, el 26 de marzo de 1975, ante Gilberto Alfaro Berrios,
inscrita al folio 78 del tomo 238 de Trujillo Alto, inscripcion lra. y Unica.

CARGAS Y GRAVAMENES:

Por su procedencia: LIBRE.

Por si: LIBRE.

BITACORA:

ASIENTO 87 DIARIO 96, DE FECHA 8 DE MAYO DE 1995: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #20 de Agrupacion, otorgada en San Juan, el 4 de diciembre
de 1992, ante Edgardo L. Martinez Rosario, mediante la cual Compania de Fomento
Industrial de Puerto Rico como duena de las fincas # l 1778, #6436 y #4003 de
Trujillo Alto, agrupa las mismas con un valor de $ 1,600,000.00, describiendose
la finca agrupada de la siguiente forma:

RUSTICA: Predio de terreno localizado en el Barrio Las Cuevas de Trujillo Alto,
Puerto Rico, con un area superficial de cuarenta y ocho punto cuarenta y TRES
(48.42) cuerdas, equivalentes a 190,349.059 metros cuadrados. Esta en lindes por
el NORTE, con camino municipal, antes Carretera Estatal #8860 ahora con
propiedad de Hipolito O'Farril y con terrenos propiedad de Antonio R. Diaz, por
el SUR, con terrenos propiedad de Faustino Betancourt Pomales y con el Rio
Grande de Loiza, por el ESTE, con terrenos propiedad de Metropol Development
Corporation y terrenos propiedad de Antonio R. Diaz y por el OESTE, con camino
municipal antes, Carretera Estatal #8860, ahora.

NOTA: Se adjunta escritura de Acta Aclaratoria #6, otorgada en San Juan, el 27
de febrero de 1997, ante Edgardo L. Martinez mediante la cual Compania de
Fomento Industrial de Puerto Rico, expone y aclara que la cabida correcta es
48.11 cuerdas equivalentes a 189,111.92 metros cuadrados y no la que se expresa
en el documento de agrupacion antes relacionado.

ASIENTO 359 DIARIO 84, DE FECHA 11 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura # 11, de Segregacion y Compraventa, otorgada en San Juan, el
5 de agosto de 1994, ante L. Martinez Nazario, mediante la la cual la Compania
de Fomento Industrial de Puerto Edgardo como duena de la finca agrupada con
cabida superficial de 48.42 cuerdas, segrega y vende a favor de Inter-American
Industrial Development Inc., por el precio de $309,709.93 el siguiente solar:

RUSTICA: Parcela radicada en el Barrio Las Cuevas del Termino Municipal de
Trujillo Alto, con una cabida superficial de 9385.832 metros cuadrados,
equivalentes a 2.388 cuerdas, en lindes por el NORTE, con el solar #3. SUR, con
la Calle N. ESTE, Calle C y por el OESTE, con el solar #8.


<PAGE>   101

Pag.#2
Finca #11778 de Trujillo Alto

Segun expresa el documento dicha segregacion fue aprobada mediante Resolucion de
ARPE de fecha 14 de julio de 1992, Proyecto #92-19-A-263 CGT, la cual se adjunta
a la escritura.

Que despues de efectuada la citada segregacion la finca principal queda con un
remanente de 46.032 CUERDAS, equivalentes a 180,963.227 metros cuadrados.

Son condiciones de esta Compraventa que la compradora y/o entidades subsidiarias
y/o afiliadas . utilizaran la propiedad para fines de manufactura y distribucion
y para aquellos otros usos relacionados a su operacion que apruebe la Junta de
Planificacion por un termino de 10 anos a partir del otorgamiento de esta
escritura. No se podra vender, arrendar, ceder o traspasar la propiedad al
Estado Libre Asociado de Puerto Rico por un termino de 10 anos sin el
consentimiento de la Compania. Tampoco podra vender, arrendar o hipotecar por el
citado termino sin el consentimiento escrito de la Compania.

OBSERVACION: Segun la Resolucion de ARPE que se adjunta se autoriza la
segregacion de los solares 7 y 8 con cabida superficial de 9385.832 metros
cuadrados y 9,403.429 metros cuadrados.

NOTA: Tambien se acompanan las siguientes escrituras.

a) Escritura #5 de Acta Aclaratoria, otorgada en San Juan, el 27 de febrero de
1997, ante Edgardo L. Martinez Nazario mediante la cual la Compania de Fomento
Industrial de Puerto Rico, aclara la escritura # 11, relacionada en este asiento
en cuanto a la cabida de la finca principal y la cual debe leer: 48.11 cuerdas
equivalentes a 189,111.192 metros cuadrados.

Que una vez segregado el SOLAR #7 el remanente de la finca principal debe leer:
46.032 cuerdas equivalentes a 179,725.360 metros cuadrados.

b) Escritura #20 de Acta de Rectificacion, otorgada en San Juan, el 7 de marzo
de 1997, ante Manuel L. Correa Marquez, mediante la cual se aclara la escritura
#6 de hipoteca (ver asiento 320 diario 84) en cuanto a la cabida de la finca
principal de donde se segrego el solar que se hipoteca, cuya finca se expresa
debe leer 48.11 CUERDAS equivalentes a 189,111.192 metros cuadrados.

ASIENTO 320 DIARIO 84, DE FECHA 10 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #6, otorgada en San Juan, el 5 de agosto de 1994, ante Noel
Gonzalez Miranda, mediante la cual Inter-American Industrial Development Inc.
como duena del solar #7 del Parque Industrial Las Cuevas, segregado de las
fincas # 11778. #6436 y #4003 agrupadas, constituye hipoteca sobre dicho solar
por la suma de $ 1,830,000.00, con intereses al 1% anual, sobre el interes
preferencial prevaleciente en el Citibank, N.A. de New York, en garantia de un
pagare a favor del Portador, que vence en la Presentacion.

NOTA I: Se acompana Resolucion Corporativa de la citada corporacion autorizando
la Compraventa e Hipoteca del citado solar.

NOTA II: Favor Referirse al Acta Aclaratoria que se ha unido al documento
relacionado en el asiento anterior.

OBSERVACION: Lo anterior no comprende una calificacion de estos documentos ni
presupone que los mismos seran inscritos.

REVISADOS. Embargos por Contribuciones, Embargos Federales, Sentencias y
Bitacora hasta el Asiento 42 del Diario 149.

San Juan Puerto Rico, a 4 de septiembre de 1997.

JUSTO GARCIA INIGUEZ, INC.
JGI/mvd
Cotejado por: 11778.S4T

<PAGE>   102

                                ESTUDIO DE TITULO
                                 ACTUALIZACION


CASO: COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO

RE : #1222.6270. / Simmons Caribbean Bedding Inc.- Parcela de 48.42 cuerdas.

FINCA #6436, inscrita al folio 82 del tomo 128 de Trujillo Alto, inscripcion la.
Seccion IV de San Juan.

DESCRIPCION:

RUSTICA: Porcion de terreno situada en el Barrio denominado Las Cuevas del
Termino Municipal de Trujillo Alto, compuesto de 5.00 cuerdas, equivalentes a l
hectarea, 96 areas, 51 centiareas y 59 miliareas, en lindes por el NORTE y
OESTE, con un camino vencinal que lo separa de terrenos propiedad de Diazlite,
Inc. SUR y ESTE, con la finca principal de la cual esta se segrega, propiedad de
Faustino Betaacourt.

ORIGEN: Se segrega de la finca #1803, inscrita a los folios 250 y
181 vto. de los tomos 27 y 29
de Trujillo Alto.

PROPIETARIO REGISTRAL: COMPANIA DE FOMENTO INDUSTRIAL DE PUERTO RICO, quien
adquirio por cesion a su favor por Antonio R. Diaz, mayor de edad, soltero, en
pago de deuda. Se valora esta finca en $175,000.00. Segun consta de la escritura
#4, otorgada en San Juan, el 26 de marzo de 1975, ante Gilberto Alfaro Berrios,
inscrita al folio 82 vto. del tomo 128 de Trujillo Alto, inscripcion 2da. y
Ultima.

CARGAS Y GRAVAMENES:

Por su procedencia:

1 - Servidumbre de paso.

2 - Arrendamiento: (Sobre parcela de una cuerda) a favor de Manuel Quinones
casado con Carmen Rivera y de Manuel Perez casado con Guillermina Rodriguez, por
el termino de 7 anos con un canon de $45.00 mensuales. Tambien se les concede a
los arrendatarios el derecho de extraccion de grava arena sobre la finca
principal por el termino del arrendamiento. Segun la escritura #9, otorgada en
San Juan, el 11 de enero de 1955, ante Vicente Hita, Jr., inscrita al folio 180
vto. del tomo 29 de Trujillo Alto, inscripcion 4ta. finca #1803, de la cual se
segrega la finca objeto de este Informe.

Por si: LIBRE.

BITACORA:

ASIENTO 87 DIARIO 96, DE FECHA 8 DE MAYO DE 1995: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #20 de Agrupacion, otorgada en San Juan, el 4 de diciembre
de 1992, ante Edgardo L. Martinez Rosario, mediante la cual Compania de Fomento
Industrial de Puerto Rico como duena de las fincas #11778, #6436 y #4003 de
Trujillo Alto, agrupa las mismas con un valor de $1,600,000.00, describiendose
la finca agrupada de la siguiente forma:

RUSTICA: Predio de terreno localizado en el Barrio Las Cuevas de Trujillo Alto,
Puerto Rico, con un area superficial de cuarenta y ocho punto cuarenta y TRES
(48.42) cuerdas, equivalentes a 190,349.059 metros cuadrados. Esta en lindes por
el NORTE, con camino municipal, antes Carretera Estatal #8860 ahora con
propiedad de Hipolito O'Farril y con terrenos propiedad de Antonio R. Diaz, por
el SUR, con terrenos propiedad de Faustino Betancourt Pomales y con el Rio
Grande de Loiza, por el ESTE, con terrenos propiedad de Metropol Development
Corporation y terrenos propiedad de Antonio R. Diaz y por el OESTE, con camino
municipal : antes, Carretera Estatal # 8860, ahora.

NOTA: Se adjunta escritura de Acta Aclaratoria #6, otorgada en San Juan, el 27
de febrero de 1997, ante Edgardo L. Martinez mediante la cual Compania de
Fomento Industrial de Puerto


<PAGE>   103

Pag.#2
Finca #6436 de Trujillo Alto

Rico, expone y aclara que la cabida correcta es 48.11 cuerdas equivalentes a
189,111.92 metros cuadrados y no la que se expresa en el documento de agrupacion
antes relacionado.

ASIENTO 359 DIARIO 84. DE FECHA 11 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #11, de Segregacion y Compraventa, otorgada en San Juan, el
5 de agosto de 1994, ante Edgardo L. Martinez Nazario, mediante la la cual la
Compania de Fomento Industrial de Puerto Rico, como duena de la finca agrupada
con cabida superficial de 48.42 CUERDAS, segrega y vende a favor de
Inter-American Industrial Development Inc., por el precio de $309,709.93 el
siguiente solar:

RUSTICA: Parcela radicada en el Barrio Las Cuevas del Termino Municipal de
Trujillo Alto, con una cabida superficial de 93 85.832 metros cuadrados,
equivalentes a 2.3 88 CUERDAS, en lindes por el NORTE, con el solar #3. SUR, con
la Calle N. ESTE, Calle C y por el OESTE, con el solar #8.

Segun expresa el documento dicha segregacion fue aprobada mediante Resolucion de
ARPE de fecha 14 de julio de 1992, Proyecto #92-19-A-263 CGT, la cual se adjunta
a la escritura.

Que despues de efectuada la citada segregacion la finca principal queda con un
remanente de 46.032 CUERDAS equivalentes a 180,963.227 metros cuadrados.

Son condiciones de esta Compraventa que la compradora y/o entidades subsidiarias
y/o afiliadas utilizaran la propiedad para fines de manufactura y distribucion y
para aquellos otros usos relacionados a su operacion que apruebe la Junta de
Planificacion por un termino de 10 anos a partir del otorgamiento de esta
escritura. No se podra vender, arrendar, ceder o traspasar la propiedad al
Estado Libre Asociado de Puerto Rico por un termino de 10 anos sin el
consentimiento de la Compania. Tampoco podra vender, arrendar o hipotecar por el
citado termino sin el consentimiento escrito de la Compania.

OBSERVACION: Segun la Resolucion de ARPE que se adjunta se autoriza la
segregacion de los solares 7 y 8 con cabida superficial de 9385.832 metros
cuadrados y 9,403.429 metros cuadrados.

NOTA:

Tambien se acompanan las siguientes escrituras.

a) Escritura #5 de Acta Aclaratoria, otorgada en San Juan, el 27 de febrero de
1997, ante Edgardo L. Martinez Nazario mediante la cual la Compania de Fomento
Industrial de Puerto Rico, aclara la escritura #11, relacionada en este asiento
en cuanto a la cabida de la finca principal y la cual debe leer: 48.11 cuerdas
equivalentes a 189,111.192 metros cuadrados.

Que una vez segregado el SOLAR #7 el remanente de la finca principal debe leer:
46.032 cuerdas equivalentes a 179,725.360 metros cuadrados.

b) Escritura #20 de Acta de Rectificacion, otorgada en San Juan, el 7 de marzo
de 1997, ante Manuel L. Correa Marquez, mediante la cual se aclara la escritura
#6 de hipoteca (ver asiento 320 diario 84) en cuanto a la cabida de la finca
principal de donde se segregO el solar que se hipoteca, cuya finca se expresa
debe leer 48.11 CUERDAS equivalentes a 189,111.192 metros cuadrados.


Se acompana Resolucion Corporativa de la Corporacion adquiriente autorizando a
otorgar esta Acta de Rectificacion.

ASIENTO 320 DIARIO 84, DE FECHA 10 DE AGOSTO DE 1994: PRESENTADA Y PENDIENTE DE
DESPACHO: Escritura #6, otorgada en San Juan, el 5 de agosto de 1994, ante Noel
Gonzalez Miranda, mediante la cual Inter-American Industrial Development Inc.
como duena del solar #7 del Parque Industrial Las Cuevas, segregado de las
fincas #11778, #643 6 y #4003 agrupadas,


<PAGE>   104

Pagina #3
Finca #6436 de Trujillo Alto

constituye hipoteca sobre dicho solar por la suma de $1,830,000.00, con
intereses al 1% anual, sobre el interes preferencial prevaleciente en el
Citibank, N.A. de New York, en garantia de un pagare a favor del Portador, que
vence en la Presentacion.

NOTA I: Se acompana Resolucion Corporativa de la citada corporacion autorizando
la Compraventa e Hipoteca del citado solar.

NOTA II: Favor Referirse al Acta Aclaratoria que se ha unido al documento
relacionado en el asiento anterior.

OBSERVACION: Lo anterior no comprende una calificacion de estos documentos ni
presupone que los mismos seran inscritos.

REVISADOS:Embargos por ontribuciones, Embargos Federales, Sentencias y Bitucora
hasta el Asiento 42 del Diario 149.

San Juan, Puerto Rico a 4 de septiembre de 1997.

JUSTO GARCIA INIGUEZ INC.
JGI/m
Cotejado
6436.S4T

<PAGE>   105

                                  LAW OFFICES

       GONZALEZ OLIVER, CORREA CALZADA, COLLAZO SALAZAR, HERRERO & JIMENEZ
                             POST OFFICE BOX 11550

                       SAN JUAN, PUERTO RICO 00922- 1550


                                           TELEPHONE (809) 793-5000
                                        BANCO SANTANDER PUERTO RICO BLDG.
                                           1508 F. D. ROOSEVELT AVENUE
                                             SAN JUAN, PUERTO RICO
                                             CABLE ADDRESS "COCOHER"
                                                FAX NO. 793-5007

12 de diciembre de 1997

Banco Santander Puerto Rico
Prestamos Construccion

SIMMONS CARIBBEAN BEDDING, INC.


                                                  INVOICE NO. 982 (1)

================================================================================
DATE      Por servicios profesionales prestados
          al cliente de referencia, relacionados
          con el Contrato de Prestaino de
          Construccion , incluyendo preparacion,
          redaccion y otorgamiento de extenso
          Contrato de Prestamo, escritura de
          hipoteca, reuniones, llamadas telefonicas,
          revision de documentos y otros servicios
          necesarios

          Honorarios                                   $18,500.00

          Sellos y Comprobantes Hipoteca
          por $3,200,000 (Orig. $3,521.00;
          Copia $1,760.50; Reg. $12,760.50)             18,042.00

          Estudios de Titulo y Revisiones                  150.00
          Poliza de Titulo                               4,975.00
          Presentacion y Retiro                             40.00
          Minuta de Presentacion                            15.00
          Estudio Corporativo                               50.00

<PAGE>   106


                               IN ACCOUNT WITH

                                  LAW OFFICES

       GONZALEZ OLIVER, CORREA CALZADA, COLLAZO SALAZAR, HERRERO & JIMENEZ
                             POST OFFICE BOX 11550

                       SAN JUAN, PUERTO RICO 00922-1550


                                           TELEPHONE (809) 793-5000
                                        BANCO SANTANDER PUERTO RICO BLDG.
                                           1508 F. D. ROOSEVELT AVENUE
                                             SAN JUAN, PUERTO RICO
                                             CABLE ADDRESS "COCOHER"
                                                FAX NO. 793-5007


RE: Simmons Caribbean Bedding, Inc.


                                                  INVOICE NO. 982 (1)

================================================================================





DATE      Gastos miscelaneos que incluyen
          fotocopias, sellos correo,
          envio facsimiles, mensajero                   100.00
                                                    ----------

                    TOTAL...........................$41,872.00
                                                    ==========



          ACR75B/A:SIMMONS.FAC