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                                                                    Exhibit 10.1

                     ESOP STOCK SALE AND EXCHANGE AGREEMENT

         This ESOP STOCK SALE AND EXCHANGE AGREEMENT (this "Agreement"), is
dated as of July 22, 1998 by and among SIMMONS HOLDINGS, INC., a Delaware
corporation ("Holdings"), SIMMONS COMPANY, a Delaware corporation (the
"Company"), STATE STREET BANK & TRUST COMPANY, solely in its capacity as Trustee
(the "Trustee") of the Simmons Company Employee Stock Ownership Trust (the
"ESOT") and REM Acquisition, Inc., a Delaware corporation ("MergerCo").

                              W I T N E S S E T H:
                              -------------------

         WHEREAS, the ESOT is, as of the date hereof, the record and beneficial
owner of 5,663,721 shares of Series A Preferred Stock of the Company, of which
2,250,049 shares are, pursuant to the terms of the Simmons Company Employee
Stock Ownership plan, as amended and restated effective January 17, 1989, and as
further amended through the date hereof (the "ESOP"), allocated to the accounts
of ESOP participants (such shares are referred to herein as the "Allocated
Shares"), and 3,413,672 shares are, pursuant to the terms of the ESOP, not so
allocated (such shares are referred to herein as the "Unallocated Shares" and
together with the Allocated Shares, the "ESOP Shares");

         WHEREAS, MergerCo and Holdings entered into an Agreement and Plan of
Merger, dated as of July 16, 1998 (as such agreement may be amended from time to
time, the "Merger Agreement"), which is attached as Exhibit A hereto, pursuant
to which MergerCo will be merged with and into Holdings, with Holdings being the
surviving corporation (the "Merger"). Terms used and not otherwise defined
herein shall have the meanings ascribed to such terms in the Merger Agreement;

         WHEREAS, pursuant to the Merger Agreement, the consummation and
effectiveness of the Merger is conditioned in part upon the execution, delivery
and performance of this Agreement;

         WHEREAS, the Trustee, as successor to NationsBank, N.A. (South), the
Company and Holdings are parties to a 1996 Stockholders' Agreement dated as of
March 22, 1996 (the "Stockholders' Agreement");

         WHEREAS, in connection with the consummation of the Merger, the parties
hereto have agreed, effective as of the Closing hereunder, to terminate the
Stockholders' Agreement and enter into a new stockholders' agreement
substantially in the form of Exhibit B hereto (the "New Stockholders'
Agreement") which, among other things, will provide the Trustee with certain
rights with respect to the ESOP Shares;

         NOW THEREFORE, in consideration of the foregoing and the mutual
premises, representatives, warranties, agreements and covenants set forth herein
and in the Merger Agreement, MergerCo Holdings, the Company and the Trustee,
each intending to be legally bound, hereby agree as follows:

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         1.       PURCHASE AND SALE OF THE ALLOCATED SHARES.

                  1.1.     PURCHASE AND SALE.

                           (a) Subject to the terms and conditions hereof, on
                  the Closing Date (as defined below), the Trustee shall sell
                  (the "Sale") to MergerCo, and MergerCo shall purchase from the
                  Trustee, all of the shares of Series A Preferred Stock to the
                  Company that constitute Allocated Shares owned by the ESOT on
                  the Closing Date (which number of shares shall be 2,250,049
                  shares), for a purchase price per share in cash of $ 7.1463
                  (the "Purchase Price"), which is equal to the price per share
                  that would have been payable to the ESOP pursuant to the
                  Merger Agreement with respect to a share of Series A Preferred
                  Stock of the Company if, immediately prior to the Effective
                  Time, that share had been converted into one share of Common
                  Stock of the Company and exchanged for shares of Class C
                  Common Stock of Holdings in accordance with the exchange ratio
                  set forth in the Stockholders Agreement and had such shares of
                  Class C Common Stock been converted into the right to receive
                  the Cash Price pursuant to Section 3.1(c)(ii) of the Merger
                  Agreement.

                           (b) Not less than 10 days prior to the Closing Date,
                  the Trustee and the Company shall notify MergerCo of the
                  number of Allocated Shares and Unallocated Shares that the
                  Trustee estimates will be outstanding at the Closing Date
                  under the ESOP.

                  1.2.     CLOSING.

                           (a) Subject to the terms and conditions hereof, the
                  closing of the Sale shall take place immediately prior to the
                  Effective Time of the Merger and at the same place as the
                  closing of the Merger under the Merger Agreement (the time and
                  date of the closing of the Sale shall be referred to herein as
                  the "Closing Date").

                           (b) On the Closing Date, the Trustee shall deliver to
                  MergerCo one or more stock certificates representing the
                  Allocated Shares to be purchased by MergerCo pursuant to
                  Section 1.1 in proper form for transfer, accompanied by
                  appropriate stock powers duly executed in blank, together with
                  any and all necessary documentary or transfer tax stamps duly
                  affixed and cancelled and otherwise in form satisfactory to
                  MergerCo.

                           (c) On the Closing Date, MergerCo shall deliver to
                  the Trustee the aggregate Purchase Price for the Allocated
                  Shares sold pursuant to Section 1.1, in cash by wire transfer
                  of immediately available funds to such bank account as the
                  Trustee shall designate in writing to MergerCo at least two
                  business days prior to the Closing Date.

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         2.       EXCHANGE OF THE UNALLOCATED SHARES.

                  2.1. EXCHANGE OF UNALLOCATED SHARES. Subject to the terms and
         conditions hereof, the Trustee shall exchange the shares of Series A
         Preferred Stock of the Company that constitute Unallocated Shares owned
         by the ESOT on the Closing Date (which, for this purpose is assumed to
         be approximately 3,413,672 shares) for, and Holdings shall issue to the
         Trustee in exchange therefor an aggregate of, 3,484,997 shares of Class
         C Stock of Holdings, which is the number determined in accordance with
         the exchange ratio for "Exchange Shares" set forth in Section 3.1(c) of
         the Stockholders' Agreement as if each Unallocated Share had been
         converted into one share of Common Stock of the Company and exchanged
         for Class C Stock of Holdings in accordance with the Stockholders
         Agreement and the Trustee hereby acknowledges that such Unallocated
         Shares shall be shares of Common Stock of Holdings and shall remain
         outstanding following the Merger (the "Exchange"). In connection
         therewith, the Trustee does hereby waive its right to be redeemed or to
         receive any cash consideration as Merger Consideration (as defined in
         the Merger Agreement) for any of the Unallocated Shares held thereby,
         and agrees that all such Unallocated Shares shall constitute "Rollover
         Shares" for all purposes in connection with the Merger.

                  2.2. CLOSING OF THE EXCHANGE. The closing of the Exchange
         shall take place, at the sole option of MergerCo, simultaneously with,
         immediately before, or immediately after, the closing of the Sale.
         MergerCo shall notify the Trustee two business days prior to the
         Closing Date of the order of occurrence of the Sale and Exchange. At
         such closing, the Trustee shall deliver to Holdings one or more stock
         certificates representing the Unallocated Shares in proper form for
         transfer, accompanied by appropriate stock powers duly executed in
         blank, together with any and all necessary documentary or transfer tax
         stamps duly affixed and cancelled and otherwise in form satisfactory to
         MergerCo, and Holdings shall deliver to the Trustee one or more
         certificates representing the Shares of Common Stock determined in
         accordance with Section 2.1.

         3. ADDITIONAL PURCHASE RIGHTS. Subject to the terms and conditions
hereof, if all the conditions set forth in Section 8.1 are satisfied, provided
that the condition set forth in Section 8.1.5(d) is not satisfied, then MergerCo
shall have the right to purchase all but not less than all of the Unallocated
Shares (which shall be Series A Preferred Shares) held by the Trustee and the
Trustee shall be obligated to sell such shares to MergerCo, at the request of
MergerCo, at the Purchase Price per share set forth in Section 1.1, and upon the
same terms and conditions as set forth in Section 1 with respect to the
Allocated Shares.

         4. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. As an inducement to
MergerCo to enter into this Agreement and to consummate the transactions
contemplated hereby, the Trustee represents and warrants, as of the date hereof
and as of the Effective Time, to MergerCo as follows:


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                  4.1.     AUTHORITY AND RELATED MATTERS.

                           (a) The Trustee has full legal right, power, capacity
                  and authority to execute and deliver this Agreement and all of
                  the other instruments contemplated hereby, to consummate the
                  transactions contemplated hereby (including the New
                  Stockholders' Agreement) and by the Merger Agreement and to
                  comply with the terms, conditions and provisions hereof and
                  thereof. This Agreement is, and each other instrument of the
                  Trustee contemplated hereby (including the New Stockholders'
                  Agreement) will be, the legal, valid and binding obligation of
                  the Trustee, enforceable against it in accordance with its
                  terms.

                           (b) The ESOT is the record and beneficial owner of
                  5,663,721 shares of Series A Preferred Stock of the Company,
                  of which 2,250,049 constitute Allocated Shares and 3,413,672
                  constitute Unallocated Shares. Except for this Agreement and
                  the transactions contemplated hereby (including the New
                  Stockholders' Agreement), and except as disclosed in the
                  Merger Agreement or the Plan, there are no agreements,
                  arrangements, warrants, options, puts, calls, rights, option
                  or other employee benefit plans or other commitments or
                  understandings of any character to which the ESOT is a party
                  or by which any of its assets (including the ESOP Shares) is
                  bound and relating to the issuance, sale, purchase,
                  redemption, conversion, exchange, registration, voting or
                  transfer of any ESOP Shares or other securities of Holdings or
                  the Company. As of the Closing Date and subject to the
                  Company's releasing the ESOP Shares from the Company's pledge
                  agreement with the ESOT, the ESOP Shares to be sold to
                  MergerCo will be transferred to MergerCo free of any
                  preemptive or subscription rights and free and clear of all
                  liens, claims, charges, security interests, mortgages,
                  pledges, easements, conditional sales or other title retention
                  agreements, defect in title, covenants or other encumbrances
                  or restrictions of any kind (collectively, "Encumbrances").

                           (c) Neither the execution and delivery by the Trustee
                  of this Agreement or of any of the other instruments
                  contemplated hereby to be executed by it (including the New
                  Stockholders' Agreement), the consummation by the Trustee of
                  any of the transactions contemplated hereby, nor compliance by
                  the Trustee with or fulfillment by the Trustee of the terms,
                  conditions and provisions hereof or thereof will:

                                    (i) conflict with, result in a breach of the
                           terms, conditions or provisions of, or constitute a
                           default, an event of default or an event creating
                           rights of acceleration, amendment, termination or
                           cancellation or a loss of rights under, or result in
                           the creation or imposition of any Encumbrance upon,
                           any of the assets or properties of the Trustee or the
                           ESOT under any charter, by-laws, trust agreement,
                           partnership agreement or certificate of partnership
                           or other constitutive documents of the Trustee and
                           the ESOT

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                           (including the ESOP), any note, instrument,
                           agreement, mortgage, lease, license, franchise,
                           Governmental Permit (as defined in the Merger
                           Agreement) or judgment, order, award or decree to
                           which the Trustee or the ESOT is a party or by which
                           the Trustee or the ESOT (provided that the Trustee
                           makes no representation with respect to ERISA); or

                                    (ii) require the approval, consent,
                           authorization or act of, or the making by the Trustee
                           of any declaration, filing or registration with, any
                           third Person or any Governmental Body (as defined in
                           the Merger Agreement).

                  4.2. NO FINDER. None of the Trustee, the ESOT, or any party
         acting on his or its behalf, has paid or become obligated to pay any
         fee or commission to any broker, finder or intermediary for or on
         account of the transactions contemplated by this Agreement or the
         Merger Agreement, except that the Trustee has engaged Houlihan, Lokey,
         Howard and Zukin, Inc. ("HL") in connection with the transactions
         contemplated by this Agreement and the Merger Agreement.

                  4.3. ABSENCE OF PROCEEDINGS. There is no action, suit,
         proceeding or investigation pending or, to the knowledge of the
         Trustee, threatened, against the Trustee or the ESOT to consummate the
         transactions contemplated hereby or by the Merger Agreement.

                  4.4. FAIRNESS OPINION. On the date hereof, the ESOT has
         received the fairness opinion (the "ESOT Fairness Opinion") of HL to
         the effect that the consideration to be received by the ESOT for the
         ESOP Shares in connection with the transactions contemplated by this
         Agreement and the Merger is not less than fair value and that such
         transactions, considered as a whole, is fair to the ESOP from a
         financial point of view, and such opinion has not been withdrawn,
         qualified or otherwise modified.

                  4.5. INVESTMENT INTENT. The Trustee is exchanging the
         Unallocated Shares hereunder solely for its own account and with no
         intention of distributing or reselling the Unallocated Shares of any
         part thereof, or interest therein, in any transaction that would be in
         violation of the Securities Act of 1933, as amended (the "Securities
         Act") or any other securities laws of the United States of America or
         any state thereof.

                  4.6. STATUS AS ACCREDITED INVESTOR. As the Closing Date, the
         Trustee will be an "accredited investor" (as that term is defined in
         Rule 501 of Regulation D under the Securities Act). The Trustee has
         such knowledge and experience in business and financial matters so that
         the Trustee is capable of evaluating the merits and risks of the
         Exchange and of the investment in Holdings. The Trustee understands the
         full nature and risk of an investment in Holdings. The Trustee further
         acknowledges that it has had access to the books and records of
         Holdings, is generally familiar with the business being conducted by
         Holdings and its subsidiaries and has had an opportunity to ask
         questions concerning Holdings and its subsidiaries; provided, however,
         that nothing herein shall affect the

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         representations and warranties of Holdings or the Company hereunder,
         any of the obligations of Holdings or the Company, or any the Trustee's
         rights under the other provisions of this Agreement. The Trustee
         acknowledges that none of MergerCo, Holdings, the Company nor any
         Affiliate thereof has made, or will make, and the Trustee has not
         relied upon, any representation or warranty, whether express or
         implied, of any character, except as expressly set forth herein.

         5. REPRESENTATIONS AND WARRANTIES OF MERGERCO. As an inducement to the
Trustee to enter into this Agreement and to consummate the transactions
contemplated hereby, MergerCo represents and warrants to the Trustee as follows:

                  5.1. ORGANIZATION. MergerCo is a corporation duly organized,
         legally existing and in good standing under the laws of the
         jurisdiction of its formation and has full corporate power and
         authority to own or lease and to operate and use its properties and
         assets and to carry on its business as now conducted.

                  5.2.     AUTHORITY.

                           (a) MergerCo has the requisite power and authority to
                  execute and deliver this Agreement and all of the other
                  instruments contemplated hereby to be executed by it
                  (including the New Stockholders' Agreement), to consummate the
                  transactions contemplated hereby and to comply with the terms,
                  conditions and provisions hereof. The execution, delivery and
                  performance of this Agreement by MergerCo have been duly
                  authorized and approved by all necessary corporate action on
                  its behalf and do not require any further authorization or
                  consent of MergerCo or its stockholders. This Agreement is,
                  and each other instrument of MergerCo contemplated hereby to
                  be executed by them (including the New Stockholders'
                  Agreement) will be, the legal, valid and binding obligation of
                  MergerCo, enforceable against MergerCo in accordance with
                  their terms.

                           (b) Neither the execution and delivery of this
                  Agreement by MergerCo or any of the other instruments
                  contemplated hereby, the consummation by MergerCo of any of
                  the transactions contemplated hereby nor compliance by
                  MergerCo with or fulfillment by MergerCo of the terms,
                  conditions and provisions hereof will:

                                    (i) conflict with or result in a breach of
                           the terms, conditions or provisions of, or constitute
                           a default, an event of default or an event creating
                           rights of acceleration, termination or cancellation
                           or a loss of rights under the charter, or by-laws, or
                           other constitutive documents of MergerCo or any note,
                           instrument, agreement, mortgage, lease, license,
                           franchise, Governmental Permit or judgment, order,
                           award or decree to which any of its properties is
                           subject, or by which MergerCo is bound; or

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                                    (ii) require the approval, consent,
                           authorization or act of, or the making by MergerCo of
                           any declaration, filing or registration with, any
                           third person or any Governmental Body, except as
                           provided under the New Jersey Industrial Site
                           Recovery Act or under the Hart Scott Rodino Act (the
                           "H-S-R Act").

                  5.3. NO FINDER. Neither MergerCo nor any party acting on its
         behalf or become obligated to pay any fee or commission to any broker,
         finder or intermediary for or on account of the transactions
         contemplated by this Agreement.

                  5.4. ABSENCE OF PROCEEDINGS. There is no action, suit,
         proceeding or investigation pending, or to the knowledge of MergerCo,
         threatened, against MergerCo which might adversely affect or restrict
         MergerCo's ability to consummate the transactions contemplated by this
         Agreement and the Merger Agreement.

                  5.5. COMMITMENT LETTERS. To the extent the financing under
         this Agreement or the Merger Agreement is to be provided by third
         parties, MergerCo has provided the Trustee with complete and correct
         copies of the commitment letters (the "Commitment Letters") relating to
         the provisions of such financing.

                  5.6. GOVERNMENTAL CONSENTS. No consent, approval or
         authorization of, or declaration, filing or registration with, any
         governmental or regulatory authority (other than filings pursuant to
         the H-S-R Act) is required to be made or obtained by MergerCo in
         connection with the execution, delivery and performance of this
         Agreement.

                  5.7. REPRESENTATIONS AND WARRANTIES. The representations and
         warranties of MergerCo under the Merger Agreement are true and correct
         as of the date thereof except for (i) representations and warranties
         that speak as of a specific date or time which need only be true and
         correct as of such date or time and (ii) representations and warranties
         which are not qualified by a Material Adverse Effect (as defined in the
         Merger Agreement) or otherwise by material adversity (which need be
         true and correct in all material respects only).

                  5.8. CERTAIN TRANSACTIONS OR ARRANGEMENTS. Except for
         arrangements and agreements previously disclosed to the Trustee or as
         expressly contemplated by this Agreement, the Commitment Letters and
         the Merger Agreement immediately following the Closing Date, neither
         MergerCo nor any of its respective affiliates will be, directly or
         indirectly, a party to any agreement, arrangement or understanding with
         Holdings or any of its subsidiaries.

         6. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY. As an
inducement to the Trustee to enter into this Agreement and to consummate the
Exchange contemplated hereby, each of the Holdings and the Company hereby
represent and warrant to the Trustee as and to the

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extent provided in Sections 4.1, 4.2, 4.4(a) (first three sentences only),
4.4(b) and 4.5 of the Merger Agreement.

         7.       COVENANTS

                  7.1. CERTAIN AGREEMENTS. Each of the parties hereto shall use
         his or its commercially reasonable best efforts to consummate the
         transactions contemplated by this Agreement and the Merger Agreement.
         Each party shall promptly notify the others of any action suit or
         proceeding that shall be instituted or threatened against such party to
         restrain, prohibit or otherwise challenge the legality of any
         transaction contemplated by this Agreement. Each party shall promptly
         notify the other parties of any lawsuit, claim, proceedings or
         investigation that may be threatened, brought, asserted or commenced
         after the date hereof against Holdings, the Company or any Subsidiary
         that would have been required to be disclosed under Section 4.3, 5.4 or
         6 hereof, and, in the case of any of the foregoing pending on the date
         hereof, of any material development in respect thereto. Each of the
         parties hereto, shall give prompt notice to the other parties of (a)
         any notice or other communication received by any such Person from any
         Governmental Body or third Person alleging that the consent of such
         Governmental Body or third Person is or may be required in connection
         with the transactions contemplated by this Agreement, (b) the
         occurrence of any event or circumstance which could have a Material
         Adverse Effect, and of which such party has knowledge, (c) the breach
         of any representation, warranty, covenant or other material agreement
         of any such party contained herein or (d) any amendments or supplements
         to, or waivers or consents under, the Merger Agreement; provided,
         however that notice of any such amendments, supplements, waivers or
         consents shall be given to the Trustee at least two business days prior
         to the adoption, granting or execution thereof.

                  7.2. GOVERNMENTAL FILINGS. The Trustee, Holdings, the Company
         and MergerCo shall cooperate with each other in filing any necessary
         applications, reports or other documents with any federal or state
         agencies, authorities or bodies (domestic or foreign) having
         jurisdiction with respect to this Agreement and the transactions
         contemplated hereby, and in seeking necessary consultation with and
         prompt favorably action by, including required consents of, any such
         agencies, authorities or bodies.

                  7.3. AGREEMENTS. The Company and the Trustee shall cooperate
         to amend, effective as of the Effective Time, the ESOP, the Trust
         Agreement and any other documents which MergerCo reasonably determines
         are made necessary or desirable to implement the transactions
         contemplated herein including, but not limited to, the following:

                           (a) The amendment of the Consolidated ESOP Loan
                  Agreement, dated March 22, 1996 (the "Loan Agreement"), and
                  the Consolidated Pledge Agreement dated March 22, 1996 (the
                  "Pledge Agreement"), to provide that $1,000,000 of the final
                  repayment of principal with respect to that loan made by the
                  Company to the

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                  ESOT as described in the Loan Agreement (the "ESOP Loan") will
                  be extended through a date which is the earlier of:

                                    (i)  the seventh anniversary of the Closing
                           Date;

                                    (ii) the sale of all or substantially all of
                           the assets of the Company; the merger of Holdings or
                           the Company with or into another person where
                           Holdings or the Company, as applicable, is not the
                           surviving entity; the sale in a single transaction or
                           series of related transactions, of shares of common
                           stock or Holdings or the Company, but not in the
                           aggregate, representing 90% or more of such then
                           outstanding common stock; or the liquidation or
                           dissolution of Holdings or the Company; or

                                    (iii) a Holdings IPO (as defined in the New
                           Stockholders' Agreement)

                           (b) The amendment of the Loan Agreement to delete
                  Section 12 thereof.

                           (c) The amendment of the Loan Agreement and related
                  pledge agreement to provide for the release of the Unallocated
                  Shares if sold pursuant to Section 3 or a substitution of the
                  Common Stock of Holdings to be received in the Merger for the
                  Unallocated Shares as collateral for the Loan if the Exchange
                  is consummated.

                           (d) The amendment of the ESOP to delete the last
                  sentence of Section 5.04(f) thereof.

                           (e) With respect to shares of Common Stock
                  distributed to participants and "put" back to the Company or
                  the Trust in accordance with statutory put rights, the
                  addition of provisions that calculate the put price with
                  reference to an enterprise value basis, without the
                  application of any minority discounts.

                           (f) The amendment of the ESOP to include a provision
                  whereby the proceeds of the sale of the Allocated Shares by
                  the ESOP as contemplated herein will be allocated to the
                  Profit Sharing Component of Participants' Accounts (each as
                  defined in the ESOP) and will not be available for, or be
                  required to be invested in, stock of Holdings or of the
                  Company.

         Notwithstanding the foregoing, no amendment to the ESOP, the Trust
Agreement or any other document shall be made which would limit or eliminate the
protections currently affecting the ESOT as to the circumstances under which the
ESOP Loan may be declared in default; the limitation on the ability to use
dividend payments made with respect shares of employer securities held by the
ESOT to repay the ESOP Loan; and the general prohibitions on repaying the ESOP
Loan using the

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proceeds of a sale of the assets of the suspense account. In addition, the
suspense account shall remain in effect and amounts held therein will be
continued to be invested in stock of Holdings.

                  7.4. INVESTIGATION OF HOLDINGS, THE COMPANY AND MERGERCO BY
         THE TRUSTEE. Holdings, the Company and MergerCo shall afford to the
         officers, employees and authorized representatives of the Trustee
         (including, without limitation, independent public accountants,
         attorneys, environmental consultants and engineers) reasonable access
         during normal business hours to the offices, properties, employees and
         business and financial records (including computer files, retrieval
         programs and similar documentation) of Holdings, the Company and
         MergerCo to the extent the Trustee shall reasonably deem necessary or
         desirable and shall furnish to the Trustee or its authorized
         representatives, such additional information concerning Holdings, the
         Company and MergerCo and their properties, assets, businesses and
         operations as shall be reasonably requested, including all such
         information as shall be necessary to enable the Trustee or its
         representatives to verify the accuracy of the representations and
         warranties contained in Section 6, to verify that the covenants of
         Holdings, the Company and MergerCo have been complied with, and to
         determine whether the conditions set forth in Section 8 have been
         satisfied. The Trustee covenants that such investigation shall be
         conducted in such a manner as not to interfere unreasonably with the
         operations of Holdings, the Company and MergerCo. No investigation by
         the Trustee or its representatives hereunder shall affect the
         representations and warranties of Holdings, the Company and MergerCo.
         Nothing in this section shall be interpreted so as to grant MergerCo
         the right to perform invasive or subsurface investigations of the
         properties.

         8.       CONDITIONS.

                  8.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF TRUSTEE. The
         obligations of the Trustee to consummate the transactions contemplated
         by this Agreement shall, at its option, be subject to the satisfaction
         on or prior to the Closing Date, of the following conditions:

                       8.1.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND
                  WARRANTIES. There shall have been no material breach of
                  covenants by MergerCo, Holdings or the Company in the
                  performance of any of their covenants and agreements herein;
                  each of the representations and warranties of MergerCo,
                  Holdings and the Company contained to in this Agreement and of
                  MergerCo contained in the Merger Agreement shall be true and
                  correct as of the Closing Date as though made as of the
                  Closing Date, except for (i) representations and warranties
                  that speak as of a specific date or time which need only be
                  true and correct as of such date or time, (ii) representations
                  and warranties which are not qualified by Material Adverse
                  Effect or otherwise by material adversity (which need be true
                  and correct except for such inaccuracies as in the aggregate
                  (together with the inaccuracies referred to in the following
                  clause (iii)) would not have a Material Adverse Effect), (iii)
                  representations and warranties which are qualified by Material
                  Adverse Effect or otherwise by material adversity shall also
                  be true and correct without regard to such qualification
                  except for such inaccuracies

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                  as in the aggregate (together with the inaccuracies referred
                  to in the preceding clause (ii)) would not have a Material
                  Adverse Effect, (iv) the representations and warranties set
                  forth in Section 4.2 shall be true and correct, and (v)
                  changes therein specifically permitted by this Agreement and
                  the Merger Agreement and there shall have been delivered to
                  the Trustee a certificate to such effect, dated the Closing
                  Date, and signed by the President or other senior executive
                  officer of Merger Co., Holdings and the Company.

                       8.1.2 LITIGATION. At the Closing Date, there shall be no
                  injunction, restraining order or decree of any nature of any
                  court or other Governmental Body of competent jurisdiction
                  that is in effect that restrains or prohibits the consummation
                  of the transactions or other material obligations of the
                  parties hereto as contemplated hereby, and no proceedings
                  seeking any such relief or seeking material damages with
                  respect to the transactions contemplated hereby shall be
                  threatened or pending by any Governmental Body of competent
                  jurisdiction.

                       8.1.3 MERGER AGREEMENT. The Merger Agreement shall not
                  have been terminated and shall be scheduled to be consummated
                  immediately after the consummation of the Sale. In the event
                  that following the consummation of the transactions
                  contemplated by this Agreement, the Merger Agreement shall be
                  terminated or the Merger shall not be consummated, all
                  obligations of the Trustee hereunder shall cease and all
                  actions taken by the Trustee under this Agreement (including
                  amendments, waivers, exchanges or sales) shall be deemed void
                  ab initio and the Trustee and each other party to this
                  Agreement shall be restored to its legal, contractual and
                  ownership position immediately prior to entering into this
                  Agreement.

                       8.1.4 ADDITIONAL CONDITION WITH RESPECT TO THE SALE. The
                  Trustee's obligations to consummate the Sale shall be subject
                  to the satisfaction of the additional condition that (i) the
                  closing under the Sale be consummated concurrently immediately
                  or before the closing under the Exchange (unless MergerCo
                  shall have exercised its right to purchase all of the ESOP
                  Shares as set forth under Section 1.3) and (ii) either the
                  Exchange must occur or MergerCo must purchase the Unallocated
                  Shares pursuant to, and subject to the terms and conditions
                  set forth or referred to in, Section 1.3. In the event that
                  notwithstanding the fact, that the conditions to the Sale
                  shall be satisfied under this Agreement, the Trustee shall
                  have determined that any conditions to the Exchange set forth
                  in Section 8.1.5 of this Agreement shall not have been
                  satisfied or MergerCo shall not have exercised its additional
                  right, if applicable, to purchase all the Unallocated Shares
                  as provided under Section 1.3, the Trustee's and MergerCo's
                  obligation to consummate the Sale shall automatically be
                  terminated and rescinded and the Trustee's actions with
                  respect thereto (including amendments, waivers, exchanges or
                  sales) shall be void ab initio and the Trustee and each other

                                      -11-


<PAGE>   12



                  party to this Agreement shall be restored to its legal,
                  contractual and ownership position immediately prior to
                  entering into this Agreement.

                       8.1.5 ADDITIONAL CONDITIONS WITH RESPECT TO THE EXCHANGE.

                           The Trustee's obligations to consummate the Exchange
shall be subject to the satisfaction of the following additional conditions:

                           (a) at the Closing Date, each of the representations
                  and warranties of Holdings and the Company contained in the
                  Merger Agreement shall be true and correct as of the Closing
                  Date as though made as of the Closing Date, except for (i)
                  representations and warranties that speak as of a specific
                  date or time which need only be true and correct as of such
                  date or time, (ii) representations and warranties which are
                  not qualified by Material Adverse Effect or otherwise by
                  material adversity (which need be true and correct except for
                  such inaccuracies as in the aggregate (together with the
                  inaccuracies referred to in the following clause (iii)) would
                  not have a Material Adverse Effect), (iii) representations and
                  warranties which are qualified by Material Adverse Effect or
                  otherwise by material adversity shall also be true and correct
                  without regard to such qualification except for such
                  inaccuracies as in the aggregate (together with the
                  inaccuracies referred to in the preceding clause (ii)) would
                  not have a Material Adverse Effect and (v) changes therein
                  specifically permitted by the Merger Agreement.

                           (b) the outstanding capital stock of the Surviving
                  Corporation following the consummation of the Merger under the
                  Merger Agreement and the transactions contemplated hereby
                  shall be as described in the Commitment Letters and the pro
                  forma information delivered to the Trustee on July 20, 1998 by
                  MergerCo and the Trustee shall have received a certificate of
                  the Surviving Corporation signed by the President or any other
                  senior executive officer of the Surviving Corporation setting
                  forth the capitalization of the Surviving Corporation
                  following the consummation of the Merger under the Merger
                  Agreement and confirming that the price per share of Common
                  Stock of MergerCo paid by the sole stockholder of MergerCo is
                  not less than the implied price per share being paid by the
                  Trustee for each share of Common Stock of Holdings in the
                  Exchange.

                           (c) no amendment shall have been made to the Merger
                  Agreement that adversely affects the rights of the Trustee or
                  the ESOT hereunder without the prior written consent of the
                  Trustee.

                           (d) the Trustee shall not have determined that, due
                  to facts and circumstances arising after the date hereof, the
                  consummation of the transactions contemplated hereby or by the
                  Merger Agreement would constitute a "Prohibited Transaction"
                  within the meaning of Section 4975 of the Code or Section 406
                  of

                                      -12-


<PAGE>   13



                  ERISA, such determination to be made in good faith, based upon
                  consultation with the Trustee's financial advisor and legal
                  counsel and consistent with the written opinion of the
                  Trustee's legal counsel;

                           (e) The Trustee shall have received the legal
                  opinions, dated as of the Closing Date, of Jones, Day, Reavis
                  & Pogue as counsel to the Company, and Ropes & Gray as counsel
                  to MergerCo and the Surviving Corporation (as defined in the
                  Merger Agreement), as applicable, with respect to the matters
                  set forth on Exhibit I hereto, such opinions to be in form and
                  substance reasonably satisfactory to the Trustee; and

                           (f) the indebtedness and other credit arrangements
                  incurred or made by Holdings or the Company shall be
                  materially in the amount and on the terms provided to the
                  Trustee in the Commitment Letters.

                       8.1.6 STOCKHOLDERS AGREEMENT. The parties thereto, other
                  than the Trustee on behalf of the ESOT and ESOP, shall have
                  executed and delivered the Stockholders Agreement.

                  8.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF MERGERCO. The
         obligations of MergerCo to consummate the transactions contemplated by
         this Agreement shall, at its option, be subject to the satisfaction on
         or prior to the Closing Date, of the following conditions:

                       8.2.1 NO MISREPRESENTATIONS OR BREACH OF COVENANTS AND
                  WARRANTIES. There shall have been no material breach of
                  covenants by the Trustee, Holdings or the Company in the
                  performance of any of their covenants and agreements herein;
                  each of the representations and warranties of the Trustee,
                  Holdings and the Company contained in this Agreement shall be
                  true and correct as of the Closing Date as though made as of
                  the Closing Date, except for (i) representations and
                  warranties that speak as of a specific date or time which need
                  only be true and correct as of such date or time, (ii)
                  representations and warranties which are not qualified by
                  materiality or Material Adverse Effect and which need be true
                  and correct in all material respects only, and (iii) changes
                  therein specifically permitted by this Agreement and the
                  Merger Agreement; and there shall have been delivered to
                  MergerCo a certificate to such effect, dated the Closing Date,
                  and signed by the President or other senior executive officer
                  of the Trustee, Holdings and the Company.

                       8.2.2 LITIGATION. At the Closing Date, there shall be no
                  injunction, restraining order or decree of any nature of any
                  court or other Governmental Body of competent jurisdiction
                  that is in effect that restrains or prohibits the consummation
                  of the transactions or other material obligations of the
                  parties hereto as contemplated hereby, and no proceedings
                  seeking any such relief or seeking material damages with

                                      -13-


<PAGE>   14



                  respect to the transactions contemplated hereby shall be
                  threatened or pending by any Governmental Body of competent
                  jurisdiction.

                       8.2.3 MERGER AGREEMENT. The Merger Agreement shall not
                  have been terminated and shall be scheduled to be consummated
                  immediately after the consummation of the Sales, and the
                  conditions precedent to MergerCo's obligations under the
                  Merger Agreement shall have been satisfied or waived and
                  MergerCo shall have received such assurances to that effect as
                  it may reasonably request. In the event that following the
                  consummation of the transactions contemplated by this
                  Agreement the Merger has not occurred, all obligations of
                  MergerCo hereunder shall cease and all actions taken by
                  MergerCo under this Agreement (including amendments, waivers,
                  exchanges or sales) shall be deemed void ab initio and
                  MergerCo and each other party to this Agreement shall be
                  restored to its legal, contractual and ownership position
                  immediately prior to entering into this Agreement.

                       8.2.4 ADDITIONAL CONDITIONS WITH RESPECT TO THE SALE.
                  MergerCo's obligations to consummate the Sale shall be subject
                  to the satisfaction of the additional condition that the
                  closing under the Sale be consummated concurrently with,
                  immediately before, or immediately after the closing under the
                  Exchange (unless MergerCo shall have exercised its right to
                  purchase all of the ESOP Shares as set forth in Section 3). In
                  the event that notwithstanding that fact that the conditions
                  to he Sale shall be satisfied under this agreement, the
                  Trustee shall have determined that any conditions to the
                  Exchange set forth in Section 8.1.5 of this Agreement shall
                  not have been satisfied or MergerCo shall not have exercised
                  its additional right, if applicable, to purchase all the
                  Unallocated Shares as provided under Section 3, the Trustee's
                  and MergerCo's obligation to consummate the Sale shall
                  automatically be terminated and rescinded and the Trustee's
                  actions with respect thereto (including amendments, waivers,
                  exchanges or sales) shall be void ab initio and the Trustee
                  and each other party to this Agreement shall be restored to
                  its legal, contractual and ownership position immediately
                  prior to entering into this Agreement.

                       8.2.5  STOCKHOLDERS AGREEMENT.  The Trustee, on behalf 
                  of the ESOP and ESOT, and Holdings shall have executed and
                  delivered the Stockholders Agreement.

                  8.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOLDINGS AND THE
         COMPANY. The obligations of Holdings and the Company to consummate the
         transactions contemplated by this Agreement shall, at their respective
         option, be subject to the satisfaction at or prior to the Closing Date,
         of the following conditions:

                       8.3.1 NO MISREPRESENTATIONS OR BREACH OF COVENANTS AND 
                  WARRANTIES. There shall have been no material breach of
                  covenants by the Trustee and MergerCo

                                      -14-


<PAGE>   15



                  in the performance of any of their covenants and agreements
                  herein; each of the representations and warranties of the
                  Trustee and MergerCo contained in this Agreement shall be true
                  and correct as of the Closing Date as though made as of the
                  Closing Date, except for (i) representations and warranties
                  that speak as of a specific date or time which need only be
                  true and correct as of such date or time and (ii)
                  representations and warranties which are not qualified
                  Material Adverse Effect or otherwise by material adversity
                  (which need be true and correct except for such inaccuracies
                  as in the aggregate (together with the inaccuracies referred
                  to in the following clause (iii)) would not have a Material
                  Adverse Effect), (iii) representations and warranties which
                  are qualified by Material Adverse Effect or otherwise by
                  material adversity shall also be true and correct without
                  regard to such qualification except for such inaccuracies as
                  in the aggregate (together with the inaccuracies referred to
                  in the preceding clause (ii)) would not have a Material
                  Adverse Effect and (iv) changes therein specifically permitted
                  by this Agreement and the Merger Agreement and there shall
                  have been delivered to Holdings a certificate to such effect,
                  dated the Closing Date, and signed by the President or other
                  senior executive officer of the Trustee and MergerCo.

                       8.3.2 LITIGATION. At the Closing Date, there shall be no
                  injunction, restraining order or decree of any nature of any
                  court or other Governmental Body of competent jurisdiction
                  that is in effect that restrains or prohibits the consummation
                  of the transactions or other material obligations of the
                  parties hereto as contemplated hereby, and no proceedings
                  seeking any such relief or seeking material damages with
                  respect to the transactions contemplated hereby shall be
                  threatened or pending by any Governmental Body of competent
                  jurisdiction.

                       8.3.3 MERGER AGREEMENT. The Merger Agreement shall not
                  have been terminated and shall be scheduled to be consummated
                  immediately after the consummation of the Sale. In the event
                  that following the consummation of the transactions
                  contemplated by this Agreement, the Merger Agreement shall be
                  terminated or the Merger shall not be consummated, all
                  obligations of Holdings or the Company hereunder shall cease
                  and all actions taken by Holdings or the Company under this
                  Agreement (including amendments, waivers, exchanges, sales)
                  shall be deemed void ab initio and Holdings, the Company and
                  each other party to this Agreement shall be restored to its
                  legal, contractual and ownership position immediately prior to
                  entering into this Agreement.

         9.       ADDITIONAL CONSENTS.

                  9.1. CONSENT TO THE MERGER. The Trustee hereby consents to the
         terms of the Merger as set forth in the Merger Agreement, and
         acknowledges that such consent shall constitute a final and irrevocable
         waiver of any further rights that the Trustee may otherwise have
         pursuant to the Stockholders' Agreement as the same applies to the
         Merger.

                                      -15-


<PAGE>   16




         10.      GENERAL.

                  10.1. NON-SURVIVAL OF REPRESENTATIONS. Warranties and
         Agreements. All representations and warranties in this Agreement shall
         terminate at the earlier of (i) the consummation of the transactions
         contemplated hereby and (ii) the termination of this Agreement in
         accordance with Section 10.2. All covenants and agreements set forth in
         this Agreement shall survive in accordance with their terms.

                  10.2. TERMINATION. Anything contained in this Agreement to the
         contrary notwithstanding, this Agreement (i) may be terminated at any
         time prior to the Closing Date by the mutual consent of the parties
         hereto and (ii) shall terminate automatically upon the earlier
         termination of the Merger Agreement in accordance with section 9.1
         thereof; provided, however, that if pursuant to the terms thereof, the
         Merger Agreement is amended by the parties thereof to extend its
         termination date beyond September 30, 1998, this Agreement may only be
         extended for the same period with the prior consent of the Trustee,
         which consent shall not be unreasonably withheld. In the event that
         this Agreement shall be terminated pursuant to this Section, all
         obligations of the parties under this Agreement (other than under this
         Section and Section 10.1) shall be terminated without liability or
         penalty on the part of any party or its officers or directors to any
         other party, other than may result from any willful and material breach
         by a party of this Agreement.

                  10.3. NOTICES. All notices and other communications given or
         made pursuant to this Agreement shall be in writing and shall be deemed
         to have been duly given or made (a) five business days after being sent
         by registered or certified mail, return receipt requested, (b) upon
         delivery, if hand delivered, (c) one business day after being sent by
         prepaid overnight carrier with guaranteed delivery, with a record of
         receipt, or (d) upon transmission with confirmed delivery if sent by
         cable, telegram, facsimile or telecopy to the parties at the following
         addresses (or at such other addresses as shall be specified by the
         parties by like notice):

                           (a)      If to MergerCo:

                                    REM Acquisition, Inc.
                                    c/o Fenway Partners, Inc.
                                    152 West 57th Street
                                    New York, New York  10019
                                    Attention:       Richard C. Dresdale
                                    Telecopy:        212-581-1205

                                    with copies to:

                                    Ropes & Gray

                                      -16-


<PAGE>   17



                                    One International Place
                                    Boston, Massachusetts 02110
                                    Attention:       Lauren I. Norton
                                    Telecopy:        617-951-7050

                           (b)      if to the Company:

                                    One Concourse Parkway Suite 600
                                    Atlanta, GA 30328
                                    Attention:       Zenon S. Nie
                                    Telecopy:        770-392-2565

                                    with copies to:

                                    (i)     Roger W.  Franklin
                                            (at the address listed above)

                                    and

                                    (ii)    Jones, Day, Reavis & Pogue
                                            3500 One Peachtree Center
                                            303 Peachtree Street NE
                                            Atlanta, GA 30308
                                            Attention:   Lizanne Thomas, Esq.
                                            Telecopy:    404-581-8330

                           (c)      if to Holdings:

                                    c/o Investcorp International, Inc.
                                    280 Park Avenue
                                    New York, NY 10017
                                    Attention:       Christopher I.  O'Brien
                                    Telecopy:        212-983-7073

                                    with a copy to:

                                    Gibson, Dunn & Crutcher LLP
                                    200 Park Avenue
                                    New York, NY 10166
                                    Attention:       Sean P.  Griffiths, Esq.
                                    Telecopy:        212-351-4035

                           (d)      if to the Trustee:

                                      -17-


<PAGE>   18




                                    State Street Bank & Trust Company
                                    Batterymarch Park III
                                    Three Pine Hill Drive
                                    Quincy, MA 02169
                                    Attn:   Kelly Q.  Driscoll
                                    Telecopy:        617-376-7313

                                    with a copy to:

                                    Kirkpatrick & Lockhart LLP
                                    1500 Oliver Building
                                    Pittsburgh, PA 15272
                                    Attention:       Charles R.  Smith, Esq.
                                    Telecopy:        412-355-6501

                  10.4. PARTIAL INVALIDITY. Wherever possible, each provision
         hereof shall be interpreted in such manner as to be effective and valid
         under applicable law, but in the case that any provision contained
         herein shall, for any reason, be held to be invalid, illegal or
         unenforceable in any respect, such invalidity, illegality or
         unenforceability shall not affect any other provisions of this
         Agreement, and this Agreement shall be construed as if such invalid,
         illegal or unenforceable provision or provisions had never been
         contained herein unless the deletion of such provision or provisions
         would result in such a material change as to cause completion of the
         transactions contemplated hereby to be unreasonable.

                  10.5. EXECUTION IN COUNTERPARTS. This Agreement may be
         executed in one or more counterparts, each of which shall be considered
         an original instrument, but all of which shall be considered one and
         the same agreement, and shall become binding when one or more
         counterparts have been signed by each of the parties and delivered to
         each of the Trustee, Holdings and MergerCo.

                  10.6. GOVERNING LAW. This Agreement shall be governed by and
         construed in accordance with ERISA and the laws of the State of
         Delaware without regard to principles of conflicts of laws.

                  10.7. ASSIGNMENT: SUCCESSORS AND ASSIGNS. Neither this
         Agreement nor any of the rights, interests or obligations hereunder
         shall be assigned by any of the parties hereto without the prior
         written consent of the other parties, except that MergerCo may, without
         the prior written consent of the other parties, assign its rights
         hereunder (but, not its obligations) in whole or in part to one or more
         other special purpose entities formed for investment by MergerCo.
         Subject to the foregoing, this Agreement shall be binding upon and
         inure to the benefit of the parties hereto and their respective
         successors or assigns, heirs, legatees, distributees, executors,
         administrators and guardians. Nothing in this Agreement, expressed

                                      -18-


<PAGE>   19



         or implied, is intended or shall be construed upon any Person any
         right, remedy or claim under or by reason of this Agreement.

                  10.8. TITLES AND HEADINGS. Titles and headings to sections
         herein are inserted for convenience of reference only and are not
         intended to be a part of or to affect the meaning or interpretation of
         this Agreement. All references to"Sections" in this Agreement refer to
         Sections of this Agreement unless the context otherwise clearly
         indicates.

                  10.9. KNOWLEDGE. In each provision of this Agreement in which
         a representation or warranty is qualified to the "knowledge" of a
         Person or to the "best of the knowledge" of a person, unless otherwise
         stated in such provision, each such phrase means that the Person does
         not have actual knowledge after due investigation thereof of any state
         of facts which is different from the facts described in the warranty or
         representation.

                  10.10. ENTIRE AGREEMENT: AMENDMENTS. This Agreement contains
         the entire understanding of the parties hereto with regard to the
         subject matter contained herein. The parties hereto, by mutual
         agreement in writing, may amend, modify and supplement this Agreement.
         Any such agreement shall be validly and sufficiently authorized for
         purposes of this Agreement if it is signed by the Trustee, MergerCo,
         Holdings and the Company.

                  10.11. WAIVERS. Any term or provision of this Agreement may be
         waived, or the time for its performance may be extended, by the party
         or parties entitled to the benefit thereof. The failure of any party
         hereto to enforce at any time any provision of this Agreement shall not
         be construed to be a waiver of such provision, nor in any way to affect
         the validity of this Agreement or any part hereof or the right of any
         party thereafter to enforce each and every such provision. No Waiver of
         any breach of this Agreement shall be held to constitute a waiver of
         any other or subsequent breach.

                  10.12. SPECIFIC PERFORMANCE. The parties acknowledge that
         irreparable damage would result if this Agreement were not specifically
         enforced, and they therefore consent that the rights and obligations of
         the parties under this Agreement may be enforced by a decree of
         specific performance issues by a court of competent jurisdiction. Such
         a remedy shall, however, not be exclusive, and shall be in addition to
         any other remedies which any party may have under this Agreement or
         otherwise.

                  10.13. STOCKHOLDER AGREEMENT. On or prior to the closing
         hereunder or under the Merger Agreement, Holdings shall not enter into
         any agreement with another stockholder of Holdings (other than the
         Trustee or the Principal Stockholder or a management stockholder) with
         provisions relating to tag-along rights and drag-along obligations and
         registration rights for resales of Common Stock of Holdings after the
         Closing Date that are more favorable to such stockholder than the
         rights and obligations of the Trustee under the Stockholders Agreement.
         For purposes of this Section 10.13 "Principal Stockholder" shall have
         the meaning set forth in the Stockholder Agreement.

                                      -19-


<PAGE>   20


                                        [ESOP Stock Sale and Exchange Agreement]

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 22nd day of July, 1998.





SIMMONS HOLDINGS, INC., a
Delaware corporation


By:   /s/ Zenon S. Nie
   --------------------------------------------
          Name: Zenon S. Nie
          Title:  Chief Executive Officer


SIMMONS COMPANY, a Delaware corporation


By:   /s/ Zenon S. Nie
   --------------------------------------------
          Name: Zenon S. Nie
          Title:  Chief Executive Officer

STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE OF THE
SIMMONS COMPANY EMPLOYEE
STOCK OWNERSHIP TRUST


By:   /s/ Kelly Q. Driscoll
   --------------------------------------------
      Name: Kelly Q. Driscoll
      Title: Vice President

REM ACQUISITION, INC., a Delaware corporation


By:   /s/ Gregory P. Meredith
   --------------------------------------------
       Name: Gregory P. Meredith
       Title: Vice President




                                      -20-


<PAGE>   21


                                        [ESOP Stock Sale and Exchange Agreement]

                                    EXHIBIT I

Form of Legal Opinions

Pursuant to Section 8.1.5(e) of the Agreement, the Trustee shall receive legal
opinions, dated as of the Closing Date, from Jones, Day, Reavis & Pogue, as
counsel to the Company, __________, as counsel to Holdings and from Ropes & Gray
as counsel to MergerCo and the Surviving Corporation, as applicable, subject to
usual and customary qualifications and assumptions, with respect to the
following matters.

         A. The Company:

            1. Each of the Company and Holdings has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Delaware with corporate power and authority to own or lease its
properties and to conduct its business as it is currently conducted.

            2. Except as set forth in the final sentence of this paragraph, the
authorized capital stock and the number of shares of capital stock issued and
outstanding of Holdings and the Company as of the date hereof and prior to the
Closing Date are as set forth in the Agreement. To our knowledge, as of the date
hereof all of the shares of capital stock of Holdings and the Company are duly
and validly issued, fully paid and nonassessable, and free of any statutory
preemptive rights. Except for the agreements disclosed or entered into in
connection with the Agreement or referenced therein, to our knowledge neither
Holdings nor the Company is a party to any agreement, arrangement, warrant,
option, put, call, rights or other employee benefit plans, or other commitments
or understandings, relating to the issuance, sale, purchase, redemption,
conversion or exchange of any shares of capital stock of Holdings or the
Company.

            We note that certificates representing ______ previously issued
shares of the Company's capital stock have been lost or that such certificates
have not been canceled in the stock records at the time of subsequent transfer
of shares represented thereby. In expressing the foregoing opinions, we are not
passing on the effect of the loss or non-cancellation of any such certificates.

            3. Each of Holdings and the Company has the corporate power and
authority to execute, deliver and perform the terms and provisions of the
Agreement, the Merger Agreement and the New Stockholders' Agreement (the
"Transaction Documents") and each of Holdings and the Company has taken or
caused to be taken all necessary corporate action to authorize the same.

            4. The Transaction Documents have been duly executed and delivered
by each of Holdings and the Company.

                                      -21-


<PAGE>   22


                                        [ESOP Stock Sale and Exchange Agreement]

            5. Neither the execution and delivery by Holdings or the Company of
the Transaction Documents nor the performance by Holdings or the Company of
their respective obligations thereunder violates any provision of the
Certificate of Incorporation or Bylaws of Holdings or the Company, each as
amended and restated to date.

         B. MergerCo

            1. MergerCo has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware, with corporate power
and authority to own or lease its properties and to conduct its business as
currently conducted.

            2. The authorized capital stock and the number of shares of capital
stock issued and outstanding of MergerCo as of the date hereof and after giving
effect to the Merger is ________________. To our knowledge, as of the date
hereof, all of the shares of capital stock are duly and validly issued, fully
paid and nonassessable, and free of any statutory preemptive rights.

            3. MergerCo has the corporate power and authority to execute,
deliver and perform the terms and provisions of the Agreement and the New
Stockholders' Agreement and any other agreement or document made pursuant
thereto and they have taken or caused to be taken all necessary corporate action
to authorize the same.

            4. Each Transaction Document to which MergerCo is a party has been
duly executed and delivered by MergerCo.

            5. Neither the execution and delivery by MergerCo of the Transaction
Documents, nor the performance by it of its obligations thereunder, violates any
provision of the Certificate of Incorporation or Bylaws of MergerCo, or, to our
knowledge, any agreement or other arrangement to which MergerCo is a party or by
which its properties is bound.

            6. The Merger has been consummated and according to the records of
Holdings ____ shares of Common Stock are held by the Trustee, which shares are
duly authorized, validly issued and fully paid and non-assessable. The other
shares held of record of Holdings are, to our knowledge, as set forth in the
Agreement.



                                      -22-