UNIT
      PURCHASE AGREEMENT

     

    BY
      AND AMONG

     

    ST
      SAN DIEGO, LLC,

     

    SLEEP
      COUNTRY USA, INC.,

     

    SC
      HOLDINGS, INC.

     

    AND

     

    SIMMONS
      BEDDING COMPANY

     

                                

     

    Dated
      as of July 24, 2006

     

    


     

    


     

    


     

    


     

    


     

    



    
      
        
           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    


    

      


      
        	
                ARTICLE
                  I

              	
                DEFINITIONS

              	
                1

              
	
                1.1

              	
                Certain
                  Definitions

              	
                1

              
	
                1.2

              	
                Terms
                  Defined Elsewhere in this Agreement

              	
                6

              
	
                1.3

              	
                Other
                  Definitional and Interpretive Matters

              	
                8

              
	
                ARTICLE
                  II

              	
                SALE
                  AND PURCHASE OF UNITS

              	
                9

              
	
                2.1

              	
                Sale
                  and Purchase of Units

              	
                9

              
	
                2.2

              	
                Allocation
                  of Purchase Price

              	
                9

              
	
                ARTICLE
                  III

              	
                PURCHASE
                  PRICE

              	
                10

              
	
                3.1

              	
                Purchase
                  Price

              	
                10

              
	
                3.2

              	
                Calculation
                  and Payment of Purchase Price

              	
                10

              
	
                3.3

              	
                Post-Closing
                  Purchase Price Adjustment

              	
                10

              
	
                ARTICLE
                  IV

              	
                CLOSING
                  AND TERMINATION

              	
                12

              
	
                4.1

              	
                Closing
                  Date

              	
                12

              
	
                4.2

              	
                Termination
                  of Agreement

              	
                12

              
	
                4.3

              	
                Procedure
                  Upon Termination

              	
                13

              
	
                4.4

              	
                Effect
                  of Termination

              	
                13

              
	
                ARTICLE
                  V

              	
                REPRESENTATIONS
                  AND WARRANTIES REGARDING THE COMPANY

              	
                13

              
	
                5.1

              	
                Organization
                  and Good Standing

              	
                13

              
	
                5.2

              	
                Authorization
                  of Agreement

              	
                13

              
	
                5.3

              	
                Conflicts;
                  Consents of Third Parties

              	
                14

              
	
                5.4

              	
                Capitalization

              	
                14

              
	
                5.5

              	
                Subsidiaries

              	
                15

              
	
                5.6

              	
                Financial
                  Statements

              	
                15

              
	
                5.7

              	
                No
                  Undisclosed Liabilities

              	
                15

              
	
                5.8

              	
                Absence
                  of Certain Developments

              	
                16

              
	
                5.9

              	
                Taxes

              	
                16

              
	
                5.10

              	
                Real
                  Property

              	
                17

              
	
                5.11

              	
                Tangible
                  Personal Property; Condition of Assets

              	
                18

              
	
                5.12

              	
                Intellectual
                  Property

              	
                19

              
	
                5.13

              	
                Material
                  Contracts

              	
                19

              
	
                5.14

              	
                Employee
                  Benefits Plans

              	
                21

              
	
                5.15

              	
                Labor
                  and Employment

              	
                23

              
	
                5.16

              	
                Litigation

              	
                24

              
	
                5.17

              	
                Compliance
                  with Laws; Permits

              	
                24

              
	
                5.18

              	
                Environmental
                  Matters

              	
                24

              
	
                5.19

              	
                Suppliers

              	
                25

              
	
                5.20

              	
                Financial
                  Advisors

              	
                25

              
	
                5.21

              	
                Insurance

              	
                25

              
	
                5.22

              	
                Related
                  Party Transactions

              	
                25

              
	
                5.23

              	
                No
                  Other Representations or Warranties; Schedules

              	
                26

              
	
                ARTICLE
                  VI

              	
                REPRESENTATIONS
                  AND WARRANTIES OF HOLDINGS AND SIMMONS

              	
                26

              
	
                6.1

              	
                Organization
                  and Good Standing

              	
                26

              
	
                6.2

              	
                Authorization
                  of Agreement

              	
                26

              
	
                6.3

              	
                Conflicts;
                  Consents of Third Parties

              	
                27

              
	
                6.4

              	
                Ownership
                  and Transfer of Units

              	
                27

              
	
                6.5

              	
                Litigation

              	
                27

              
	
                6.6

              	
                Financial
                  Advisors

              	
                27

              
	
                ARTICLE
                  VII

              	
                REPRESENTATIONS
                  AND WARRANTIES OF PURCHASER

              	
                28

              
	
                7.1

              	
                Organization
                  and Good Standing

              	
                28

              
	
                7.2

              	
                Authorization
                  of Agreement

              	
                28

              
	
                7.3

              	
                Conflicts;
                  Consents of Third Parties

              	
                28

              
	
                7.4

              	
                Litigation

              	
                29

              
	
                7.5

              	
                Investment
                  Intention

              	
                29

              
	
                7.6

              	
                Financial
                  Advisors

              	
                29

              
	
                7.7

              	
                Financing

              	
                29

              
	
                7.8

              	
                Condition
                  of the Business

              	
                29

              
	
                ARTICLE
                  VIII

              	
                COVENANTS

              	
                30

              
	
                8.1

              	
                Access
                  to Information

              	
                30

              
	
                8.2

              	
                Conduct
                  of the Business Pending the Closing

              	
                30

              
	
                8.3

              	
                Consents

              	
                32

              
	
                8.4

              	
                Regulatory
                  Approvals

              	
                32

              
	
                8.5

              	
                Further
                  Assurances

              	
                33

              
	
                8.6

              	
                Confidentiality

              	
                33

              
	
                8.7

              	
                Preservation
                  of Records

              	
                33

              
	
                8.8

              	
                Publicity

              	
                34

              
	
                8.9

              	
                Employee
                  Benefits

              	
                34

              
	
                8.10

              	
                Supplementation
                  and Amendment of Schedules

              	
                34

              
	
                8.11

              	
                Non-Competition
                  by Holdings, Simmons and their Subsidiaries

              	
                35

              
	
                8.12

              	
                Insurance

              	
                36

              
	
                8.13

              	
                Tax
                  Matters

              	
                37

              
	
                8.14

              	
                Financing

              	
                40

              
	
                ARTICLE
                  IX

              	
                CONDITIONS
                  TO CLOSING

              	
                40

              
	
                9.1

              	
                Conditions
                  Precedent to Obligations of Purchaser

              	
                40

              
	
                9.2

              	
                Conditions
                  Precedent to Obligations of Holdings and Simmons

              	
                42

              
	
                9.3

              	
                Notices;
                  Frustration of Closing Conditions

              	
                43

              
	
                ARTICLE
                  X

              	
                INDEMNIFICATION

              	
                43

              
	
                10.1

              	
                Survival
                  of Representations and Warranties

              	
                43

              
	
                10.2

              	
                Indemnification
                  by Simmons

              	
                43

              
	
                10.3

              	
                Indemnification
                  by Purchaser

              	
                44

              
	
                10.4

              	
                Indemnification
                  Procedures

              	
                45

              
	
                10.5

              	
                Certain
                  Limitations on Indemnification

              	
                46

              
	
                10.6

              	
                Calculation
                  of Losses; Materiality

              	
                47

              
	
                10.7

              	
                Tax
                  Treatment of Indemnity Payments

              	
                47

              
	
                10.8

              	
                Exclusive
                  Remedy

              	
                47

              
	
                ARTICLE
                  XI

              	
                MISCELLANEOUS

              	
                48

              
	
                11.1

              	
                Payment
                  of Sales, Use or Similar Taxes

              	
                48

              
	
                11.2

              	
                Expenses

              	
                48

              
	
                11.3

              	
                Submission
                  to Jurisdiction; Consent to Service of Process

              	
                48

              
	
                11.4

              	
                Entire
                  Agreement; Amendments and Waivers

              	
                49

              
	
                11.5

              	
                Governing
                  Law

              	
                49

              
	
                11.6

              	
                Notices

              	
                49

              
	
                11.7

              	
                Severability

              	
                50

              
	
                11.8

              	
                Binding
                  Effect; Assignment

              	
                51

              
	
                11.9

              	
                Non-Recourse

              	
                51

              
	
                11.10

              	
                Counterparts

              	
                51

              


      

    

    


    


    


     

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
          TABLE
            OF CONTENTS

          (continued)

           

           

          


        

      

    



    Schedules

     

    
      	
              Schedule
                5.3(a)

            	
              No
                Conflicts

            
	
              Schedule
                5.3(b)

            	
              Consents

            
	
              Schedule 5.4(b)

            	
              Capitalization

            
	
              Schedule 5.6

            	
              Financial
                Statements

            
	
              Schedule
                5.8

            	
              Absence
                of Certain Changes

            
	
              Schedule
                5.9

            	
              Taxes

            
	
              Schedule
                5.10(a)

            	
              Real
                Property

            
	
              Schedule
                5.11

            	
              Tangible
                Personal Property

            
	
              Schedule
                5.12(a)

            	
              Intellectual
                Property

            
	
              Schedule 5.12(c)

            	
              Infringement
                of Intellectual Property

            
	
              Schedule
                5.13

            	
              Material
                Contracts

            
	
              Schedule
                5.14(a)

            	
              Employee
                Benefit Plans

            
	
              Schedule
                5.15(a)

            	
              Labor
                and Collective Bargaining Agreements

            
	
              Schedule
                5.15(b)

            	
              Labor

            
	
              Schedule
                5.16

            	
              Litigation

            
	
              Schedule
                5.18

            	
              Environmental
                Matters

            
	
              Schedule
                5.20

            	
              Financial
                Advisors

            
	
              Schedule
                5.21

            	
              Insurance

            
	
              Schedule
                5.22

            	
              Related
                Party Transactions

            
	
              Schedule
                7.3(a)

            	
              No
                Conflicts

            
	
              Schedule
                8.2

            	
              Conduct
                of the Business Pending the Closing

            


    

    


    Schedules
      and Exhibits

     

    Schedule
      1 - Definition of Adjusted EBITDA

    Schedule
      2 - Allocation of Purchase Price

    Schedule
      3 - Preliminary Statement

    Exhibit
      A - Working Capital Statement

    Exhibit
      B - Estoppel Certificate

    Exhibit
      C - Simmons Dealer Incentive Agreement

    Exhibit
      D - Opinion of Counsel

    Exhibit
      E - Form of Authorized Dealer Agreement

    Exhibit
      F - Form of Co-op Advertising Agreement

    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    UNIT
      PURCHASE AGREEMENT

     

    This
      UNIT PURCHASE AGREEMENT (the “Agreement”),
      dated as of July 24, 2006, by and among ST San Diego, LLC, a California limited
      liability company (“Purchaser”),
      Sleep Country USA, Inc., a Delaware corporation, which immediately preceding
      the
      Closing (as defined below) shall be converted to a Delaware limited liability
      company (the “Company”),
      SC Holdings, Inc., a Delaware corporation (“Holdings”),
      and Simmons Bedding Company, a Delaware corporation (“Simmons”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      Holdings owns an aggregate of 3,000 shares of the Company’s common stock, $0.01
      par value per share (the “Shares”),
      which constitute all of the issued and outstanding shares of capital stock
      of
      the Company;

     

    WHEREAS,
      prior to the Closing, Holdings will convert the Company into a Delaware limited
      liability company named Sleep Country USA, LLC (the “Conversion”),
      and, after the effective time of the Conversion, the Company shall be deemed,
      for all purposes of and in accordance with the laws of the State of Delaware,
      to
      be the same entity as the Company prior to the Conversion;

     

    WHEREAS,
      after the Conversion, Holdings will own 100 units of the Company’s common units
      (the “Units”),
      which Units will constitute, immediately prior to Closing, all of the issued
      and
      outstanding equity interests of the Company;

     

    WHEREAS,
      Holdings desires to sell to Purchaser, and Purchaser desires to purchase from
      Holdings, the Units for the purchase price and upon the terms and conditions
      hereinafter set forth; and

     

    WHEREAS,
      Simmons owns 100% of the issued and outstanding shares of capital stock of
      Holdings and will receive substantial benefits from the transactions
      contemplated hereby.

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants and
      agreements hereinafter contained, the parties hereby agree as
      follows:

     

    ARTICLE
      I  

     

    


     

    DEFINITIONS

     

    1.1  Certain
      Definitions.

     

    (a)  For
      purposes of this Agreement, the following terms shall have the meanings
      specified in this Section
      1.1:

     

    “Actual
      Knowledge”
      means the actual knowledge of Steve Fendrich, Joe Paviglianti, Terry Horsley,
      Richard Thomas, Charles Dieteker, Jacqueline Steven, Bill Creekmuir or Kristen
      McGuffey, or any knowledge which would have been obtained by any such person
      after inquiry of such other named persons, but without any other
      inquiry.

     

    “Adjusted
      EBITDA”
      has the meaning specified on Schedule 1
      attached hereto.

     

    “Affiliate”
      means, with respect to any Person, any other Person that, directly or indirectly
      through one or more intermediaries, controls, or is controlled by, or is under
      common control with, such Person, and the term “control”
      (including the terms “controlled
      by”
      and “under
      common control with”)
      means the possession, directly or indirectly, of the power to direct or cause
      the direction of the management and policies of such Person, whether through
      ownership of voting securities, by contract or otherwise.

     

    “Business
      Day”
      means any day of the year on which national banking institutions in California
      and Georgia are open to the public for conducting business and are not required
      or authorized to close.

     

    “Closing
      Date Debt”
      means, without duplication, (A) the amount of (i) the aggregate debt for
      borrowed money (excluding current liabilities) of the Company outstanding on
      the
      Closing Date, and (ii) any amount, whether or not a current liability, owed
      by
      the Company to Simmons, Dreamwell, Ltd., a Nevada limited liability company,
      or
      any of their respective Affiliates (excluding trade payables incurred in the
      Ordinary Course of Business), all of which will be required to be repaid by
      the
      Company at or immediately prior to the Closing Date, and all prepayment
      penalties and costs incurred or to be incurred by the Company (or Purchaser)
      in
      connection therewith, and (B) the aggregate payoff amount reflected in
      payoff letters provided on or before the Closing Date in respect of any
      capitalized equipment lease obligations of the Company (or, if payoff letters
      are not so provided in respect of any capitalized equipment lease obligations,
      the aggregate amount of the present value under any such obligations as of
      the
      Closing Date determined in accordance with
      the historical accounting practices of
      the Company).

     

    “Code”
      means the Internal Revenue Code of 1986, as amended.

     

    “Contract”
      means any written or oral contract, agreement, indenture, note, bond, mortgage,
      loan, instrument, lease, license, restriction, understanding or undertaking
      of
      any kind or character.

     

    “Environmental
      Law”
      means any applicable Law currently in effect relating to the protection of
      the
      environment or natural resources, including the Comprehensive Environmental
      Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.),
      the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801
et seq.),
      the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.),
      the Clean Water Act (33 U.S.C. § 1251 et seq.),
      the Clean Air Act (42 U.S.C. § 7401 et seq.)
      the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.),
      and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136
et seq.),
      as each has been amended and the regulations promulgated pursuant
      thereto.

     

    “Excess
      Cash”
      means the amount of any and all cash and cash equivalents of the Company
      (excluding Petty Cash) as of the Closing Date equal to the excess of current
      assets of the Company (excluding Petty Cash) over current liabilities of the
      Company as of the Closing Date, as determined in accordance with
      GAAP.

     

    “Force
      Majeure Event”
      means acts of god or the public enemy, fire, flood, earthquake, war, military
      action or hostilities, terrorism, sabotage or similar events.

     

    “GAAP”
      means generally accepted accounting principles in the United States,
      consistently applied in accordance with the Company’s historical
      practice.

     

    “Governmental
      Body”
      means any government or governmental or regulatory body thereof, or political
      subdivision thereof, whether federal, state, local or foreign, or any agency,
      instrumentality or authority thereof, or any court or arbitrator (public or
      private).

     

    “Hazardous
      Material”
      means any substance, material or waste which is regulated by any Governmental
      Body including petroleum and its by-products, asbestos, and any material or
      substance which is defined as a “hazardous
      waste,”
      “hazardous
      substance,”
      “hazardous
      material,”
      “restricted
      hazardous waste,”
      “industrial
      waste,”
      “solid
      waste,”
      “contaminant,”
      “pollutant,”
      “toxic
      waste”
      or “toxic
      substance”
      under any provision of Environmental Law.

     

    “HSR
      Act”
      means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
      and
      the rules and regulations promulgated thereunder.

     

    “Intellectual
      Property”
      means all intellectual property rights owned or used by the Company arising
      from
      or in respect of the following: (i) patents and patent applications,
      including continuations, divisionals, continuations-in-part, reissues or
      reexaminations and patents issuing thereon (collectively, “Patents”),
      (ii) trademarks, service marks, trade dress, logos, corporate names, trade
      names and Internet domain names, together with the goodwill associated with
      any
      of the foregoing, and all applications and registrations therefor (collectively,
      “Marks”),
      (iii) copyrights and registrations and applications therefor, works of
      authorship and moral rights (collectively, “Copyrights”),
      (iv)  confidential and proprietary information, including trade secrets,
      discoveries, concepts, ideas, research and development, algorithms, know-how,
      formulae, inventions (whether or not patentable), processes, techniques,
      technical data, designs, drawings, specifications, databases, and customer
      lists, in each case excluding any rights in respect of any of the foregoing
      that
      comprise or are protected by Patents (collectively, “Trade
      Secrets”)
      and (v) Software.

     

    “IRS”
      means the United States Internal Revenue Service and, to the extent relevant,
      the United States Department of Treasury.

     

    “Knowledge
      of the Company”
      means the actual knowledge of Steve Fendrich, Joe Paviglianti, Terry Horsley,
      Richard Thomas, Charles Dieteker, Jacqueline Steven, Bill Creekmuir or Kristen
      McGuffey, or any knowledge which would have been obtained by any such person
      after inquiry that a reasonably prudent person would undertake in the particular
      circumstance.

     

    “Knowledge
      of the Purchaser”
      means the actual knowledge of Dale Carlsen, Michael Dunn, Kevin Moretton, Robert
      Killgore, Michael Combest, John Haitz, Paul Grimm or Bruce Kerr, or any
      knowledge which would have been obtained by any such person after inquiry that
      a
      reasonably prudent person would undertake in the particular
      circumstance.

     

    “Law”
      means any foreign, federal, state, local law, statute, code, ordinance, rule
      or
      regulation, or any decree, injunction, judgment, order or ruling.

     

    “Legal
      Proceeding”
      means any judicial, administrative or arbitral actions, suits or proceedings
      (public or private) by or before a Governmental Body.

     

    “Liability”
      means any debt, liability or obligation (whether known or unknown, direct or
      indirect, absolute or contingent, accrued or unaccrued, liquidated or
      unliquidated, or due or to become due and whether or not required to be
      reflected or reserved against on a balance sheet under GAAP) and including
      all
      costs and expenses relating thereto.

     

    “Lien”
      means any lien, encumbrance, pledge, mortgage, deed of trust, security interest,
      lease, charge, option, right of first refusal, easement, servitude, transfer
      restriction, or adverse claim or right of any kind or character.

     

    “Material
      Adverse Effect”
      means any circumstance, occurrence of any event, change in, or effect on the
      Company that, individually or when taken with all other related circumstances,
      events, changes in or effects on the Company, has (or is reasonably likely
      to
      have) a materially adverse effect (financial or otherwise) on (i) the
      business, assets, properties, results of operations or financial condition
      of
      the Company or (ii) the ability of the Company to consummate the
      transactions contemplated by this Agreement, other than an effect resulting
      from
      an Excluded Matter. “Excluded
      Matter”
      means any one of the following: (i) the effect of any change in the United
      States economy or securities or financial markets in general, which change
      does
      not disproportionately affect the Company and which is not the result of a
      Force
      Majeure Event; (ii) the effect of any change that generally affects any
      industry in which the Company operates, which such change does not
      disproportionately affect the Company and which is not the result of a Force
      Majeure Event; (iii) the effect of any action taken by Purchaser or its
      Affiliates with respect to the transactions contemplated hereby or with respect
      to the Company; or (iv) any effect resulting from the public announcement
      of this Agreement, compliance with terms of this Agreement or the consummation
      of the transactions contemplated by this Agreement.

     

    “Order”
      means any order, injunction, judgment, decree, ruling, writ, assessment or
      arbitration award of a Governmental Body.

     

    “Ordinary
      Course of Business”
      means solely any act or omission that (i) is in the ordinary and usual
      course of normal day-to-day operations of the Company, consistent with
      historical practices, (ii) does not relate to any breach of Contract, tort,
      infringement, willful misconduct or violation of Law, and (iii) does not
      require, under Law, Contract or consistent with the historical practices of
      the
      Company, authorization by the Company’s Board of Directors.

     

    “Permits”
      means any approvals, authorizations, consents, licenses, permits or certificates
      of a Governmental Body.

     

    “Permitted
      Exceptions” means
      (i) all defects, exceptions, restrictions, easements, rights of way and
      encumbrances disclosed in policies of title insurance and on Schedule
      5.10(a);
      (ii) statutory liens for current Taxes, assessments or other governmental
      charges not yet due or the amount or validity of which is being contested in
      good faith by appropriate proceedings; (iii) zoning, entitlement and other
      land use and environmental regulations by any Governmental Body; (iv) title
      of a lessor under a capital or operating lease or any Real Property Lease,
      together with any defects, easements, restrictions, exceptions, rights of way
      and encumbrances to which any such lessor is subject; and (v) such other
      imperfections in title, charges, easements, restrictions and encumbrances not
      arising out of or relating to the failure of the Company to pay any amount
      when
      due which would not result in Losses or Liabilities to the Company in excess
      of
      $10,000.

     

    “Person”
      means any individual, corporation, partnership, limited liability company,
      firm,
      joint venture, association, joint-stock company, trust, unincorporated
      organization, Governmental Body or other entity.

     

    “Petty
      Cash”
      means the amount of petty cash kept on hand at each of the Company’s stores,
      distribution centers, corporate offices and other facilities and excluding
      cash
      in bank accounts or uncashed checks, all in the Ordinary Course of
      Business.

     

    “Release”
      means any release, spill, emission, leaking, pumping, injection, deposit,
      disposal, discharge, dispersal, or leaching into the environment.

     

    “Remedial
      Action”
      means all actions required under Environmental Laws to clean up, remove, treat
      or address any Hazardous Material in the environment at levels exceeding those
      allowed by applicable Environmental Laws, including pre-remedial studies and
      investigations or post-remedial monitoring and care.

     

    “Senior
      Executives”
      means the following individuals: Joe Paviglianti, Terry Horsley, Richard Thomas,
      Charles Dieteker, Jacqueline Steven and, for 2005, Steven Fendrich.


     

    “Software”
      means any and all (i) computer programs, including any and all software
      implementations of algorithms, models and methodologies, whether in source
      code
      or object code, and (ii) databases and compilations, including any and all
      data and collections of data, whether machine readable or
      otherwise.

     

    “Subsidiary”
      means any Person of which a majority of the outstanding share capital, voting
      securities or other voting equity interests are owned, directly or indirectly,
      by the Company.

     

    “Tax”
      or “Taxes”
      means (i) all federal, state, local or foreign taxes, charges, fees, imposts,
      levies or other assessments, including all net income, gross receipts, capital,
      sales, use, ad valorem, value added, transfer, franchise, profits, inventory,
      capital stock, license, withholding, payroll, employment, social security,
      unemployment, excise, severance, stamp, occupation, property and estimated
      taxes, customs duties, fees, assessments and charges of any kind whatsoever,
      and
      (ii) all interest, penalties, fines, additions to tax or additional amounts
      imposed by any Taxing Authority in connection with any item described in clause
      (i).

     

    “Taxing
      Authority”
      means the IRS and any other Governmental Body responsible for the administration
      of any Tax.

     

    “Tax
      Return”
      means any return, report or statement required to be filed with respect to
      any
      Tax (including any attachments thereto, and any amendment thereof), including
      any information return, claim for refund, amended return or declaration of
      estimated Tax, and including, where permitted or required, com-bined,
      consolidated or unitary returns for any group of entities that includes Holdings
      or any of their Affiliates.

     

    “Technology”
      means, collectively, all information, designs, formulae, algorithms, procedures,
      methods, techniques, ideas, know-how, research and development, technical data,
      programs, subroutines, tools, materials, specifications, processes, inventions
      (whether patentable or unpatentable and whether or not reduced to practice),
      apparatus, creations, improvements, works of authorship and other similar
      materials, and all recordings, graphs, drawings, reports, analyses, and other
      writings, and other tangible embodiments of the foregoing, in any form whether
      or not specifically listed herein, and all related technology, that are used
      in,
      incorporated in, embodied in, displayed by or relate to, or are used by the
      Company.

     

    “WARN
      Act”
      means the Worker Adjustment and Retraining Notification Act of 1988, as amended,
      and the rules and regulations promulgated thereunder.

     

    “Working
      Capital”
      means the current assets (excluding Petty Cash and deferred tax benefits) of
      the
      Company, reduced by the current liabilities of the Company (including any
      intercompany Liabilities owed to Simmons, Dreamwell, Ltd. and their Affiliates
      (other than the Company), in each case determined in accordance with GAAP.
      Items
      already included in Closing Date Debt shall not be included in Working
      Capital.

     

    1.2  Terms
      Defined Elsewhere in this Agreement.
      For purposes of this Agreement, the following terms have meanings set forth
      in
      the sections indicated:

     

    
      	
              Term

            	
              Section

            
	
              Actual
                Closing Date Working Capital

            	
              3.3(a)

            
	
              Actual
                Closing Date Working Capital Statement

            	
              3.3(a)

            
	
              Agreement

            	
              Recitals

            
	
              Allocation
                Statement

            	
              2.2(c)

            
	
              Antitrust
                Laws 

            	
              8.4

            
	
              Arbiter

            	
              3.3(b)

            
	
              Audited
                Financial Statements 

            	
              5.6

            
	
              Balance
                Sheet

            	
              5.6

            
	
              Balance
                Sheet Date 

            	
              5.6

            
	
              Basket

            	
              10.5(a)

            
	
              Cap

            	
              10.5(a)

            
	
              Closing
                

            	
              4.1

            
	
              Closing
                Date 

            	
              4.1

            
	
              Common
                Stock 

            	
              5.4(a)

            
	
              Company

            	
              Recitals

            
	
              Company
                Documents

            	
              5.2

            
	
              Company
                Plan 

            	
              5.14

            
	
              Company
                Properties 

            	
              5.10

            
	
              Confidentiality
                Agreement

            	
              8.6

            
	
              Consolidated
                Returns

            	
              8.13(a)

            
	
              Continuing
                Employees

            	
              8.9(a)

            
	
              Co-op
                Agreement

            	
              9.1(i)

            
	
              Copyrights

            	
              1.1
                (in Intellectual Property definition)

            
	
              Dealer
                Agreement

            	
              9.1(i)

            
	
              Dealer
                Incentive Agreement

            	
              9.1(h)

            
	
              Employee
                Benefit Plan

            	
              5.14

            
	
              Environmental
                Permits

            	
              5.18(a)

            
	
              Equipment

            	
              5.11

            
	
              ERISA

            	
              5.14

            
	
              Estimated
                Closing Date Working Capital

            	
              3.2

            
	
              Estimated
                Closing Date Working Capital Statement

            	
              3.2

            
	
              Excluded
                Matter

            	
              1.1
                (in definition of Material Adverse Effect)

            
	
              Expenses

            	
              10.2(a)(ii)

            
	
              Extra
                Taxes

            	
              8.13(c)

            
	
              Financing

            	
              8.14

            
	
              Golden
                Parachute

            	
              5.9(p)

            
	
              Incentives

            	
              3.1

            
	
              Indemnification
                Claim

            	
              10.4(b)

            
	
              Indemnified
                Party

            	
              10.4(b)

            
	
              Indemnifying
                Party

            	
              10.4(b)

            
	
              Losses
                

            	
              10.2(a)(i)

            
	
              Marks

            	
              1.1
                (in Intellectual Property definition)

            
	
              Material
                Contracts 

            	
              5.13(a)

            
	
              Multiemployer
                Plan

            	
              5.14

            
	
              Patents

            	
              1.1
                (in Intellectual Property definition)

            
	
              Personal
                Property Leases

            	
              5.11

            
	
              Plan

            	
              5.14

            
	
              Pre-Closing
                Periods

            	
              8.13(a)

            
	
              Preliminary
                Statement

            	
              3.2

            
	
              Purchase
                Price 

            	
              3.1

            
	
              Purchaser

            	
              Recitals

            
	
              Purchaser
                Documents

            	
              7.2

            
	
              Purchaser
                Indemnified Parties 

            	
              10.2(a)

            
	
              Purchaser
                Plans

            	
              8.9(b)

            
	
              Real
                Property Lease 

            	
              5.10

            
	
              Revised
                Statements

            	
              2.2(c)

            
	
              Securities
                Act

            	
              7.5

            
	
              Simmons
                Documents 

            	
              6.2

            
	
              Simmons
                Indemnified Parties 

            	
              10.3(a)

            
	
              Shares

            	
              Recitals

            
	
              Supplemental
                Material

            	
              8.10

            
	
              Survival
                Period

            	
              10.1

            
	
              Tax
                Claim

            	
              8.13(b)

            
	
              Territory

            	
              8.11(a)

            
	
              Unaudited
                Financial Statements 

            	
              5.6

            
	
              Units

            	
              Recitals

            
	
              Welfare
                Plan

            	
              5.14

            


    

    


    1.3  Other
      Definitional and Interpretive Matters.
      

     

    (a)  Unless
      otherwise expressly provided, for purposes of this Agreement, the following
      rules of interpretation shall apply:

     

    Calculation
      of Time Period.
      When calculating the period of time before which, within which or following
      which any act is to be done or step taken pursuant to this Agreement, the date
      that is the reference date in calculating such period shall be excluded. If
      the
      last day of such period is a non-Business Day, the period in question shall
      end
      on the next succeeding Business Day. Notwithstanding the foregoing, for purposes
      of any calculation used herein referring to July 1, 2006, the calculation
      date shall be July 1, 2006, notwithstanding the fact it is a
      Saturday.

     

    Dollars.
      Any reference in this Agreement to $ shall mean U.S. dollars.

     

    Exhibits/Schedules.
      The Exhibits and Schedules to this Agreement are hereby incorporated and made
      a
      part hereof and are an integral part of this Agreement. All Exhibits and
      Schedules annexed hereto or referred to herein are hereby incorporated in and
      made a part of this Agreement as if set forth in full herein. Any matter or
      item
      disclosed on one Schedule shall be deemed to have been disclosed on each other
      Schedule, to the extent reasonably apparent on its face. Disclosure of any
      item
      on any Schedule shall not constitute an admission or indication that such item
      or matter is material or would have a Material Adverse Effect. No disclosure
      on
      a Schedule relating to a possible breach or violation of any Contract, Law
      or
      Order shall be construed as an admission or indication that breach or violation
      exists or has actually occurred. Any capitalized terms used in any Schedule
      or
      Exhibit but not otherwise defined therein shall be defined as set forth in
      this
      Agreement.

     

    Gender
      and Number.
      Any reference in this Agreement to gender shall include all genders, and words
      imparting the singular number only shall include the plural and vice
      versa.

     

    Headings.
      The provision of a Table of Contents, the division of this Agreement into
      Articles, Sections and other subdivisions and the insertion of headings are
      for
      convenience of reference only and shall not affect or be utilized in construing
      or interpreting this Agreement. All references in this Agreement to any
“Section”
      are to the corresponding Section of this Agreement unless otherwise
      specified.

     

    Herein.
      The words such as “herein,”
      “hereinafter,”
      “hereof,”
      and “hereunder”
      refer to this Agreement as a whole and not merely to a subdivision in which
      such
      words appear unless the context otherwise requires.

     

    Including.
      The word “including”
      or any variation thereof means (unless the context of its usage otherwise
      requires) “including,
      without limitation”
      and shall not be construed to limit any general statement that it follows to
      the
      specific or similar items or matters immediately following it.

     

    Reflected
      On or Set Forth In.
      An item arising with respect to a specific representation or warranty shall
      be
      deemed to be “reflected
      on”
      or “set
      forth in”
      a balance sheet or financial statements, to the extent any such phrase appears
      in such representation or warranty, if (a) there is a reserve, accrual or other
      similar item underlying a number on such balance sheet or financial statements
      that related to the subject matter of such representation, (b) such item is
      otherwise specifically set forth on the balance sheet or financial statements
      or
      (c) such item is reflected on the balance sheet or financial statements and
      is
      specifically set forth in the notes thereto.

     

    (b)  The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement and, in the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as jointly drafted by the parties
      hereto and no presumption or burden of proof shall arise favoring or disfavoring
      any party by virtue of the authorship of any provision of this
      Agreement.

     

    ARTICLE
      II  

     

    


     

    SALE
      AND PURCHASE OF UNITS

     

    2.1  Sale
      and Purchase of Units.
      Upon the terms and subject to the conditions contained herein, on the Closing
      Date, Holdings agrees to sell to Purchaser, and Purchaser agrees to purchase
      from Holdings, the Units.

     

    2.2  Allocation
      of Purchase Price.
      The sale of the Units shall be treated as a sale of assets of the Company for
      federal, state and local income Tax purposes. At Closing, Simmons and Purchaser
      shall agree upon a good faith allocation of the Purchase Price and any other
      items that are treated as additional purchase price for federal, state and
      local
      income Tax purposes among the different items of assets of the Company and
      the
      covenant described in Section 8.11
      and attach hereto as Schedule 2
      a
      statement (the “Allocation
      Statement”)
      evidencing such allocation. Purchaser shall provide to Simmons from time to
      time
      revised copies of the Allocation Statement (the “Revised
      Statements”)
      so as to report any matter on the Allocation Statement that needs updating
      (including Purchase Price adjustments, if any). Simmons shall have 20 days
      to
      review the last Revised Statements and will notify Purchaser of disputes with
      any revised allocation. The parties shall act in good faith to resolve any
      such
      dispute. If the parties cannot resolve the disputed allocation then the Arbiter
      (as defined herein) shall review and determine the proper allocation. This
      allocation will be binding on the parties. Any Arbiter fees and expenses shall
      be borne one-half by Purchaser and one-half by Simmons.

     

    ARTICLE
      III  

     

    


     

    PURCHASE
      PRICE

     

    3.1  Purchase
      Price.
      The aggregate consideration for the Units shall be an amount in cash equal
      to
      (i) 6.0 times the Adjusted EBITDA for the last full 12-month period ended on
      July 1, 2006, minus
      (ii) any Closing Date Debt, minus
      (iii) any amount by which Estimated Closing Date Working Capital is less
      than zero, plus
      (iv) any amount by which the Estimated Closing Date Working Capital exceeds
      zero, minus
      (v) the amount, if any, by which the aggregate rebates, co-op advertising
      and return allowances as of the Closing Date (collectively, the “Incentives”)
      exceeds the aggregate receivables relating to Incentives as of the Closing
      Date,
plus
      (vi) the amount, if any, by which the aggregate receivables relating to
      Incentives as of the Closing Date exceeds the amount of the Incentives (the
      “Purchase
      Price”).
      Any Excess Cash will be distributed by the Company to Holdings immediately
      prior
      to Closing (after calculation of the Estimated Closing Date Working Capital),
      and all Petty Cash will be retained by the Company. 

     

    3.2  Calculation
      and Payment of Purchase Price.
      Attached as Schedule 3
      hereto is a statement agreed to by the parties estimating as of July 1, 2006 (as
      if the Closing had occurred as of the end of business on such date) the items
      set forth in items (i) - (vi) of this Section 3.2 below (the “Preliminary
      Statement”).
      At least 5 Business Days prior to the Closing Date, the Company shall deliver
      to
      Purchaser: (i) a calculation of Adjusted EBITDA; (ii) a calculation of the
      estimated Working Capital of the Company as of the Closing Date (prior to the
      distribution of any Excess Cash) determined in accordance with GAAP (the
“Estimated
      Closing Date Working Capital”)
      and reflected in a statement in substantially the form attached hereto as
Exhibit A
      and in accordance with the methodology used in Schedule
      3
      hereto (the “Estimated
      Closing Date Working Capital Statement”);
      (iii) a calculation of the Closing Date Debt (together with customary
      pay-off letters from all holders of Closing Date Debt to be repaid as of or
      prior to the Closing); (iv) a calculation of Excess Cash and Petty Cash; (v)
      a
      calculation of the amounts under Section 3.1 (iv) and (v) above; and (vi) a
      calculation of the Purchase Price to be paid at Closing. Such calculations
      and
      statements provided by the Company shall be subject to the review and approval
      of Purchaser. On the Closing Date, Purchaser shall pay the Purchase Price to
      Holdings, which shall be paid by wire transfer of immediately available United
      States funds into an account designated by Holdings.

     

    3.3  Post-Closing
      Purchase Price Adjustment.
      Following the Closing, the Purchase Price shall be adjusted as provided in
      this
Section 3.3
      to reflect any difference between the Actual Closing Date Working Capital and
      the Estimated Closing Date Working Capital. 

     

    (a)  Within
      60 days following the Closing Date, Purchaser shall deliver to Simmons a
      calculation of the actual Working Capital of the Company as of the Closing
      Date
      (prior to the distribution of any Excess Cash) determined in accordance with
      GAAP (the “Actual
      Closing Date Working Capital”) and
      reflected in a statement substantially in the form of Exhibit A
      attached hereto (the “Actual
      Closing Date Working Capital Statement”).
      

     

    (b)  Acceptance
      of Statements; Dispute Procedures.
      The Actual Closing Date Working Capital Statement delivered by Purchaser to
      Simmons shall be conclusive and binding upon the parties unless Simmons, within
      20 Business days after delivery to Simmons of the Actual Closing Date Working
      Capital Statement, notifies Purchaser in writing that Simmons disputes any
      of
      the amounts set forth therein, specifying the nature of the dispute and the
      basis therefor. Purchaser shall grant Holdings, Simmons and their Affiliates
      and
      representatives (including advisors and accountants) access to all books,
      records and employees of the Company that is reasonably requested by Holdings
      or
      Simmons in connection with Purchaser’s preparation of the Actual Closing Date
      Working Capital Statement. The parties shall in good faith attempt to resolve
      any dispute and, if the parties so resolve all disputes, the Actual Closing
      Date
      Working Capital Statement, as amended to the extent necessary to reflect the
      resolution of the dispute, shall be conclusive and binding on the parties.
      If
      the parties do not reach agreement in resolving the dispute within 15 days
      after
      notice is given by Simmons to Purchaser pursuant to the second preceding
      sentence, the parties shall submit the dispute to Deloitte & Touche or such
      other nationally recognized independent accounting firm which is mutually
      agreeable to the parties (the “Arbiter”)
      for resolution. Promptly, but no later than 20 days after acceptance of its
      appointment as Arbiter, the Arbiter shall determine (it being understood that
      in
      making such determination, the Arbiter shall be functioning as an expert and
      not
      as an arbitrator), based solely on written submissions by Purchaser and Simmons,
      and not by independent review, only those issues in dispute and shall render
      a
      written report as to the resolution of the dispute and the resulting computation
      of the Actual Closing Date Working Capital which shall be conclusive and binding
      on the parties. In resolving any disputed item, the Arbiter (x) shall be bound
      by the provisions of this Section 3.3
      and (y) may not assign a value to any item greater than the greatest value
      for
      such items claimed by either party or less than the smallest value for such
      items claimed by either party. The fees, costs and expenses of the Arbiter
      shall
      be allocated to and borne equally by Purchaser and Simmons.

     

    (c)  Payment.
      Upon final determination of Actual Closing Date Working Capital as provided
      in
Section
      3.3(b)
      above, (A) if Actual Closing Date Working Capital is greater than Estimated
      Closing Date Working Capital, the Purchase Price shall be increased by the
      excess of the Actual Closing Date Working Capital over Estimated Closing Date
      Working Capital and Purchaser shall promptly, but no later than five Business
      Days after such final determination, pay the amount of such difference, together
      with interest thereon from the Closing Date to the date of payment thereof,
      to
      be distributed to Holdings, and (B) if Actual Closing Date Working Capital
      is
      less than Estimated Closing Date Working Capital, the Purchase Price shall
      be
      decreased by the excess of Estimated Closing Date Working Capital over Actual
      Closing Date Working Capital and Simmons shall promptly, but no later than
      five
      Business Days after such final determination, pay to Purchaser the amount of
      such difference, together with interest thereon from the Closing Date to the
      date of payment thereof as determined below.

     

    (d)  Interest.
      For the purposes of Section
      3.3(c),
      interest will be payable at the “prime”
      rate, as announced by the Wall Street Journal, Eastern Edition, as of the
      Closing Date, calculated based on a 365 day year and the actual number of days
      elapsed.

     

    ARTICLE
      IV  

     

    


     

    CLOSING
      AND TERMINATION

     

    4.1  Closing
      Date.
      The closing of the sale and purchase of the Units provided for in Section
      2.1
      hereof (the “Closing”)
      shall take place at the offices of Shartsis Friese LLP, One Maritime Plaza,
      18th
      Floor, San Francisco, California 94111 (or at such other place as the parties
      may designate in writing) at 10:00 a.m. (San Francisco time) on a date to
      be specified by the parties (the “Closing
      Date”),
      which date shall be no later than the second Business Day after the satisfaction
      or waiver of the conditions set forth in Article
      IX
      (other than conditions that by their nature are to be satisfied at the Closing,
      but subject to the satisfaction or waiver of those conditions at such time),
      but
      in no event later than August 28, 2006, unless another time, date or place
      is agreed to in writing by the parties hereto. At the election of any party
      hereto, the Closing may take place through an exchange of consideration and
      documents using overnight courier service or facsimile. 

     

    4.2  Termination
      of Agreement.
      This Agreement may be terminated prior to the Closing as follows:

     

    (a)  At
      the election of Holdings or Purchaser on or after August 15, 2006, (the
“Termination
      Date”),
      if the Closing shall not have occurred by the close of business on such date,
      provided that the terminating party is not in breach in any material respect
      of
      any of its covenants hereunder. Notwithstanding the foregoing, (i) the
      Termination Date shall be extended to August 28, 2006 if the only reason the
      Closing shall not have occurred by such date is due to either the waiting period
      applicable to the transactions contemplated by this Agreement under the HSR
      Act
      shall not have expired or early termination shall not have been granted
      (provided that the parties have complied with their obligations under Section
      8.4 hereof); and (ii) the Termination Date shall be extended to August 22,
      2006
      if the only reason the Closing shall not have occurred by such date is due
      to
      the fact the condition set forth in Section 9.1(f) (consents) has not been
      met,
      but the Termination Date shall not be extended beyond August 28, 2006 without
      the consent of Simmons and Purchaser.

     

    (b)  by
      mutual written consent of Holdings and Purchaser; 

     

    (c)  by
      Purchaser if Purchaser is not then in material breach of its obligations under
      this Agreement and there has been a material breach of any representation,
      warranty, covenant or agreement contained in this Agreement on the part of
      Company, Simmons or Holdings which has or would prevent one of the conditions
      set forth in section 9.1(a) or (b) from being satisfied, and Company, Simmons
      or
      Holdings, as the case may be, has not cured such breach within 15 days after
      notice thereof by Purchaser;

     

    (d)  by
      Company, Simmons or Holdings if none of Company, Simmons or Holdings is then
      in
      material breach of its obligations under this Agreement and there has been
      a
      material breach of any representation, warranty, covenant or agreement contained
      in this Agreement on the part of Purchaser which has or would prevent one of
      the
      conditions set forth in section 9.2(a) or (b) from being satisfied, and
      Purchaser has not cured such breach within 15 days after notice thereof by
      Company, Simmons or Holdings; or

     

    (e)  by
      Holdings or Purchaser if there shall be in effect a final nonappealable Order
      of
      a Governmental Body of competent jurisdiction restraining, enjoining or
      otherwise prohibiting the consummation of the transactions contemplated hereby;
      provided,
      however,
      that the right to terminate this Agreement under this Section
      4.2(c)
      shall not be available to a party if such Order was primarily due to the failure
      of such party to perform any of its obligations under this
      Agreement.

     

    4.3  Procedure
      Upon Termination.
      In the event of termination and abandonment by Purchaser or Holdings, or both,
      pursuant to Section 4.2
      hereof, written notice thereof shall forthwith be given to the other party
      or
      parties, and this Agreement shall terminate, and the purchase of the Units
      hereunder shall be abandoned, without further action by Purchaser or
      Holdings.

     

    4.4  Effect
      of Termination.

     

    (a)  In
      the event that this Agreement is validly terminated in accordance with
Section
      4.2
      and 4.3,
      then each of the parties shall be relieved of their duties and obligations
      arising under this Agreement after the date of such termination and such
      termination shall be without liability to Purchaser, Simmons, the Company or
      Holdings; provided,
      however that no such termination shall relieve any party hereto from liability
      for any willful breach of this Agreement and, provided,
      further,
      that the obligations of the parties set forth in Section
      8.6
      and Article
      XI
      hereof shall survive any such termination and shall be enforceable
      hereunder.

     

    (b)  Nothing
      in this Section
      4.4
      shall relieve Simmons, Holdings, the Company or Purchaser of any liability
      for a
      breach of any of its covenants or agreements or willful breach of its
      representations and warranties contained in this Agreement prior to the date
      of
      termination. The damages recoverable by the non-breaching party shall include
      all attorneys’ fees reasonably incurred by such party in connection with the
      transactions contemplated hereby.

     

    ARTICLE
      V  

     

    


     

    REPRESENTATIONS
      AND WARRANTIES REGARDING THE COMPANY

     

    Simmons
      and Holdings hereby represent and warrant to Purchaser that:

     

    5.1  Organization
      and Good Standing.
      The Company is a corporation duly organized, validly existing and in good
      standing under the laws of the State of Delaware and has all requisite corporate
      power and authority to own, lease and operate its properties and to carry on
      its
      business as now conducted. The Company is duly qualified or authorized to do
      business and is in good standing under the laws of each jurisdiction in which
      it
      owns or leases real property and each other jurisdiction in which the conduct
      of
      its business or the ownership of its properties requires such qualification
      or
      authorization, except where the failure to be so qualified, authorized or in
      good standing would not result in Liabilities or Losses in excess of $75,000
      individually or $150,000 in the aggregate.

     

    5.2  Authorization
      of Agreement.
      The Company has all requisite power and authority to execute and deliver this
      Agreement and each other agreement, document, or instrument or certificate
      contemplated by this Agreement or to be executed by the Company in connection
      with the consummation of the transactions contemplated by this Agreement
      (the “Company
      Documents”),
      and to consummate the transactions contemplated hereby. The execution and
      delivery of this Agreement and the Company Documents and the consummation of
      the
      transactions contemplated hereby and thereby have been duly authorized by all
      requisite corporate action on the part of the Company. This Agreement has been,
      and each of the Company Documents will be at or prior to the Closing, duly
      and
      validly executed and delivered by the Company and (assuming the due
      authorization, execution and delivery by the other parties hereto and thereto)
      this Agreement constitutes the legal, valid and binding obligations of the
      Company, enforceable against it in accordance with its terms, subject to
      applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
      affecting creditors’ rights and remedies generally, and subject, as to
      enforceability, to general principles of equity, including principles of
      commercial reasonableness, good faith and fair dealing (regardless of whether
      enforcement is sought in a proceeding at law or in equity).

     

    5.3  Conflicts;
      Consents of Third Parties.

     

    (a)  Except
      as set forth on Schedule
      5.3(a),
      none of the execution and delivery by the Company of this Agreement or the
      Company Documents, the consummation of the transactions contemplated hereby
      or
      thereby, or compliance by the Company with any of the provisions hereof or
      thereof will conflict with, or result in any violation of or default (with
      or
      without notice or lapse of time, or both) under, or give rise to a right of
      termination or cancellation under, any provision of (i) the certificate of
      incorporation and by-laws or comparable organizational documents of the Company;
      (ii) any Material Contract or Permit to which the Company is a party or by
      which any of the properties or assets of the Company are bound; (iii) any
      Order of any Governmental Body applicable to the Company or by which any of
      the
      properties or assets of the Company are bound; or (iv) any applicable Law,
      other than, in the case of Permits or clause (iv), such conflicts or violations
      that would not result in Liabilities or Losses in excess of $75,000 individually
      or $150,000 in the aggregate.

     

    (b)  Except
      as set forth on Schedule
      5.3(b),
      no consent, waiver, approval, Order, Permit or authorization of, or declaration
      or filing with, or notification to, any Person or Governmental Body is
      required on the part of the Company in connection with the execution and
      delivery of this Agreement or the Company Documents or the compliance by the
      Company with any of the provisions hereof or thereof, or the consummation of
      the
      transactions contemplated hereby or thereby, except for compliance with the
      applicable requirements of the HSR Act. The consents obtained by the Company
      prior to Closing are sufficient to enable the Purchaser to operate the business
      immediately following Closing in all material respects as it was operated prior
      to Closing.

     

    5.4  Capitalization.

     

    (a)  The
      authorized capital stock of the Company as of the date hereof consists of 3,000
      shares of common stock, $0.01 par value per share (“Common
      Stock”).
      As of the date hereof, there are 3,000 shares of Common Stock issued and
      outstanding and no shares of Common Stock are held by the Company as treasury
      stock. All of the issued and outstanding Common Stock were duly authorized
      for
      issuance and are validly issued, fully paid and non-assessable and were not
      issued in violation of any purchase or call option, right of first refusal,
      subscription right, preemptive right or any similar rights. Except as set forth
      on Schedule
      5.4(a),
      all of the Shares are free and clear of all Liens and claims of every
      kind.

     

    (b)  Except
      as set forth on Schedule
      5.4(b),
      there is no existing option, warrant, call, right, or Contract of any character
      to which the Company is a party requiring, and there are no securities of the
      Company outstanding which upon conversion or exchange would require, the
      issuance, of any equity interests of the Company or other securities convertible
      into, exchangeable for or evidencing the right to subscribe for or purchase
      equity interests of the Company. The Company is not a party to any voting trust
      or other Contract with respect to the voting, redemption, sale, transfer or
      other disposition of the Common Stock of the Company.

     

    (c)  Except
      as set forth on Schedule
      5.4(c),
      the Company has not authorized or issued debt securities or other instruments
      of
      indebtedness.

     

    5.5  Subsidiaries.
      The Company has no Subsidiaries. The Company does not own, directly or
      indirectly, any capital stock or equity securities of any Person.

     

    5.6  Financial
      Statements.
      The Company has made available to Purchaser copies of (i) the audited
      consolidated balance sheet of the Company as at December 28, 2002 and the
      related audited consolidated statement of income and of cash flows of the
      Company for the year then ended (such audited statements, including the related
      notes and schedules thereto, complete and correct copies of which are attached
      as Schedule 5.6,
      are referred to herein as the “Audited
      Financial Statements”),
      (ii) the unaudited consolidated balance sheets of the Company as at
      December 27, 2003, December 25, 2004 and December 31, 2005 and the related
      unaudited consolidated statements of income and cash flows of the Company for
      the years then ended (complete and correct copies of which are attached as
      Schedule 5.6),
      and (iii) the unaudited consolidated balance sheet of the Company as at
      June 3, 2006 and the related unaudited consolidated statement of income and
      cash flows of the Company for the five (5) month period then ended (such
      unaudited statements, including the related notes and schedules thereto,
      complete and correct copies of which are attached as Schedule 5.6,
      are referred to herein as the “Unaudited
      Financial Statements”).
      Except as set forth in the notes thereto and as disclosed in Schedule
      5.6,
      each of the Audited Financial Statements has been prepared in accordance with
      GAAP and presents fairly in all material respects the financial position,
      results of operations and cash flows of the Company as at the dates and for
      the
      periods indicated therein. Except as set forth in the notes thereto and as
      disclosed in Schedule
      5.6,
      each of the Unaudited Financial Statements has been prepared in accordance
      with
      the historical accounting practices of the Company and
      presents fairly in all material respects the financial position, results of
      operations and cash flows of the Company as at the dates and for the periods
      indicated therein.

     

    For
      the purposes hereof, the unaudited balance sheet of the Company as at
      June 3, 2006 is referred to as the “Balance
      Sheet”
      and June 3, 2006 is referred to as the “Balance
      Sheet Date”.

     

    5.7  No
      Undisclosed Liabilities.
      The Company does not have any Liabilities of any kind that would have been
      required to be reflected in, reserved against or otherwise described on the
      Balance Sheet or in the notes thereto in accordance with
      GAAP
      and were not so reflected, reserved against or described, other than (i)
      Liabilities incurred in the Ordinary Course of Business after the Balance Sheet
      Date, (ii) Liabilities incurred in connection with the transactions contemplated
      hereby and (iii) Liabilities that would not be in excess of $75,000 individually
      or $150,000 in the aggregate.

     

    5.8  Absence
      of Certain Developments.
      Except as set forth on Schedule
      5.8,
      since the Balance Sheet Date, the business has been conducted only in the
      Ordinary Course of Business and there has not been:

     

    (a)  any
      change in its financial condition, assets, liabilities (contingent or
      otherwise), income, operations or business which would have an effect on the
      financial condition, assets, liabilities (contingent or otherwise), income,
      operations of the Company or the business, taken as a whole, resulting in Losses
      in excess of $75,000 individually or $150,000 in the aggregate;

     

    (b)  any
      damage, destruction or loss (whether or not covered by insurance) adversely
      affecting any material portion of its properties or business;

     

    (c)  any
      capital expenditure or commitment by the Company in excess of $75,000
      individually or $150,000 in the aggregate;

     

    (d)  any
      unfair labor practices or charges, strikes, work stoppages, slowdowns or
      lockouts or labor grievance or complaints that would reasonably be expected
      to
      result in Losses in excess of $75,000 individually or $150,000;

     

    (e)  any
      plan, agreement or arrangement granting any preferential rights to purchase
      or
      acquire any interest in any of its assets, property or rights or requiring
      consent of any part to the transfer and assignment of any such assets, property
      or rights;

     

    (f)  any
      new or any amendment or termination of any existing Material Contract to which
      it is a party; or

     

    (g)  any
      action or event that, if it occurred after the date of this Agreement, would
      have required the consent of Purchaser under Section 8.2.

     

    5.9  Taxes.
      Except as set forth on Schedule 5.9:

     

    (a)  All
      income Tax and other material Tax Returns required to be filed by the Company
      have been properly completed and filed on a timely basis or otherwise properly
      extended for subsequent filing by the authorized due dates. The foregoing Tax
      Returns are correct in all material respects. No extension of time within which
      to file any income Tax or other material Tax Return of the Company is
      outstanding. 

     

    (b)  With
      respect to all taxable periods or portions of periods ending on or prior to
      Closing, all material amounts of Taxes required to be paid by the Company
      (whether or not required to be shown on any Tax Return and whether or not any
      Tax Return was required) have been paid.

     

    (c)  No
      material issues have been raised (and are currently pending) in writing in
      respect of the Company by any Taxing Authority in connection with any of its
      Tax
      Returns. As of the date hereof, no waivers of statutes of limitation with
      respect to any of the Tax Returns described in clause (a) above have been given
      by or requested from the Company. All material deficiencies asserted or
      assessments made as a result of any examinations have been fully paid, or are
      fully reflected as a liability in the Audited Financial Statements in accordance
      with GAAP or the Unaudited Financial Statements in accordance with
      the historical accounting practices of the Company, as the case may
      be.
      There are no Liens on any of the assets of the Company that arose in connection
      with any failure or alleged failure to pay any Tax, except for Permitted
      Exceptions.

     

    (d)  The
      Company has withheld and paid all material Taxes required to have been withheld
      and paid in connection with amounts paid or owing to any employee, independent
      contractor, creditor, stockholder or other third party.

     

    (e)  Except
      for the affiliated group of which Simmons is the ultimate parent, since February
      1, 2003, the Company has not been a member of an affiliated group of
      corporations, within the meaning of Section 1504 of the Code.

     

    (f)  The
      Company is not a party to and has no obligation under any Tax sharing, Tax
      indemnity or Tax allocation agreement or arrangement (other than such agreements
      existing as of the date hereof between current members of the Company’s
      affiliated group and customary Tax indemnification contained in credit or other
      commercial agreements, the primary purpose of which does not relate to
      Taxes).

     

    (g)  To
      the Knowledge of the Company, none of the Company’s assets are tax-exempt use
      property within the meaning of Section 168(h) of the Code.

     

    (h)  The
      Company has not with respect to any open taxable period applied for and been
      granted permission to adopt a change in its method of Tax accounting requiring
      adjustments under Section 481 of the Code or comparable state or foreign
      Law.

     

    (i)  During
      the two-year period ending on the Closing Date, the Company was not a
      distributing corporation or a controlled corporation in a transaction intended
      to be governed by Section 355 of the Code.

     

    (j)  No
      payment made to any employee, officer, director or independent contractor of
      the
      Company (the “Recipient”)
      pursuant to any employment contract, severance agreement or other arrangement
      (a
“Golden
      Parachute Payment”)
      will be nondeductible by the Company because of the application of Sections
      280G
      and 4999 of the Code to any Golden Parachute Payment, nor will the Company
      be
      required to compensate any Recipient because of the imposition of an excise
      tax
      (including any interest or penalties related thereto) on the Recipient by reason
      of Sections 280G and 4999 of the Code.

     

    (k)  This
      Section
      5.9
      represents the sole and exclusive representations and warranties of Simmons
      and
      Holdings with respect to Tax matters of the Company.

     

    5.10  Real
      Property.
      

     

    (a)  The
      Company does not own any real property. Schedule 5.10(a)
      sets forth a complete list of all leases of real property by the Company
      (individually, a “Real
      Property Lease”
      and collectively, the “Real
      Property Leases”
      or “Company
      Properties”)
      as lessee or lessor. The Company Properties constitute all interests in real
      property currently used, occupied or currently held for use in connection with
      the business of the Company and which are necessary for the continued operation
      of the business of the Company as the business is currently conducted. The
      Company has provided Purchaser with true, correct and complete copies of the
      Real Property Leases, together with all amendments, modifications or
      supplements, if any, thereto. The Company has a valid, binding and enforceable
      leasehold interest under each of the Real Property Leases under which it is
      a
      lessee, free and clear of all Liens other than Permitted Exceptions. Each of
      the
      Real Property Leases is in full force and effect. The Company has not received
      any written notice of any default or event that with notice or lapse of time,
      or
      both, would constitute a default by the Company under any of the Real Property
      Leases. To the Actual Knowledge of the Company, Holdings and Simmons the
      landlord is not in material default under any of the Real Property Leases.
      The
      Company has not assigned any such lease or sublet all or any part of
      the Company Properties. Except as described on Schedule 5.10(a),
      there are no material physical or mechanical defects in any of the Company
      Properties and  each such facility is in the condition and repair
      required under the Lease.

     

    (b)  To
      the Actual Knowledge of the Company, the Real Property Leases and the
      Company Properties (and improvements thereon) are presently in compliance with
      all Laws relating to the Real Property, including the Americans with
      Disabilities Act, except where the failure to be in compliance would not result
      in Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate. The Company has not received any notice from any party asserting
      that
      any of the Real Property Leases or the Company Properties are  in
      violation of any Laws. The Company has not received notice of any pending or
      threatened condemnation, annexation, special assessments, zoning or subdivision
      changes, or other adverse claims affecting the Company Properties.

     

    5.11  Tangible
      Personal Property; Condition of Assets.
      Schedule
      5.11
      sets forth a list of all leases of personal property by the Company
      (“Personal
      Property Leases”)
      involving annual payments in excess of $75,000. The Company has not received
      any
      written notice of any default or any event that with notice or lapse of time,
      or
      both, would constitute a default, by the Company under any of the Personal
      Property Leases. The
      furniture, fixtures, machinery, shelving, racks, equipment, tools, dies, molds,
      jigs, fixtures, office equipment, business machines, telephones and telephone
      systems, parts, accessories and other tangible personal property (other than
      inventory) owned or leased by the Company and used in its operations
      (collectively, the “Equipment”)
      constitute all tangible personal property necessary in order for the Company
      to
      conduct its business as it has been conducted in the past. All Equipment
      operates substantially in accordance with its specifications, adequately
      performs the functions it is supposed to perform, is free of any material
      structural, mechanical, installation or engineering defects and in good
      operating condition and repair (ordinary wear and tear excepted). The
      Company possesses good, valid and marketable title to, or valid leaseholder
      interest in, or valid license to use all the property under the Personal
      Property Leases and the Equipment used or necessary for the conduct of the
      business, free and clear of all Liens other than Permitted Exceptions.


     

    5.12  Intellectual
      Property.

     

    (a)  Schedule
      5.12(a)
      sets forth an
      accurate and complete list of all issued Patents, pending Patent applications,
      registered Marks, pending applications for registration of Marks, registered
      Copyrights and Internet domain names owned by the Company.

     

    (b)  Except
      as set forth on Schedule
      5.12(b),
      the Company owns, or possesses adequate licenses or other valid rights to use
      (in each case, free and clear of any Liens),
      all Intellectual Property
      and Technology used by the Company in the Ordinary Course of
      Business.
      Without limiting the generality of the foregoing, except as set forth on
Schedule
      5.12(b),
      the Company owns all rights, title and interests in and to all of the Marks
      throughout the respective jurisdictions set forth on Schedule 5.12(a)
      (free and clear of all Liens), and no Person has or has claimed or alleged
      any
      right or interest therein or thereto. 

     

    (c)  The
      conduct
      of the business and operations of the Company and the use of the
      Intellectual
      Property and Technology owned by the Company does
      not infringe
      or constitute a misappropriation of the Intellectual Property of any
      Person.

     

    (d)  As
      of the date of this Agreement, there is no pending Legal Proceeding (and the
      Company has not received written notice of any claim) challenging any right
      of
      the Company in
      or the validity of any Intellectual Property or Technology owned by or
      exclusively licensed to the Company,
      which, to the Knowledge of the Company, if adversely determined, would result
      in
      Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate.

     

    (e)  Except
      as set forth on Schedule
      5.12(e),As
      of the date of this Agreement, there are no Orders to which the Company is
      a
      party that restrict the Company’s right to use any Intellectual Property or
      Technology used by the Company in the Ordinary Course of Business.  

     

    (f)  Except
      as set forth on Schedule
      5.12(f),
      to the Knowledge of the Company, no Person is infringing or misappropriating
      any
      Intellectual Property owned by or exclusively licensed to the
      Company.

     

    (g)  To
      the Knowledge of the Company, no Intellectual Property owned by or exclusively
      licensed to the Company is invalid or unenforceable.

     

    (h)  The
      Intellectual Property and
      Technology
      are sufficient to continue to operate the business of the Company immediately
      after the Closing as currently conducted. All patents, trademarks, trade names,
      service marks and copyrights, and all registrations thereof, included in the
      Intellectual Property owned by the Company, and all Intellectual Property
      licensed to the Company, are valid and in full force and effect.

     

    5.13  Material
      Contracts.

     

    (a)  Schedule
      5.13(a)
      sets forth all of the following Contracts to which the Company is a party or
      by
      which it is bound (collectively, the “Material
      Contracts”):

     

    (i)  Contracts
      for the employment of any individual on a full-time, part-time or consulting
      or
      other basis providing annual compensation in excess of $75,000;

     

    (ii)  Contracts
      providing for severance, retention, change in control or other similar
      payments;

     

    (iii)  Contracts
      in which the Company has agreed or is bound not to compete in any manner or
      geographic area or in any business;

     

    (iv)  Contracts
      limiting the Company’s freedom to operate, own, pledge, sell, transfer or
      otherwise dispose of or encumber any of its assets;

     

    (v)  all
      Contracts regarding capital stock of the Company, including any shareholder
      agreement, voting or voting trust agreement or proxy;

     

    (vi)  Contracts
      between the Company, on one hand, and Simmons, Holdings or any of their
      Affiliates or any current officer or director of the Company, on the other
      hand;

     

    (vii)  Contracts
      with any labor union or association representing any employee of the
      Company;

     

    (viii)  Contracts
      for the sale of any of the assets of the Company other than in the Ordinary
      Course of Business;

     

    (ix)  Contracts
      relating to any acquisition to be made by the Company of any operating business
      or the capital stock of any other Person;

     

    (x)  Contracts
      relating to the incurrence of indebtedness for borrowed money, or the making
      of
      any loans, in each case involving amounts in excess of $75,000;

     

    (xi)  Contracts
      for indemnification, reimbursement, guaranty, suretyship or other obligation
      to
      assume or incur any obligation of a third party involving amounts in excess
      of
      $75,000 individually or $150,000 in the aggregate;

     

    (xii)  Contracts
      for joint ventures, strategic alliances, partnerships, or sharing of profits
      or
      proprietary information; 

     

    (xiii)  Contracts,
      including distribution, supply and advertising Contracts, which involve the
      expenditure of more than $75,000 in the aggregate or require performance by
      any
      party more than one year from the date hereof that, in either case, are not
      terminable by the Company without penalty on notice of 90 days’ or
      less;

     

    (xiv)  Real
      Property Leases set forth on Schedule
      5.10;

     

    (xv)  Personal
      Property Leases set forth on Schedule
      5.11;
      and

     

    (xvi)  Contracts
      under which the Company has licensed any material Intellectual Property or
      material Technology from any third Person or under which the Company licenses
      any material Intellectual Property or material Technology to any third
      Person.

     

    (b)  All
      Material Contracts are in full force and binding upon the parties thereto.
      Except as set forth on Schedule
      5.13(b),
      the Company has not received any notice of any default or event that with notice
      or lapse of time, or both, would constitute a default by the Company under
      any
      Material Contract. The Company has provided Purchaser with true, correct and
      complete copies of all of the Material Contracts, together with all amendments,
      modifications or supplements thereto.

     

    5.14  Employee
      Benefits Plans.

     

    (a)  Schedule
      5.14(a)
      lists each employment, bonus, deferred compensation, incentive compensation,
      stock purchase, stock option, stock appreciation right or other stock-based
      incentive, severance, change-in-control or termination pay, hospitalization
      or
      other medical, disability, life or other insurance, supplemental unemployment
      benefits, profit-sharing, pension or retirement plan, program, agreement or
      arrangement and each other material employee benefit plan, program, agreement
      or
      arrangement, sponsored, maintained or contributed to or required to be
      contributed to by the Company for the benefit of any current or former employee,
      independent contractor or director of the Company (the “Company
      Plans“).
      Except for amendments that are required for the Company Plans to meet the
      requirements of applicable law, tax-qualified status under Section 401(a) of
      the
      Code, if applicable, or Section 409A of the Code, if applicable, applicable
      regulatory guidance, the terms of such Company Plans, the Company has no formal
      plan or commitment, whether legally binding or not, to create any additional
      Company Plans or modify or change any existing Company Plan that would
      materially affect any current or former employee, independent contractor or
      director of the Company.

     

    (b)  With
      respect to each of the Company Plans, true and complete copies of each of the
      following documents, as applicable, have been made available to the
      Purchaser:

     

    (i)  a
      copy of the Company Plan documents (including all amendments thereto) for each
      written Company Plan or a written description of any Company Plan that is not
      otherwise in writing;

     

    (ii)  a
      copy of the annual report or Internal Revenue Service Form 5500 Series, if
      required under ERISA or the Code, with respect to each Company Plan for the
      last
      three (3) Plan years ending prior to the date of this Agreement for which such
      a
      report was filed;

     

    (iii)  a
      copy of the actuarial report, if required under ERISA, with respect to each
      Company Plan subject to ERISA (each, an “ERISA
      Plan”)
      for the last three (3) Plan years ending prior to the date of this Agreement
      for
      which a report was required;

     

    (iv)  a
      copy of the most recent Summary Plan Description (“SPD“),
      together with all Summaries of Material Modification issued with respect to
      such
      SPD, if required under ERISA, with respect to each ERISA Plan, and all other
      material employee communications relating to each ERISA Plan;

     

    (v)  if
      the Company Plan is funded through a trust or any other funding vehicle, a
      copy
      of the trust or other funding agreement (including all amendments thereto)
      and
      the latest financial statements thereof, if any; and

     

    (vi)  the
      most recent determination letter received from the Internal Revenue Service
      (“IRS”)
      with respect to each Company Plan that is intended to be qualified under Section
      401(a) of the Code.

     

    (c)  None
      of the Company Plans is (or during the prior 6 years has been) subject to Title
      IV of ERISA. 

     

    (d)  The
      Company has not engaged in a transaction or has taken or failed to take any
      action in connection with a Company Plan that could subject the Company to
      any
      material liability for either a civil penalty assessed pursuant to Section
      409,
      502(i) or 502(l) of ERISA, or a tax imposed pursuant to Section 4975(a) or
      (b),
      4976 or 4980B of the Code. 

     

    (e)  All
      contributions and premiums that the Company and each ERISA Affiliate is required
      to pay under the terms of each of the ERISA Plans and Section 412 of the Code,
      have, to the extent due, been paid in full or properly recorded on the financial
      statements or records of the Company consistent with historical practice or
      as
      otherwise required by GAAP, and none of the ERISA Plans or any trust established
      thereunder has incurred any “accumulated funding deficiency” (as defined in
      Section 302 of ERISA and Section 412 of the Code), whether or not waived, as
      of
      the last day of the most recent fiscal year of each of the ERISA Plans ended
      prior to the date of this Agreement. No lien has been imposed under Section
      412(n) of the Code or Section 302(f) of ERISA on the assets of the Company
      or
      any ERISA Affiliate, and no event or circumstance has occurred that is
      reasonably likely to result in the imposition of any such lien on any such
      assets on account of any ERISA Plan.

     

    (f)  Each
      of the Company Plans has been operated and administered in all material respects
      in accordance with its terms and applicable laws, including ERISA and the
      Code.

     

    (g)  Each
      of the ERISA Plans that is intended to be “qualified” within the meaning of
      Section 401(a) of the Code is so qualified, and with respect to such ERISA
      Plans, the Company has received a currently effective determination letter
      from
      the IRS stating that the ERISA Plan is so qualified, and no event has occurred
      that would affect such qualified status. 

     

    (h)  Any
      fund established under an ERISA Plan that is intended to satisfy the
      requirements of Section 501(c)(9) of the Code has so satisfied such
      requirements.

     

    (i)  No
      Company Plan provides benefits coverage, including without limitation death
      or
      medical benefits coverage (whether or not insured), with respect to current
      or
      former employees of the Company after retirement or other termination of service
      (other than coverage (i) mandated by applicable laws or (ii) the full direct
      cost of which is borne by the current or former employee (or beneficiary
      thereof)).

     

    (j)  Except
      as set forth on Schedule 5.14(a)
      the consummation of the transactions contemplated by this Agreement will not,
      either alone or in combination with any other event, (i) entitle any current
      or
      former employee, officer or director of the Company to severance pay,
      unemployment compensation or any other similar termination payment, or (ii)
      accelerate the time of payment or vesting, or increase the amount of or
      otherwise enhance any benefit due from the Company to any such employee, officer
      or director.

     

    (k)  There
      are no pending or, to the Actual Knowledge of the Company, Holdings or Simmons,
      threatened or anticipated claims by any current or former employee or
      beneficiary under any Company Plan (other than routine claims for benefits).
      

     

    5.15  Labor
      and Employment.

     

    (a)  Except
      as set forth on Schedule
      5.15(a),
      the Company is not a party to any labor or collective bargaining
      agreement.

     

    (b)  Except
      as set forth on Schedule
      5.15(b),
      there are no (i) strikes, work stoppages, work slowdowns or lockouts pending
      or,
      to the Actual Knowledge of the Company, threatened against or involving the
      Company, (ii) unfair labor practice charges, or grievances or complaints pending
      or, to the Knowledge of the Company, threatened by or on behalf of any employee
      or group of employees of the Company, or (iii) union organizational
      activities existing with respect to the Company’s employees that, to the Actual
      Knowledge of the Company, could reasonably be expected to result in Losses
      or
      Liabilities in excess of $75,000 individually or $150,000 in the aggregate.
      Except as set forth on Schedule
      5.15(b),
      no charge is pending nor, to the Company’s Actual Knowledge, threatened, against
      the Company before any court or agency alleging unlawful discrimination in
      employment practices and no charge or proceeding with regard to any unfair
      labor
      practice is pending before the National Labor Relations Board or any other
      tribunal. No one has petitioned within the last 3 years, and no one is now
      petitioning the Company, for union representation of any employees of the
      Company. The Company has not experienced any labor strike, slow-down, stoppage,
      labor difficulty or other job action during the last 3 years that, individually
      or in the aggregate, could reasonably be expected to result in Losses or
      Liabilities in excess of $75,000 individually or $150,000 in the
      aggregate.

     

    (c)  Except
      as set forth in Schedule 5.15(c),
      the Company: (i) is in compliance with all Laws respecting employment,
      employment practices, terms and conditions of employment and wages and hours,
      in
      each case, with respect to its employees and independent contractors, except
      where the failure to be in compliance would not result in Liabilities or Losses
      in excess of $75,000 individually or $150,000 in the aggregate; (ii) has
      paid, withheld and reported all amounts required by Law or by agreement to
      be
      paid in respect of or withheld and reported from the wages, salaries and other
      payment to employees; (iii) is not liable for any arrears of wages or any
      Taxes or any penalty relating thereto; and (iv) is not liable for any
      payment to any trust or other fund relating to Company Plans or to any
      Governmental Body with respect to unemployment compensation benefits, social
      security or similar types of benefits mandated by Law for employees (other
      than
      routine payments to be made in the Ordinary Course of Business).

     

    5.16  Litigation.
      Except as set forth on Schedule
      5.16,
      there are no Legal Proceedings pending or, to the Actual Knowledge of the
      Company, threatened against the Company (or its officers, directors, employees
      or agents (while acting as an agent of the Company)) or the Company’s assets,
      operations or personnel before any Governmental Body. Except as set forth on
      Schedule 5.16,
      the Company is not subject to any Order, and the Company is not in breach or
      violation of any Order. 

     

    5.17  Compliance
      with Laws; Permits.

     

    (a)  The
      Company is in compliance with all Laws of any Governmental Body applicable
      to
      its business or operations, except where the failure to be in compliance would
      not result
      in
      Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate.

     

    (b)  The
      Company has not received any written notice of or been charged with the
      violation of any Laws, except where such violation would not result
      in
      Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate.

     

    (c)  The
      Company currently has all Permits which are required for the operation of their
      respective businesses as presently conducted, other than those the failure
      of
      which to possess would not result
      in
      Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate. The Company is not in default or violation (and no event has occurred
      which, with notice or the lapse of time or both, would constitute a default
      or
      violation) of any term, condition or provision of any Permit to which it is
      a
      party, except where such default or violation would not result
      in
      Liabilities or Losses in excess of $75,000 individually or $150,000 in the
      aggregate.

     

    5.18  Environmental
      Matters.
      Except as set forth on Schedule 5.18
      hereto:

     

    (a)  the
      operations of the Company are in material compliance with all applicable
      Environmental Laws, which compliance includes obtaining, maintaining and
      complying in all material respects with any Permits required under all
      applicable Environmental Laws necessary to operate its business (“Environmental
      Permits”);

     

    (b)  the
      Environmental Permits are valid and in full force and effect, and are
      transferable;

     

    (c)  the
      Company is not subject to any pending, or to the Actual Knowledge of the
      Company, threatened claim alleging that the Company may be in violation of
      any
      Environmental Law or any Environmental Permit or may have any Liability under
      any Environmental Law;

     

    (d)  there
      are no pending or, to the Actual Knowledge of the Company, threatened
      investigations of the business of the Company, or any currently or previously
      owned or, to the Actual Knowledge of the Company, leased property of the Company
      under Environmental Laws, which would reasonably be expected to result in the
      Company incurring any material liability pursuant to any Environmental
      Law;

     

    (e)  No
      Hazardous Material has been Released by the Company, at, on or under the Real
      Property as to which Remedial Action is required under any Environmental Law
      within the past 3 years or, to the Actual Knowledge of the Company, at any
      time
      prior thereto;

     

    (f)  the
      Company has not received any notice of any private, administrative or judicial
      action, or notice of any intended private, administrative or judicial action
      relating to the presence or alleged presence of Hazardous Material in, under,
      upon or emanating from any of the real property now or during the 3 years prior
      to the Closing Date owned or leased by the Company; and

     

    (g)  there
      are no environmental audits or investigation reports conducted within the last
      5
      years in the possession of the Company relating to the Real Property or any
      Company operations thereon which have not been previously provided to the
      Purchaser.

     

    5.19  Suppliers.
      Since the Balance Sheet Date, none of the 10 largest suppliers of bedding
      products to the Company, as measured by the dollar amount of purchases thereby
      during fiscal year 2005, has terminated its relationship with the Company or
      materially reduced or changed the pricing or other terms of its business with
      the Company and no such supplier has notified the Company in writing that it
      intends to terminate or materially reduce or change the pricing or other terms
      of its business with the Company.

     

    5.20  Financial
      Advisors.
      No Person has acted, directly or indirectly, as a broker, finder or financial
      advisor for Holdings or the Company in connection with the transactions
      contemplated by this Agreement and no such Person is entitled to any fee or
      commission or like payment from Purchaser in respect thereof.

     

    5.21  Insurance.
      Schedule
      5.21
      is a complete list of all insurance policies currently in effect, or with
      respect to “occurrence” policies, that were in effect during the 3 years prior
      to the date hereof, that relate to operation of the business, or cover the
      Real
      Property. Schedule 5.21
      summarizes the following information for each such policy: the name of the
      insurer, the type of risks insured, the deductible and limits of coverage and
      the annual premium. True and complete copies of such policies have been made
      available to the Purchaser. During the last three (3) years, no material
      insurance coverage of the Company has lapsed. The Company is not in default
      or
      breach with respect to any provision contained in any such insurance policies,
      nor has the Company failed to give any notice or to present any claim thereunder
      in due and timely fashion.

     

    5.22  Related
      Party Transactions.
      Schedule 5.22
      is an accurate list of the accounts and notes receivable of the Company from
      and
      advances to employees, former employees, officers, directors, shareholders
      and
      any Affiliate of the foregoing which have not been fully repaid (other than
      advances provided to employees in connection with the performance of their
      duties in the Ordinary Course of Business which do not exceed $5,000 in any
      one
      instance). Neither Holdings nor any of its Affiliates has entered into any
      transaction with or is a party to any agreement, lease or other instrument
      or
      arrangement, or as of the Closing Date is indebted to or is owed money by the
      Company that is not disclosed in the Financial Statements. Except as disclosed
      in the Financial Statements, neither Simmons nor any of its Subsidiaries owns
      any direct or indirect interest of any kind in, or controls or is a director,
      officer, employee, shareholder or partner of, or consultant or lender to or
      borrower from or has the right to participate in the profits of, any Person
      which is a competitor, supplier, customer, landlord, tenant, creditor or debtor
      of the Company.

     

    5.23  No
      Other Representations or Warranties; Schedules.
      Except for the representations and warranties contained in this Article V
      and Article
      VI
      (each as modified by the Schedules thereto), neither Simmons, Holdings, the
      Company nor any other Person makes any other express or implied representation
      or warranty with respect the Company or the transactions contemplated by this
      Agreement, and the Company disclaims any other representations or warranties,
      whether made by the Company, Holdings, Simmons or any of their respective
      Affiliates, officers, directors, employees, agents or representatives.
Except
      for the representations and warranties contained in Article
      V
      and Article
      VI hereof
      (each
      as modified by the Schedules thereto as supplemented or amended),
      the Company, Holdings and Simmons hereby disclaim all liability and
      responsibility for any representation, warranty, projection, forecast,
      statement, or information made, communicated, or furnished (orally or in
      writing) to Purchaser or its Affiliates or representatives (including any
      opinion, information, projection, or advice that may have been or may be
      provided to Purchaser by any director, officer, employee, agent, consultant,
      or
      representative of the Company or any of their respective Affiliates). The
      Company, Holdings and Simmons make no representations or warranties to Purchaser
      regarding the probable success or profitability of the Company.

     

    ARTICLE
      VI  

     

    


     

    REPRESENTATIONS
      AND WARRANTIES OF HOLDINGS AND SIMMONS

     

    Holdings
      and Simmons hereby represent and warrant to Purchaser that:

     

    6.1  Organization
      and Good Standing.
      Each of Holdings and Simmons is a corporation duly organized, validly existing
      and in good standing under the laws of the State of Delaware and each has all
      requisite corporate power and authority to own, lease and operate its respective
      properties and to carry on its respective business.

     

    6.2  Authorization
      of Agreement.
      Each of Holdings and Simmons has all requisite corporate power, authority and
      legal capacity to execute and deliver this Agreement and each other agreement,
      document, or instrument or certificate contemplated by this Agreement or to
      be
      executed by Holdings and Simmons in connection with the consummation of the
      transactions contemplated by this Agreement (together with this Agreement,
      the
“Simmons
      Documents”),
      and to consummate the transactions contemplated hereby and thereby. The
      execution and delivery of this Agreement and each of the Simmons Documents
      and
      the consummation of the transactions contemplated hereby and thereby have been
      duly authorized by all required corporate action on the part of Holdings and
      Simmons. This Agreement has been, and each of the Simmons Documents will be
      at
      or prior to the Closing, duly and validly executed and delivered by Holdings
      and
      Simmons, and (assuming the due authorization, execution and delivery by the
      other parties hereto and thereto) this Agreement constitutes, and each Simmons
      Document, when so executed and delivered will constitute, the legal, valid
      and
      binding obligation of Holdings and Simmons, enforceable against Holdings and
      Simmons in accordance with its terms, subject to applicable bankruptcy,
      insolvency, reorganization, moratorium and similar laws affecting creditors’
rights and remedies generally, and subject, as to enforceability, to general
      principles of equity, including principles of commercial reasonableness, good
      faith and fair dealing (regardless of whether enforcement is sought in a
      proceeding at law or in equity).

     

    6.3  Conflicts;
      Consents of Third Parties.
      Except as set forth on Schedule
      6.3:

     

    (a)  None
      of the execution and delivery by Holdings and Simmons of this Agreement or
      the
      Simmons Documents, the consummation of the transactions contemplated hereby
      or
      thereby, or compliance by Holdings and Simmons with any of the provisions hereof
      or thereof will conflict with, or result in any violation of or default (with
      or
      without notice or lapse of time, or both) under, or give rise to a right of
      termination or cancellation under, any provision of (i) the respective
      certificates of incorporation and by-laws (or other organizational and governing
      documents) of Holdings and Simmons; (ii) any Contract, or Permit to which
      Holdings or Simmons is a party or by which any of the properties or assets
      of
      Holdings or Simmons are bound; (iii) any Order of any Governmental Body
      applicable to Holdings or Simmons or by which any of the respective properties
      or assets of Holdings or Simmons are bound; or (iv) any applicable
      Law.

     

    (b)  No
      consent, waiver, approval, Order, Permit or authorization of, or declaration
      or
      filing with, or notification to, any Person or Governmental Body is
      required on the part of Holdings or Simmons in connection with the execution
      and
      delivery of this Agreement or the Simmons Documents, or the compliance by
      Holdings and Simmons with any of the provisions hereof or thereof, the
      consummation of the transactions contemplated hereby, except for (A) compliance
      with the applicable requirements of the HSR Act and (B) for such other consents,
      waivers, approvals, Orders, permits or authorizations the failure of which
      to
      obtain would not have a material adverse effect on Holdings’ or Simmons’ ability
      to consummate the transactions contemplated hereby.

     

    6.4  Ownership
      and Transfer of Units.
      Holdings is the record and beneficial owner of the Shares, and as of the Closing
      Date will be the owner of the Units, free and clear of any and all Liens.
      Holdings has the corporate power and authority to sell, transfer, assign and
      deliver such Units as provided in this Agreement, and such delivery will convey
      to Purchaser good and marketable title to such Units, free and clear of any
      and
      all Liens.

     

    6.5  Litigation.
      There are no Legal Proceedings pending or, to the Actual Knowledge of Holdings
      and Simmons threatened that are reasonably likely to prohibit or restrain the
      ability of Holdings or Simmons to enter into this Agreement or consummate the
      transactions contemplated hereby.

     

    6.6  Financial
      Advisors.
      No Person has acted, directly or indirectly, as a broker, finder or financial
      advisor for Holdings or Simmons in connection with the transactions contemplated
      by this Agreement and no Person is entitled to any fee or commission or like
      payment in respect thereof.

     

    ARTICLE
      VII  

     

    


     

    REPRESENTATIONS
      AND WARRANTIES OF PURCHASER

     

    Purchaser
      hereby represents and warrants to Holdings and Simmons that:

     

    7.1  Organization
      and Good Standing.
      Purchaser is a limited liability company duly formed, validly existing and
      in
      good standing under the laws of the State of California and has all requisite
      limited liability power and authority to own, lease and operate properties
      and
      carry on its business.

     

    7.2  Authorization
      of Agreement.
      Purchaser has full limited liability company power and authority to execute
      and
      deliver this Agreement and each other agreement, document, instrument or
      certificate contemplated by this Agreement or to be executed by Purchaser in
      connection with the consummation of the transactions contemplated hereby and
      thereby (the “Purchaser
      Documents”),
      and to consummate the transactions contemplated hereby and thereby. The
      execution, delivery and performance by Purchaser of this Agreement and each
      Purchaser Document have been duly authorized by all necessary limited liability
      company, action on behalf of Purchaser. This Agreement has been, and each
      Purchaser Document will be at or prior to the Closing, duly executed and
      delivered by Purchaser and (assuming the due authorization, execution and
      delivery by the other parties hereto and thereto) this Agreement constitutes,
      and each Purchaser Document when so executed and delivered will constitute,
      the
      legal, valid and binding obligation of Purchaser, enforceable against Purchaser
      in accordance with its terms, subject to applicable bankruptcy, insolvency,
      reorganization, moratorium and similar laws affecting creditors’ rights and
      remedies generally, and subject, as to enforceability, to general principles
      of
      equity, including principles of commercial reasonableness, good faith and fair
      dealing (regardless of whether enforcement is sought in a proceeding at law
      or
      in equity).

     

    7.3  Conflicts;
      Consents of Third Parties.

     

    (a)  Except
      as set forth on Schedule 7.3(a)
      hereto, none of the execution and delivery by Purchaser of this Agreement or
      the
      Purchaser Documents, the consummation of the transactions contemplated hereby
      or
      thereby, or the compliance by Purchaser with any of the provisions hereof or
      thereof will conflict with, or result in any violation of or default (with
      or
      without notice or lapse of time, or both) under, or give rise to a right of
      termination or cancellation under, any provision of (i) the organizational
      or governing documents of Purchaser; (ii) any Contract or Permit to which
      Purchaser is a party or by which Purchaser or its properties or assets are
      bound; (iii) any Order of any Governmental Body applicable to Purchaser or
      by
      which any of the properties or assets of Purchaser are bound; or (iv) any
      applicable Law.

     

    (b)  No
      consent, waiver, approval, Order, Permit or authorization of, or declaration
      or
      filing with, or notification to, any Person or Governmental Body is required
      on
      the part of Purchaser in connection with the execution and delivery of this
      Agreement or the Purchaser Documents, the compliance by Purchaser with any
      of
      the provisions hereof or thereof, the consummation of the transactions
      contemplated hereby or the taking by Purchaser of any other action contemplated
      hereby, except for compliance with the applicable requirements of the HSR
      Act.

     

    7.4  Litigation.
      There are no Legal Proceedings pending or, to the actual knowledge of Purchaser
      (without any docket or other electronic search having been conducted),
      threatened that are reasonably likely to prohibit or restrain the ability of
      Purchaser to enter into this Agreement or consummate the transactions
      contemplated hereby.

     

    7.5  Investment
      Intention.
      Purchaser is acquiring the Units for its own account, for investment purposes
      only and not with a view to the distribution (as such term is used in
      Section 2(11) of the Securities Act of 1933, as amended (the “Securities
      Act”)
      thereof. Purchaser understands that the Units have not been registered under
      the
      Securities Act and cannot be sold unless subsequently registered under the
      Securities Act or an exemption from such registration is available.

     

    7.6  Financial
      Advisors.
      No Person has acted, directly or indirectly, as a broker, finder or financial
      advisor for Purchaser in connection with the transactions contemplated by this
      Agreement and no Person is entitled to any fee or commission or like payment
      in
      respect thereof.

     

    7.7  Financing.
      Schedule
      7.7
      sets forth complete and correct copies of a commitment letter from Wells Fargo
      (the “Financing
      Commitment”)
      for the debt financing to be used in connection with the transactions
      contemplated hereby (the “Financing”).
      The amount of the Financing, if obtained, together with financing to be provided
      by Purchaser and its Affiliates, will provide sufficient funds for Purchaser
      to
      consummate the transactions contemplated by this Agreement.

     

    7.8  Condition
      of the Business.
      Notwithstanding anything contained in this Agreement to the contrary, Purchaser
      acknowledges and agrees that neither the Company, Holdings nor Simmons is making
      any representations or warranties whatsoever, express or implied, beyond those
      expressly given by the Company, Holdings and Simmons, as the case may be, in
      Article
      V
      and Article
      VI,
      respectively (as modified by the Schedules hereto as supplemented or amended).
      Any claims Purchaser may have for breach of representation or warranty shall
      be
      based solely on the representations and warranties of the Company, Holdings
      or
      Simmons set forth in Article
      V
      or Article
      VI,
      respectively (as modified by the Schedules hereto as supplemented or amended).
      Purchaser further represents that none of the Company, Holdings, Simmons or
      any
      of their respective Affiliates nor any other Person has made any representation
      or warranty, express or implied, as to the accuracy or completeness of any
      information regarding the Company, Holdings, Simmons or the transactions
      contemplated by this Agreement not expressly set forth in this Agreement, and
      none of the Company, Holdings, Simmons any of their respective Affiliates or
      any
      other Person will have or be subject to any liability to Purchaser or any other
      Person resulting from the distribution to Purchaser, its Affiliates or their
      representatives or Purchaser’s or its Affiliates use of, any such information,
      or other publications or data room information provided to Purchaser, its
      Affiliates or their representatives, or any other document or information in
      any
      form provided to Purchaser, its Affiliates or their representatives in
      connection with the sale of the Company and the transactions contemplated
      hereby. Purchaser acknowledges that it has conducted to its satisfaction, its
      own independent investigation of the condition, operations and business of
      the
      Company. 

     

    ARTICLE
      VIII  

     

    


     

    COVENANTS

     

    8.1  Access
      to Information.
      Prior to the Closing, Purchaser shall be entitled, through its officers,
      employees and representatives (including its legal advisors and accountants),
      to
      make such investigation of the properties, businesses and operations of the
      Company, including an audit of the Company’s inventory, and such examination of
      the books and records of the Company as it reasonably requests and to make
      extracts and copies of such books and records. Any such investigation and
      examination shall be conducted during regular business hours upon reasonable
      advance notice and under reasonable circumstances and shall be subject to
      restrictions under applicable Law. The Company shall cause the officers,
      employees, consultants, agents, accountants, attorneys and other representatives
      of the Company to cooperate with Purchaser and its representatives in connection
      with such investigation and examination, and Purchaser and its representatives
      shall cooperate with the Company and its representatives and shall use their
      reasonable efforts to minimize any disruption to the business.

     

    8.2  Conduct
      of the Business Pending the Closing.

     

    (a)  Prior
      to the Closing, except (I) as set forth on Schedule
      8.2,
      (II) as required by applicable Law, (III) as otherwise contemplated by this
      Agreement or (IV) with the prior written consent of Purchaser, the Company
      shall:

     

    (i)  conduct
      the business of the Company only in the Ordinary Course of Business and not
      introduce any new method, or discontinue any existing method, of operation
      or
      accounting;

     

    (ii)  use
      its commercially reasonable efforts to (A) preserve the present business
      operations, organization and goodwill of the Company, and (B) preserve the
      present relationships with suppliers of the Company;

     

    (iii)  maintain
      its properties and facilities, including those held under the Real Property
      Leases, in as good working order and condition as at present, ordinary wear
      and
      tear excepted;

     

    (iv)  file
      on a timely basis (or properly file for extensions) all notices, reports or
      other filings required to be filed with or reported to any Governmental Body
      with respect to the continuing operations of the Company; and

     

    (v)  perform
      in all material respects in the Ordinary Course of Business, its obligations
      under all Material Contracts and comply with the terms and conditions of all
      licenses and Permits and all applicable Laws.

     

    (b)  Except
      (I) as set forth on Schedule 8.2,
      (II) as required by applicable Law, (III) as otherwise contemplated by this
      Agreement (including the Conversion) or (IV) with the prior written consent
      of
      Purchaser (which consent shall not be unreasonably withheld, delayed or
      conditioned), the Company shall not:

     

    (i)  declare,
      set aside, make or pay any dividend or other distribution (other than the
      distribution of Excess Cash to Holdings as contemplated herein or the payment
      of
      inter-company Liabilities) in respect of the capital stock of the Company or
      repurchase, redeem or otherwise acquire any outstanding securities of, or other
      ownership interests in, the Company;

     

    (ii)  transfer,
      issue, sell or dispose of any shares of capital stock or other securities of
      the
      Company or grant options, warrants, calls or other rights to purchase or
      otherwise acquire shares of the capital stock or other securities of the
      Company;

     

    (iii)  effect
      any recapitalization, reclassification or like change in the capitalization
      of
      the Company;

     

    (iv)  amend
      the certificate of incorporation or by-laws of the Company;

     

    (v)  other
      than as required by Law or any written Contract or Company Plan (as disclosed
      in
Schedule 5.14(a))
      (A)  increase the annual level of compensation of any director, officer,
      employee, consultant or agent of the Company other than in the Ordinary Course
      of Business, (B) grant any unusual or extraordinary bonus, benefit or other
      direct or indirect compensation to any director, officer, employee, consultant
      or agent, (C) materially increase the coverage or benefits available under
      any (or create any new) Company Plan or (D) enter into any employment,
      deferred compensation, severance, consulting, non-competition or similar
      agreement (or amend any such agreement) to which the Company is a party or
      involving a director or executive officer of the Company;

     

    (vi)  subject
      to any Lien, any of the properties or assets (whether tangible or intangible)
      of
      the Company, except for Permitted Exceptions;

     

    (vii)  acquire
      any properties, rights or assets or sell, assign, license, transfer, convey,
      lease or otherwise dispose of any of the properties, rights or assets of the
      Company (except as contemplated by (i) above or pursuant to an existing Contract
      for fair consideration in the Ordinary Course of Business or for the purpose
      of
      disposing of obsolete or worthless assets) to any Person, including Simmons,
      Holdings or any Affiliate thereof;

     

    (viii)  modify,
      amend, terminate any of the existing Real Property Leases or enter into any
      construction contracts with respect to improvements or alterations with respect
      to any of the Real Property Leases for an amount in excess of
      $75,000;

     

    (ix)  cancel
      or compromise any material debt or claim or waive or release any right of the
      Company;

     

    (x)  enter
      into, modify or terminate any labor or collective bargaining agreement of the
      Company;

     

    (xi)  permit
      the Company to enter into or agree to enter into any merger or consolidation
      with any Person;

     

    (xii)  make
      or rescind any material election relating to Taxes, or settle or compromise
      any
      material claim, action, suit, litigation, proceeding, arbitration,
      investigation, audit or controversy relating to Taxes; 

     

    (xiii)  issue,
      create, incur, assume, guarantee, endorse or otherwise become liable or
      responsible with respect to (whether directly, contingently or otherwise) any
      indebtedness for borrowed money (in excess of such amount set forth on the
      Balance Sheet);

     

    (xiv)  enter
      into any transaction or Contract relating primarily to the Company involving
      obligations or payments in excess of $75,000 in any year; or

     

    (xv)  agree
      to do anything prohibited by this Section
      8.2.

     

    8.3  Consents.
      The Purchaser and the Company shall use their commercially reasonable efforts,
      and Simmons and Holdings shall cooperate with Purchaser and the Company, to
      obtain at the earliest practicable date all consents and approvals required
      to
      consummate the transactions contemplated by this Agreement, including, without
      limitation, the consents and approvals referred to in Sections
      5.3(b)
      and 7.3(b)
      hereof (and Simmons shall use its commercially reasonable efforts to obtain
      at
      the earliest practicable date all consents under Section
      6.3(b));
      provided,
      however,
      that no party shall be obligated to pay any consideration to any third party
      from whom consent or approval is requested except for any payment which is
      required to be made under the terms of any Contract. In addition,
      the Company will request from, and use good faith efforts to obtain, an
      estoppel certificate (“Estoppel
      Certificates”)
      from the landlords under all Real Estate Leases to which the Company is a
      party in the form attached hereto as Exhibit B.

     

    8.4  Regulatory
      Approvals.
      Each of Purchaser, the Company and Holdings (if necessary) shall (a) make or
      cause to be made all filings required of each of them or any of their respective
      Affiliates under the HSR Act or the Sherman Act, as amended, the Clayton Act,
      as
      amended, the Federal Trade Commission Act, as amended, and any other United
      States federal or state or foreign statutes, rules, regulations, orders,
      decrees, administrative or judicial doctrines or other laws that are designed
      to
      prohibit, restrict or regulate actions having the purpose or effect of
      monopolization or restraint of trade (collectively, the “Antitrust
      Laws”)
      with respect to the transactions contemplated hereby as promptly as practicable
      and, in any event, within one (1) Business Day after the date of this Agreement
      in the case of all filings required under the HSR Act (and such filing shall
      request early termination of the waiting period under the HSR Act), (b) comply
      at the earliest practicable date with any request under the HSR Act or other
      Antitrust Laws for additional information, documents, or other materials
      received by each of them or any of their respective subsidiaries or Affiliates
      from the FTC, the Antitrust Division or any other Governmental Body in respect
      of such filings or such transactions, and (c) cooperate with each other in
      connection with any such filing (including, to the extent permitted by
      applicable law, providing copies of all such documents to the non-filing parties
      prior to filing and considering all reasonable additions, deletions or changes
      suggested in connection therewith) and in connection with resolving any
      investigation or other inquiry of any of the FTC, the Antitrust Division or
      other Governmental Body under any Antitrust Laws with respect to any such filing
      or any such transaction. Each such party shall use its reasonable best efforts
      to furnish to each other all information required for any application or other
      filing to be made pursuant to any applicable law in connection with the
      transactions contemplated by this Agreement. Each such party shall promptly
      inform the other parties hereto of any oral communication with, and provide
      copies of written communications with, any Governmental Body regarding any
      such
      filings or any such transaction. No party hereto shall independently participate
      in any formal meeting with any Governmental Body in respect of any such filings,
      investigation, or other inquiry without giving the other parties hereto prior
      notice of the meeting and, to the extent permitted by such Governmental Body,
      the opportunity to attend and/or participate. Subject to applicable Law, the
      parties hereto will consult and cooperate with one another in connection with
      any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
      and proposals made or submitted by or on behalf of any party hereto relating
      to
      proceedings under the HSR Act or other Antitrust Laws. Any party may, as it
      deems advisable and necessary, reasonably designate any competitively sensitive
      material provided to the other parties under this Section
      8.4
      as “outside
      counsel only.”
      Such materials and the information contained therein shall be given only to
      the
      outside legal counsel of the recipient and will not be disclosed by such outside
      counsel to employees, officers, or directors of the recipient, unless express
      written permission is obtained in advance from the source of the
      materials.

     

    8.5  Further
      Assurances.
      Subject to, and not in limitation of, Section
      8.4,
      each of Purchaser, Simmons and the Company shall use its commercially reasonable
      efforts to (i) take all actions necessary or appropriate to consummate the
      transactions contemplated by this Agreement and (ii) cause the fulfillment
      at
      the earliest practicable date of all of the conditions to their respective
      obligations to consummate the transactions contemplated by this
      Agreement.

     

    8.6  Confidentiality.
      Purchaser acknowledges that the information provided to it in connection with
      this Agreement and the transactions contemplated hereby is subject to the terms
      of the confidentiality agreement between Sleep Train, Inc. and the Company
      dated
      June 7, 2006 (the “Confidentiality
      Agreement”),
      the terms of which are incorporated herein by reference.

     

    8.7  Preservation
      of Records.
      Holdings, Simmons and Purchaser agree that each of them shall preserve and
      keep
      the records held by them or their Affiliates relating to the business of the
      Company for a period of 7 years from the Closing Date and shall make such
      records and personnel available to the other as may be reasonably required
      by
      such party in connection with, among other things, any insurance claims by,
      Legal Proceedings or Tax audits against or governmental investigations of
      Simmons, Holdings or Purchaser or any of their Affiliates or in order to enable
      Holdings, Simmons or Purchaser to comply with their respective obligations
      under
      this Agreement and each other agreement, document or instrument contemplated
      hereby or thereby. In the event Holdings, Simmons or Purchaser wishes the other
      party to continue to maintain such records after that time, such party shall
      first give 90 days prior written notice to the other and such party shall have
      the right at its option and expense, upon prior written notice given to such
      other party within that 90 day period, to take possession of the records within
      180 days after the date of such notice.

     

    8.8  Publicity.

     

    (a)  None
      of Holdings, Simmons, the Company, Purchaser or their Affiliates shall issue
      any
      press release or public announcement concerning this Agreement or the
      transactions contemplated hereby without obtaining the prior written approval
      of
      the other party hereto, which approval will not be unreasonably withheld or
      delayed, unless, in the sole judgment of Holdings, Simmons, the Company or
      Purchaser, as applicable, disclosure is otherwise required by applicable Law
      or
      by the applicable rules of any stock exchange on which Holdings, Simmons, the
      Company or Purchaser lists securities, provided that, to the extent required
      by
      applicable Law, the party intending to make such release shall use its
      commercially reasonable efforts consistent with such applicable Law to consult
      with the other party with respect to the timing and content
      thereof.

     

    (b)  Each
      of Purchaser, the Company, Simmons, and Holdings acknowledge and agree that
      Simmons shall have the right to file this Agreement (without schedules and
      exhibits) with the Securities and Exchange Commission, making the Agreement
      publicly available, and each party hereto further shall have the right to make
      such other public disclosures to the extent required by Law.

     

    8.9  Employee
      Benefits.

     

    (a)  Purchaser
      intends to continue in effect the Company Plans on and after the Closing Date
      through the respective insurance coverage periods thereof (or, if terminated
      early, replace any such Company Plan with a reasonably comparable plan) on
      behalf of each employee of the Company who continues in the employment of the
      Company or its Affiliates (a “Continuing
      Employee”).
      Purchaser hereby agrees to cause the Company to make a payment at the end of
      the
      Company’s fiscal year to the Company’s 401(k) Profit Sharing Plan in an amount
      at least equal to the amount accrued by the Company as of the Closing Date
      and
      included in the Actual Closing Date Working Capital.

     

    (b)  If
      Company Plans are replaced as set forth above, then for purposes of eligibility
      and vesting (but not benefit accrual) under the employee benefit plans of
      Purchaser or its Affiliates providing benefits to Continuing Employees (the
      “Purchaser
      Plans”),
      Purchaser shall credit each Continuing Employee with his or her years of service
      with the Company and any predecessor entities, to the same extent as such
      Continuing Employee was entitled immediately prior to the Closing to credit
      for
      such service under any similar Company Plan. To the extent not prohibited by
      the
      Purchaser Plans, Purchaser shall not deny Continuing Employees coverage on
      the
      basis of pre-existing conditions (to the extent provided under an applicable
      Company Plan) and shall credit such Continuing Employees for any deductibles
      and
      out-of-pocket expenses paid in the year of initial participation in the
      Purchaser Plans.

     

    8.10  Supplementation
      and Amendment of Schedules.
      From time to time prior to the Closing, the Company shall have the right to
      supplement or amend the Schedules with respect to any matter hereafter arising
      or discovered after the delivery of the Schedules pursuant to this Agreement
      (the “Supplemental
      Material”).
      No Supplemental Material shall have any effect on the satisfaction of the
      condition to closing set forth in Section
      9.1(a).
      If the Supplemental Material discloses facts that would constitute (in the
      absence of any amendment to the Schedules for such Supplemental Material) a
      breach of the Company, Holdings or Simmons’ representations and warranties
      hereunder and such breach would have a Material Adverse Effect, the Company
      shall have 15 days to cure any such breach, and if not cured within such 15-day
      period, the Purchaser may terminate this Agreement by delivering a termination
      notice to the Company within 10 days after expiration of the 15-day cure period.
      The termination notice must specify the representation or warranty breached,
      identify the specific facts in the Supplemental Material that constitute the
      breach, and describe why the breach would have a Material Adverse Effect. If
      the
      Agreement shall not have been terminated during such 10-day period, the
      Purchaser shall have waived the right to terminate the Agreement based on such
      Supplemental Material.

     

    8.11  Non-Competition
      by Holdings, Simmons and their Subsidiaries.
      In consideration of the benefits of this Agreement to Holdings and Simmons
      and
      in order to induce Purchaser to enter into this Agreement, Holdings and Simmons
      hereby covenant and agree as follows:

     

    (a)  from
      and after the Closing and until the earlier to occur of (1) the fourth
      anniversary of the Closing Date and (2) the date upon which a Simmons Sale
      (as
      defined below) occurs, Holdings, Simmons and their Subsidiaries shall not,
      directly or indirectly, as a partner, stockholder, proprietor, joint venturer,
      or investor, and whether for the benefit of Holdings, Simmons, any of their
      Subsidiaries, or any other Person: engage in, or own, manage, operate or
      control, any business or entity which engages anywhere in the States of
      Washington and Oregon (the “Territory”)
      in the business of the retail sale of mattresses and bedding products;
provided,
      however,
      that nothing herein shall prohibit Holdings, Simmons or their Subsidiaries
      from
      (i) selling mattresses to other dealers, provided
      that the terms of any such sales shall not breach the Dealer Incentive
      Agreement; or (ii) owning, in the aggregate, not more than two percent (2%)
      of any class of securities of a publicly traded entity in any of the foregoing
      lines of business so long as neither Holdings, Simmons nor any of their
      Subsidiaries participates in any way in the management, operation or control
      of
      such entity; or (iii) operating discount outlet stores solely for the sale
      of
      (A) Simmons’ salvage, discontinued, returned or excess products or floor
      samples, (B) products of licensees of Simmons or its Affiliates, and (iii)
      inventory from dealers which Simmons agrees to sell on such dealers’ behalf in
      order to create space at a dealer’s location for Simmons’ products; provided
      that such outlet stores will be limited to those in operation as of the Closing
      Date plus
      one additional outlet store in each of the States of Oregon and Washington
      (y)
      of comparable floor space as any pre-existing outlet store and (x) in a
      comparable location as Simmons’ existing outlet stores; or (iv) entering into a
      retail business dedicated exclusively to Luxury Products (as defined below)
      distributed by Windsor Bedding Co., LLC, a Subsidiary of Simmons, or a successor
      company or Affiliates; or (v) selling products directly to consumers via the
      internet or permitting dealers to sell products directly to consumers via the
      internet; or (vi) ownership in a dealer or retail store pursuant to the
      foreclosure of any pledge of interests in such dealer or retail store to secure
      any obligations owed to Simmons or any of its Subsidiaries; provided that,
      Simmons shall use commercially reasonable efforts to divest itself of any such
      dealer, stores or assets and shall provide Purchaser a right of first refusal
      to
      purchase such interests. 

     

    As
      used herein, “Luxury
      Products”
      means mattresses and bedding-related products where the mattresses are offered
      or sold at price points higher than the top-of-the-line products offered by
      the
      Company or Simmons’ then current top 10 dealers (by volume) (i.e. it being
      understood that “Luxury
      Products”
      excludes any product or line of products being sold by the Company as of the
      Closing Date).

    


    As
      used herein, “Simmons
      Sale”
      means solely: (1) a sale of all, or substantially all, of the assets of Simmons
      and its Subsidiaries, taken as a whole, to an independent third party, or (2)
      the acquisition by a person or group of related persons (other than the existing
      stockholders of Simmons) of more than 50% of the voting securities of Simmons,
      in each case in which the acquirer shall have been, at the time of such
      acquisition and throughout the 6-month period prior thereto, already engaged
      in
      the retail sale of mattresses or bedding products in the States of Oregon and
      Washington.

    


    (b)  Holdings
      and Simmons acknowledge that, given the nature of the business of Purchaser
      and
      the Company, the covenants contained in this Section
      8.11
      contain reasonable limitations as to time, geographical area and scope of
      activity to be restrained, and do not impose a greater restraint than is
      necessary to protect and preserve for the benefit of Purchaser the goodwill
      of
      the Company and to protect the legitimate business interests of Purchaser.
      If,
      however, this Section
      8.11
      is determined by any court of competent jurisdiction to be unenforceable by
      reason of its extending for too long a period of time or over too large a
      geographic area or by reason of its being too extensive in any other respect
      or
      for any other reason it will be interpreted to extend only over the longest
      period of time for which it may be enforceable and/or over the largest
      geographical area as to which it may be enforceable and/or to the maximum extent
      in all other aspects as to which it may be enforceable, all as determined by
      such court and in such action. Holdings and Simmons agree that Purchaser’s
      remedies at law for any breach or threat of breach by Holdings or Simmons of
      the
      provisions of this Section
      8.11
      may be inadequate, and that Purchaser shall be entitled to seek an injunction
      or
      injunctions, without the necessity for the posting of a bond or other collateral
      security, to prevent breaches of the provisions of this Section
      8.11
      and to seek enforcement specifically the terms and provisions
      hereof.

     

    8.12  Insurance.
      

     

    (a)  Coverage
      of the Company under all insurance policies maintained by Simmons shall cease
      for post-Closing incidents, acts, events or occurrences. From and after the
      Closing, Purchaser will be responsible for obtaining and maintaining all
      insurance coverages for the Company for post-closing incidents in their own
      right. All current policies maintained by Simmons under which the Company has
      coverage, which policies are identified as “Shared Policies” on Schedule
      5.21
      hereto (the “Shared
      Policies”)
      will be retained by Simmons, together with all rights, benefits and privileges
      thereunder (including the right to receive any and all return premiums with
      respect thereto). From and after the Closing, the Company will have the right
      to
      assert claims for any loss, liability or damage with respect to the Company
      (i)
      under Shared Policies with third party insurers that are “occurrence basis”
insurance policies (“Occurrence
      Basis Policies”)
      arising out of insured incidents occurring from the date coverage thereunder
      first commenced until the Closing; (ii) under Shared Policies with third party
      insurers that are insurance policies written on a “claims made” basis
      (“Claims
      Made Policies”)
      arising out of insured incidents occurring from the date coverage thereunder
      first commenced until the Closing; and (iii) Simmons will keep the Company,
      its
      officers, directors and employees as named insureds under Claims Made Policies
      (Director’s and Officers, Employment Practices and Fiduciary Liability) for
      claims arising out of insured incidents occurring from the date of coverage
      thereunder first commenced until the Closing and for a discovery period of
      five
      (5) years post-Closing, or comparable policies with the same or substantially
      similar terms and conditions. Notwithstanding the foregoing, it is understood
      and agreed that the retention by the Company of the benefit of Occurrence Basis
      Policies or Claims Made Policies shall, to the extent such coverage also exists
      with respect to Simmons or any of its current or former Affiliates (other than
      the Company), be without prejudice to the rights of Simmons or such other
      current or former Affiliates (other than the Company) to continue to retain
      the
      benefit of such policies at and after the Closing Date as such policies were
      in
      effect on the date prior to the Closing Date. Simmons’ and Holdings’ obligation
      to use reasonable best efforts to assist the Company and Purchaser in asserting
      claims under applicable Shared Policies will include using commercially
      reasonable efforts in assisting the Company and Purchaser to establish their
      right to coverage under such Shared Policies. 

     

    (b)  Purchaser,
      the Company and Simmons agree that any claims made under the insurance policies
      referred to herein in respect of the Company and as to which coverage remains
      available after Closing shall be administered and collected by Simmons (or
      by a
      claims handler appointed by Simmons) on behalf of Purchaser and the Company.
      Purchaser and the Company shall cooperate fully with Simmons to enable Simmons
      to comply with the requirements of the relevant insurer, and Purchaser and
      the
      Company shall provide such information and assistance as Simmons may reasonably
      request in connection with any such claim. Any monies received by Simmons as
      a
      result of such claims shall be paid over to the Company or Purchaser, net (to
      the extent such monies are not being paid over to Purchaser pursuant to Simmons’
indemnity obligations under Article X) of all reasonable costs and expenses
      of
      recovery (including, without limitation, all reasonable handling and collection
      charges by any claims handler appointed by Simmons).

     

    8.13  Tax
      Matters.

     

    (a)  Simmons
      shall prepare or cause to be prepared and either the Company or Simmons, as
      appropriate, shall file all Tax Returns with respect to the Company for all
      taxable periods ending on or prior to the Closing Date (“Pre-Closing
      Periods”).
      Except as required by Law, without the prior written consent of Simmons (which
      consent shall not be unreasonably withheld), neither the Company, Purchaser
      nor
      any Affiliate of the Company or Purchaser shall file any amended Tax Return
      with
      respect to any Pre-Closing Period. To the extent permitted by applicable Law,
      the Company shall not carry back any Tax attribute to any such period. For
      the
      avoidance of doubt, (i) all management bonuses, severance payments, interest
      payments and deductible financing costs and expenses accrued or paid by the
      Company on or prior to the Closing Date shall be treated as incurred in a
      Pre-Closing Period or the pre-Closing portion of a Straddle Period, and (ii)
      all
      transactions outside of the ordinary course of business occurring after the
      Closing shall not be treated as occurring in a Pre-Closing Period or the
      pre-Closing portion of a Straddle Period. Purchaser shall prepare or cause
      to be
      prepared and file all Tax Returns with respect to the Company for all taxable
      periods that begin before and end after the Closing Date (“Straddle
      Periods”);
      provided
      that all such Tax Returns shall be prepared in manner that is consistent with
      the prior practice of the Company. Purchaser shall deliver to Simmons copies
      of
      each such Tax Return relating to Straddle Periods, along with a statement (a
      “Tax
      Statement”)
      showing the pre-Closing portion of any Tax Liability required to be paid with
      such Tax Return (computed in accordance with Section
      8.13(b)),
      at least 20 days prior to the due date for filing such Tax Return, and shall
      permit Simmons to review and comment on such Tax Return and Tax Statement prior
      to filing. Purchaser shall not file any such Tax Return relating to Straddle
      Periods without the prior written consent of Simmons (which shall not be
      unreasonably withheld or delayed). If the parties have not resolved any dispute
      relating to any such Tax Return prior to the due date for filing such Tax
      Return, then Purchaser shall file such Tax Return as prepared, but such filing
      shall not prejudice the rights of any party to pursue such dispute. If the
      parties cannot resolve the dispute then any disputed matter shall be submitted
      to the Arbiter for resolution, which resolution shall be binding on the parties.
      

     

    (b)  Simmons
      shall pay or cause to be paid all Taxes of the Company that are allocable to
      Pre-Closing Periods and the pre-Closing portion of Straddle Periods. With
      respect to a Straddle Period, the parties hereto will, to the extent permitted
      by applicable Law, elect with the relevant Taxing Authorities to treat for
      all
      purposes the Closing Date as the last day of a taxable period of the Company,
      and such period shall be treated as a Pre-Closing Period for purposes of this
      Agreement. In any case where applicable Law does not permit the Company to
      treat
      the Closing Date as of the last day of a taxable period, then for purposes
      of
      this Agreement, the portion of such Taxes that is attributable to the
      pre-Closing portion of a Straddle Period shall be (i) in the case of Taxes
      that
      are not based on income or gross receipts, the total amount of such Taxes for
      the period in question multiplied by a fraction, the numerator of which is
      the
      number of days in the period up to the Closing Date, and the denominator of
      which is the total number of days in the entire period in question, and
      (ii) in the case of Taxes that are based on income or gross receipts, the
      Taxes that would be due with respect to the period up to the Closing Date,
      if
      such period were a taxable period.

     

    (c)  Purchaser
      shall indemnify Simmons and Holdings for any Extra Taxes incurred by Simmons
      or
      Holdings. The term “Extra
      Taxes”
      shall mean the excess (on a fully grossed-up after-Tax basis), if any, of (A)
      any Taxes actually paid by Simmons or Holdings on the sale of all of the units
      of the Company pursuant to a transaction whereby the Company prior to the
      Closing effects a Conversion over (B) the actual amount of Taxes that would
      have
      been paid by Simmons or Holdings on the sale of all of the capital stock of
      the
      Company pursuant to a transaction in which the Company, in lieu of a Conversion,
      remained a corporation and an election under Section 338(h)(10) of the Code
      was
      made by the parties. If between the date of this Agreement and the Conversion
      (which shall occur one Business Day prior to the Closing Date) any of the
      parties (or any of their respective advisers) determines that Extra Taxes
      actually may be incurred by virtue of the Conversion, such party shall notify
      the other party promptly and the Purchaser may require a 338(h)(10) election
      be
      taken in lieu of a Conversion, in which event the Agreement will be revised
      accordingly. Simmons
      and Holdings shall take any reasonable action requested in writing by Purchaser,
      including taking a position on a Tax Return, to minimize the amount of Extra
      Taxes; provided
      that any such action that would have an adverse effect on either Simmons or
      Holdings in the reasonable good faith judgment of Simmons or Holdings shall
      be
      deemed not to constitute a reasonable action for purposes of this sentence.
      Purchaser
      shall have the right to review and comment on any Tax Return of Simmons or
      Holdings that reflects any Extra Taxes, and Simmons shall give good faith
      consideration to any such comments offered by Purchaser.

     

    (d)  Notwithstanding
      any other provisions hereof, if an audit or other proceeding is commenced,
      an
      adjustment is proposed, or any other claim is made by any Taxing Authority
      with
      respect to the Company (a “Tax
      Claim”)
      for a Pre-Closing Period or a Straddle Period, Purchaser shall (to the extent
      that it has been contacted by the Taxing Authority) promptly notify Simmons
      of
      such audit or other proceeding, proposed adjustment or claim. Simmons shall
      have
      the right to handle, defend, conduct and control any Tax Claim relating to
      a
      Pre-Closing Period. Simmons shall also have the right to compromise or settle
      any such Tax Claim for Pre-Closing Periods that it has the authority to control
      pursuant to the preceding sentence, provided any such settlement involving
      conduct or other equitable remedies shall be subject to Purchaser’s prior
      written approval; and provided further that, with respect to any Tax Claim
      involving Extra Taxes, (i) Simmons shall keep Purchaser reasonably informed
      and
      consult seriously and in good faith with Purchaser and its tax advisors with
      respect to any issue relating to such Extra Taxes, (ii) Simmons shall provide
      Purchaser with copies of all correspondence, notices and other written materials
      received from any Taxing Authorities and shall otherwise keep Purchaser and
      its
      tax advisors advised of significant developments in the Tax Claim with respect
      to such Extra Taxes and of significant communications involving representatives
      of the Taxing Authorities, and (iii) Simmons shall provide Purchaser with a
      copy
      of any written submission to be sent to a Taxing Authority relating to Extra
      Taxes prior to the submission thereof and shall give serious and good faith
      consideration to any comments or suggested revisions that Purchaser or its
      tax
      advisors may have with respect thereto. In the event Simmons settles or
      compromises any Tax Claim relating to a Pre-Closing Period which requires
      Purchaser to pay Extra Taxes without Purchaser’s consent (not to be unreasonably
      withheld), and Purchaser in good faith objects to the terms of such settlement
      or compromise with respect to the Extra Taxes, then Purchaser shall have the
      right to submit the matter to the Arbiter. The Arbiter shall determine within
      30
      days of the submission of the matter to it (which such determination shall
      be
      final and binding upon the parties) whether the settlement or compromise by
      Simmons with respect to Extra Taxes was reasonable with respect to the Extra
      Taxes that are as a result due. If the Arbiter determines that such settlement
      or compromise was not reasonable with respect to the Extra Taxes that are as
      a
      result due, then Purchaser shall have no obligation to pay the Extra Taxes.
      Where a Tax Claim relates to a Straddle Period, both Simmons and Purchaser
      shall
      equally represent the Company, and shall jointly consent to any compromise
      or
      settlement, which consents shall not be unreasonably withheld. To the extent
      that Simmons requires a power of attorney to represent the Company before a
      Taxing Authority, Purchaser, the Company or any of their Affiliates (as
      appropriate), promptly upon written request by Simmons, shall execute such
      powers or specific authorizations of representative capacity, including
      acknowledgment on such power or authorization of Simmons’s settlement authority
      described in this Section
      8.13(d).
      In the event of a conflict between the provisions of this Section
      8.13(d),
      on the one hand, and the provisions of Section 10.4,
      on the other, the provisions of this Section
      8.13(d)
      shall control.

     

    (e)  Any
      refunds (and any interest received thereon) of any Tax with respect to the
      Company attributable to a taxable period beginning after the Closing Date or
      the
      post-Closing portion of a Straddle Period shall belong to the Company. Any
      refunds (and any interest received thereon) of any Tax with respect to the
      Company attributable to a Pre-Closing Period or the pre-Closing portion of
      a
      Straddle Period shall belong to Simmons except for refunds attributable to
      Extra
      Taxes, which shall be paid to the Company net of any Taxes imposed on the
      receipt thereof.

     

    (f)  Following
      the Closing, Purchaser and Simmons shall provide each other with such assistance
      as may reasonably be requested by either of them in connection with the
      preparation of any Tax Return, any audit or other examination by any Taxing
      Authority, or any judicial or administrative proceedings relating to Liability
      for Taxes of the Company. The party requesting assistance hereunder shall
      reimburse the other for reasonable out-of-pocket expenses incurred in providing
      such assistance.

     

    (g)  Any
      and all Tax allocation or Tax sharing agreements between the Company on the
      one
      hand, and Simmons or any of its Affiliates on the other hand, shall be
      terminated as to the Company as of the Closing Date and, from and after the
      Closing Date, the Company shall not be obligated to make any payment pursuant
      to
      any such agreement for any past or future period.

     

    8.14  Financing.
      Purchaser shall use commercially reasonable efforts to take, or cause to be
      taken, all actions and to do, or cause to be done, all things necessary, proper
      or advisable to arrange the Financing. In the event any portion of Financing
      becomes unavailable, Purchaser shall use commercially reasonable efforts to
      arrange to obtain alternative financing from alternative sources in an amount
      sufficient to consummate the transactions contemplated herein on terms not
      materially less beneficial to Purchaser as promptly as practicable following
      the
      occurrence of such event.

     

    ARTICLE
      IX  

     

    


     

    CONDITIONS
      TO CLOSING

     

    9.1  Conditions
      Precedent to Obligations of Purchaser.
      The obligation of Purchaser to consummate the transactions contemplated by
      this
      Agreement is subject to the fulfillment, on or prior to the Closing Date, of
      each of the following conditions (any or all of which may be waived by Purchaser
      in whole or in part to the extent permitted by applicable Law):

     

    (a)  the
      representations and warranties of the Company and Holdings set forth in this
      Agreement shall be true and correct at and as of the Closing, except to the
      extent such representations and warranties relate to an earlier date (in which
      case such representations and warranties shall be true and correct on and as
      of
      such earlier date); provided,
      however that,
      the representations and warranties set forth in Sections
      5.1
      and 5.4
      shall instead be read as set forth on Schedule
      9.1
      hereto, and provided further however, that in the event of a breach of a
      representation or warranty, the condition set forth in this Section 9.1(a)
      shall be deemed satisfied unless the effect of any or all such breaches of
      representations and warranties result in a Material Adverse Effect, and
      Purchaser shall have received a certificate signed by an authorized officer
      of
      the Company, dated the Closing Date, to the foregoing effect;

     

    (b)  the
      Company and Holdings shall have performed and complied in all material respects
      with all obligations and agreements required by this Agreement to be performed
      or complied with by them on or prior to the Closing Date, and Purchaser shall
      have received a certificate signed by an authorized officer of the Company,
      dated the Closing Date, to the foregoing effect;

     

    (c)  there
      shall not be in effect any Order by a Governmental Body of competent
      jurisdiction restraining, enjoining or otherwise prohibiting the consummation
      of
      the transactions contemplated hereby;

     

    (d)  there
      shall not have been or occurred any event, change, occurrence or circumstance
      that, individually or in the aggregate with any such events, changes,
      occurrences or circumstances, has had a Material Adverse Effect since the
      Balance Sheet Date;

     

    (e)  the
      waiting period applicable to the transactions contemplated by this Agreement
      under the HSR Act shall have expired or early termination shall have been
      granted;

     

    (f)  Holdings
      and the Company shall have obtained at least 90% of the consents listed on
      Schedule 9.1(f)
      and copies thereof shall have been delivered to Purchaser; provided that
      such 90% shall include the 5 largest revenue producing (based on 2005 fiscal
      year revenues) stores;

     

    (g)  the
      Company shall have received the written resignations, effective as of the
      Closing Date, of such of the Managers and officers of the Company other than
      such officers of the Company who are Continuing Employees of the
      Company;

     

    (h)  Simmons
      shall have executed and delivered to Purchaser the Dealer Incentive Agreement
      substantially in the form of Exhibit C
      (the “Dealer
      Incentive Agreement”);

     

    (i)  Simmons
      shall have executed and delivered to Purchaser (A) a new Authorized Dealer
      Agreement between The Sleep Train, Inc. or one of its Affiliates (which shall
      cover The Sleep Train, Inc. and the Company) and Simmons (the “Dealer
      Agreement”)
      and (B) a new Co-op Advertising Agreement between The Sleep Train, Inc. or
      one of its Affiliates (which shall cover The Sleep Train, Inc. and the Company)
      and Simmons (the “Co-op
      Agreement”),
      in each case only to revise the existing forms of such agreements attached
      hereto as Exhibit
      E
      and Exhibit
      F,
      respectively, in order to make the termination provisions consistent with the
      termination provisions contained in the Dealer Incentive Agreement and to
      provide no greater rights for either party to terminate the Authorized Dealer
      Agreement or Co-op Agreement than set forth in the Dealer Incentive
      Agreement;

     

    (j)  Holdings
      shall have delivered, or caused to be delivered, to Purchaser certificates
      representing the Units, duly endorsed in blank or accompanied by separate
      assignment of units;

     

    (k)  all
      undischarged judgments and Liens (other than Permitted Exceptions) shall have
      been paid off in full and Purchaser shall have received copies of all pay-off
      letters in respect of all Closing Date Debt (or, with respect to any capitalized
      leases, at the election of Purchaser, assumed by Purchaser) and such other
      instruments evidencing the satisfaction and cancellation of such Closing Date
      Debt, including, without limitation, executed UCC-3 termination statements
      as
      reasonably requested by Purchaser;

     

    (l)  Holdings
      shall have delivered to Purchaser a statement certifying that it is not a
      foreign person within the meaning of Section 1445 of the Code;

     

    (m)  the
      Company shall deliver to the Purchaser an opinion of counsel for the Company,
      Holdings and Simmons, dated as of the Closing Date, in substantially the form
      of
Exhibit
      D;
      and

     

    (n)  this
      Agreement and the consummation of the transactions completed hereunder shall
      have been approved by the Board of Directors or Managers of Company and
      Holdings, and each of Company and Holdings shall have delivered to Purchaser
      a
      copy of the resolutions of the Board of Directors and Managers, approving this
      Agreement and the transactions described herein, certified by each entity’s
      respective Secretary.

     

    9.2  Conditions
      Precedent to Obligations of Holdings and Simmons.
      The obligations of Holdings and Simmons to consummate the transactions
      contemplated by this Agreement are subject to the fulfillment, prior to or
      on
      the Closing Date, of each of the following conditions:

     

    (a)  the
      representations and warranties of Purchaser set forth in this Agreement shall
      be
      true and correct at and as of the Closing, except to the extent such
      representations and warranties relate to an earlier date (in which case such
      representations and warranties shall be true and correct on and as of such
      earlier date) and Holdings and Simmons shall have received a certificate signed
      by an authorized officer of Purchaser, dated the Closing Date, to the foregoing
      effect;

     

    (b)  Purchaser
      shall have performed and complied in all material respects with all obligations
      and agreements required by this Agreement to be performed or complied with
      by
      Purchaser on or prior to the Closing Date, and Holdings and Simmons shall have
      received a certificate signed by an authorized officer of Purchaser, dated
      the
      Closing Date, to the foregoing effect;

     

    (c)  there
      shall not be in effect any Order by a Governmental Body of competent
      jurisdiction restraining, enjoining or otherwise prohibiting the consummation
      of
      the transactions contemplated hereby;

     

    (d)  the
      waiting period applicable to the transactions contemplated by this Agreement
      under the HSR Act shall have expired or early termination shall have been
      granted;

     

    (e)  Purchaser
      shall have delivered, or caused to be delivered, to Holdings and Simmons
      evidence of the wire transfers referred to in Section
      3.2
      hereof;

     

    (f)  Purchaser
      shall have executed and delivered to Holdings and Simmons the Dealer Incentive
      Agreement;

     

    (g)  Purchaser
      shall have executed and delivered to Holdings and Simmons the Dealer
      Agreement;

     

    (h)  Purchaser
      shall have executed and delivered to Holdings and Simmons the Co-op Agreement;
      and 

     

    (i)  this
      Agreement and the consummation of the transactions completed hereunder shall
      have been approved by the Board of Managers of Purchaser, and Purchaser shall
      have delivered to Simmons a copy of the resolutions of the Board of Managers,
      approving this Agreement and the transactions described herein, certified by
      Purchaser’s Secretary.

     

    9.3  Notices;
      Frustration of Closing Conditions.

     

    (a)  Each
      of the Company, Holdings and Simmons, on the one hand, and Purchaser, on the
      other hand, agree to give prompt notice to each other of, and to use reasonable
      efforts to remedy, (i) the occurrence or failure to occur of any event which
      occurrence or failure to occur would be likely to cause any of its or their
      representations or warranties in this Agreement to be untrue or inaccurate
      in
      any material respect at the Closing Date, and (ii) any material failure on
      its
      or their part to comply with or satisfy any covenant, condition or agreement
      to
      be complied with or satisfied by it or them hereunder; provided, however, that
      the delivery of any notice pursuant to this Section
      9.3
      shall not limit or otherwise affect the remedies available hereunder to the
      party receiving such notice.

     

    (b)  None
      of the Company, Purchaser, Holdings or Simmons may rely on the failure of any
      condition set forth in Sections
      9.1
      or 9.2,
      as the case may be, if such failure was caused by such party’s (or its
      affiliates) failure to comply with any provision of this Agreement.

     

    ARTICLE
      X  

     

    


     

    INDEMNIFICATION

     

    10.1  Survival
      of Representations and Warranties.

     

    (a)  The
      representations and warranties of the parties contained in this Agreement shall,
      subject to Section 10.5,
      survive the Closing and claims may be asserted with respect thereto to the
      extent permitted by this Article
      X.
      

     

    (b)  All
      of the covenants or other agreements of the parties contained in this Agreement
      shall survive until fully performed or fulfilled, unless and to the extent
      only
      that non-compliance with such covenants or agreements is waived in writing
      by
      the party entitled to such performance.

     

    10.2  Indemnification
      by Simmons.

     

    (a)  Subject
      to Sections
      8.13
      and 10.5
      hereof, Simmons hereby agrees to indemnify and hold Purchaser, the Company,
      and
      their respective directors, officers, employees, Affiliates, stockholders,
      agents, attorneys, representatives, successors and permitted assigns
      (collectively, the “Purchaser
      Indemnified Parties”)
      harmless from and against (without duplication) any and all losses, liabilities,
      claims, demands, judgments, damages, fines, suits, actions, costs and expenses
      including without limitation, interest, penalties, cost of investigation and
      defense, and reasonable attorneys’ and other professional fees and expenses
      (individually, a “Loss”
      and, collectively, “Losses”):

     

    (i)  based
      upon or resulting from the failure of any of the representations or warranties
      made by Simmons, Holdings or the Company in this Agreement to be true and
      correct in all respects at and as of the date hereof and at and as of the
      Closing Date, regardless of whether the Purchaser relied on the truth of such
      representation or warranty or had any knowledge of any breach
      thereof;

     

    (ii)  based
      upon or resulting from the breach or nonfulfillment of any covenant on the
      part
      of Simmons, Holdings or the Company;

     

    (iii)  except
      as provided in Sections
      8.13(c)
      and 10.3(c)
      below, (A) based upon or resulting from any Taxes (including pursuant to any
      Tax
      Sharing, Tax Indemnity or Tax allocation agreement or arrangement) of the
      Company or any of its Affiliates with respect to any Pre-Closing Period or
      the
      pre-Closing portion of any Straddle Period (computed in accordance with
Section
      8.13(b))
      (whether now or hereafter known or due upon audit or adjustment by any
      Governmental Body or otherwise) and (B) any Taxes for which Simmons is
      responsible under Section
      11.1;

     

    (iv)  based
      upon or resulting from any Closing Date Debt;

     

    (v)  based
      upon or resulting from (A) any undischarged judgments existing as of the
      Closing or (B) any Liens existing as of the Closing (other than Permitted
      Exceptions); and

     

    (vi)  based
      upon or resulting from any restricted stock agreement, registration rights
      agreement, securityholders’ agreement, or other similar Contract relating to
      equity or phantom equity incentive compensation to which any employee is a
      party
      or is subject, including any such type of Contract between any employee and
      Simmons Company, a Delaware corporation, Simmons or any of their respective
      Affiliates.

     

    (b)  Purchaser
      acknowledges that Simmons shall not be liable for any Losses or Liabilities
      arising out of or relating to the failure to obtain the consent of any party
      under any Contract to the consummation of the transactions contemplated hereby
      if Purchaser closes the transactions contemplated hereunder without such consent
      being obtained. 

     

    10.3  Indemnification
      by Purchaser.
      Subject to Section
      10.5,
      Purchaser hereby agrees to indemnify and hold Holdings or Simmons and their
      respective directors, officers, employees, Affiliates, stockholders, agents,
      attorneys, representatives, successors and permitted assigns (collectively,
      the
“Simmons
      Indemnified Parties”)
      harmless from and against, and pay to the applicable Simmons Indemnified Parties
      the amount of, any and all Losses:

     

    (a)  based
      upon or resulting from the failure of any of the representations or warranties
      made by Purchaser in this Agreement to be true and correct in all respects
      at
      the date hereof and as of the Closing Date;

     

    (b)  based
      upon or resulting from the breach or nonfulfillment of any covenant on the
      part
      of Purchaser; and

     

    (c)  any
      Taxes for which Purchaser is responsible under Section
      8.13
      or 11.1.

     

    10.4  Indemnification
      Procedures.

     

    (a)  A
      claim for indemnification for any matter not involving a third-party claim
      may
      be asserted by notice to the party from whom indemnification is
      sought.

     

    (b)  Subject
      to Section
      8.13(d),
      which shall control with respect to Tax Claims for Pre-Closing Periods or the
      pre-Closing portion of Straddle Periods, if any Legal Proceeding shall be
      instituted, or any claim shall be asserted, by any Person that is not a party
      (or an Affiliate of a party) hereto as to which indemnification may be sought
      by
      any Purchaser Indemnified Party under Section 10.2
      or any Simmons Indemnified Party under Section 10.3
      hereof (regardless of the limitations set forth in Section
      10.5)
      (an “Indemnification
      Claim”),
      the Purchaser Indemnified Party or the Simmons Indemnified Party, as applicable
      (each, an “Indemnified
      Party”),
      shall promptly cause written notice of the assertion of any Indemnification
      Claim of which it has knowledge to be forwarded to the other party (the
“Indemnifying
      Party”).
      The failure of the Indemnified Party to give reasonably prompt notice of any
      Indemnification Claim shall not release, waive or otherwise affect the
      Indemnifying Party’s obligations with respect thereto except to the extent that
      the Indemnifying Party is prejudiced as a result of such failure. The
      Indemnifying Party shall have the right, at its expense, to be represented
      by
      counsel of its choice, which must be reasonably satisfactory to the Indemnified
      Party, and to defend against, negotiate, settle or otherwise deal with any
      Indemnification Claim which relates to any Losses indemnified against by it
      hereunder. If the Indemnifying Party elects to defend against, negotiate, settle
      or otherwise deal with any Indemnification Claim, it shall within 30 days (or
      sooner, if the nature of the Indemnification Claim so requires) notify the
      Indemnified Party whether or not it shall do so; provided
      that the attorneys’ fees and other Losses incurred by the Indemnifying Party in
      connection with such defense, negotiation, settlement or other dealings shall
      not reduce the amount recoverable under the Cap by the Indemnified Parties.
      If
      the Indemnifying Party elects not to defend against, negotiate, settle or
      otherwise deal with any Indemnification Claim which relates to any Losses
      indemnified against hereunder, the Indemnified Party may defend against,
      negotiate, settle or otherwise deal with such Indemnification Claim, and the
      Indemnifying Party shall promptly, and in any event within 20 days after demand
      therefor, reimburse the Indemnified Party for the reasonable costs and expenses
      of such defense, including attorneys’ fees and other Losses incurred by the
      Indemnified Party in connection therewith. If the Indemnifying Party shall
      assume the defense of any Indemnification Claim, the Indemnified Party may
      participate, at his or its own expense, in the defense of such Indemnification
      Claim; provided,
      however,
      that such Indemnified Party shall be entitled to participate in any such defense
      with separate counsel at the expense (so long as such fees and expenses are
      reasonable) of the Indemnifying Party if, (i) so requested by the Indemnifying
      Party to participate or (ii) in the reasonable opinion of counsel to the
      Indemnified Party, a conflict or potential conflict exists between the
      Indemnified Party and the Indemnifying Party that would make such separate
      representation advisable; provided,
      further,
      that the Indemnifying Party shall not be required to pay for more than one
      such
      counsel (plus any appropriate local counsel) for all Indemnified Parties in
      connection with any Indemnification Claim. The parties hereto agree to cooperate
      fully with each other in connection with the defense, negotiation or settlement
      of any such Indemnification Claim, and the party assuming the defense of any
      Indemnification Claim shall keep the other party reasonably informed at all
      times of the progress and development of its defense of and compromise efforts
      with respect to such Indemnification Claim and shall furnish the other party
      with copies of all relevant pleadings, correspondence and other documents.
      Notwithstanding anything in this Section
      10.4
      to the contrary, neither the Indemnifying Party nor the Indemnified Party shall,
      without the written consent of the other party, settle or compromise any
      Indemnification Claim or permit a default or consent to entry of any judgment
      unless (i) the claimant and such party provide to such other party an
      unqualified release from all liability in respect of the Indemnification Claim
      and
      (ii) the settlement, compromise, or judgment involves only the payment of money
      damages by the Indemnifying Party and does not impose an injunction or other
      equitable relief on the Indemnified Party or impose any restrictions on the
      operation of the business of the Indemnified Party or its Affiliates, in which
      case the consent of the other party shall not be unreasonably withheld or
      delayed.

     

    (c)  After
      any final decision, judgment or award shall have been rendered by a Governmental
      Body of competent jurisdiction and the expiration of the time in which to appeal
      therefrom, or a settlement shall have been consummated, or the Indemnified
      Party
      and the Indemnifying Party shall have arrived at a mutually binding agreement
      with respect to an Indemnification Claim hereunder, the Indemnified Party shall
      forward to the Indemnifying Party notice of any Losses and other sums due and
      owing by the Indemnifying Party pursuant to this Agreement with respect to
      such
      matter. 

     

    (d)  Any
      amount due and payable hereunder shall accrue interest from and after the date
      due until paid in full at the “prime”
      rate, as announced by The Wall Street Journal, Eastern Edition, in effect as
      of
      the date payment first became due, calculated based on a 365-day year and the
      actual number of days elapsed. 

     

    10.5  Certain
      Limitations on Indemnification.

     

    (a)  Notwithstanding
      the provisions of this Article
      X,
      neither Simmons nor Purchaser shall have any indemnification obligations for
      Losses under Sections
      10.2(a)(i)
      and
      10.2(a)(ii)
      or Sections
      10.3(a)
      and 10.3(b),
      for any individual item, or group of items arising out of the same event, unless
      the aggregate amount of all such Losses exceeds $450,000 (the “Basket”)
      and then only for Losses in excess of the Basket. In no event shall the
      aggregate indemnification to be paid by Simmons or Purchaser under this
Article
      X
      exceed $12,000,000 (the “Cap”).
      Notwithstanding the foregoing, neither the Basket nor the Cap shall apply to
      Losses based upon or related to (i) fraud, criminal wrongdoing or willful
      breach, (ii) any matter subject to indemnification pursuant to Sections 10.2(a)(iii)
      through 10.2(a)(vi),
      or (iii) the failure to be true and correct of any of the representations and
      warranties set forth in Section 5.1
      (Organization), 5.2
      (Authorization), 5.4
      (Capitalization), 5.9
      (Taxes), 5.14(e)
      through 5.14(j)
      (Employee Benefit Plans), 5.15(c)(ii) - 5.15(c)(iv), 6.1
      (Organization), 6.2
      (Authorization), 6.4
      (Ownership), 6.6
      (Financial Advisors), 7.1
      (Organization), 7.2
      (Authorization) or 7.6
      (Financial Advisors) hereof.

     

    (b)  No
      Indemnifying Party shall be required to indemnify the Indemnified Party to
      the
      extent of any Losses that a court of competent jurisdiction shall have
      determined by final judgment to have resulted from the bad faith, gross
      negligence or willful misconduct of the Indemnified Party.

     

    (c)  The
      indemnification obligations set forth in this Article
      X
      with respect to a breach of a particular representation, warranty, agreement
      or
      covenant shall survive the Closing for a period of 21 months from the Closing
      Date; provided,
      however,
      that Simmons’ obligation to indemnify the Purchaser for any Losses based upon or
      related to (i) fraud, criminal wrongdoing or willful breach, (ii) any matter
      subject to indemnification pursuant to Sections 10.2(a)(iii)
      through 10.2(a)(vi),
      or (iii) the failure to be true and correct of any of the representations and
      warranties set forth in Sections
      5.2
      (Authorization), 5.4
      (Capitalization), 5.9
      (Taxes) and 6.4
      (Ownership) shall survive the Closing Date until expiration of the applicable
      statute of limitations.

     

    (d)  Absent
      fraud, Purchaser shall not make any claim for indemnification under this
Article X
      in respect of any matter that is taken into account in the calculation of any
      adjustment to the Purchase Price pursuant to Section
      3.3.

     

    10.6  Calculation
      of Losses; Materiality.

     

    (a)  The
      amount of any Losses for which indemnification is provided under this
Article
      X
      shall be net of any Tax benefit actually recognized or any other amounts
      actually recovered by the Indemnified Party from any other Person with respect
      thereto; provided,
      however,
      that each Indemnifying Party waives any right to require any Indemnified Party
      to (i) recover under any insurance policies for any Losses, (ii) proceed against
      any other Person, or (iii) pursue any other remedy whatsoever in the power
      of
      any Purchaser Indemnified Party. An Indemnified Party shall not be entitled
      to
      any right of set-off against any payment due the Indemnifying Party for any
      Losses to which any Indemnified Party is entitled to be indemnified hereunder
      with respect to any Indemnification Claim unless (i) the Indemnifying Party
      has
      agreed in writing it is obligated to pay the amount of the Losses which the
      Indemnified Party seeks to set-off, or (ii) a judgment has been rendered by
      a
      court of competent jurisdiction that the Indemnifying Party owes the Indemnified
      Party the amount of the Losses which the Indemnified Party seeks to
      set-off.

     

    (b)  Materiality;
      Material Adverse Effect.
      For purposes of determining whether a representation or warranty has been
      breached for purposes of indemnification under this Article X, the words
“material” and “Material Adverse Effect” or variations thereof shall be
      disregarded, and the phrase “resulting in Liabilities or Losses in excess of
      $75,000 individually or $150,000 in the aggregate” (or substantially similar
      variations thereof) shall as a measure of materiality, also be
      disregarded.

     

    10.7  Tax
      Treatment of Indemnity Payments.
      Simmons and Purchaser agree to treat any indemnity payment made pursuant to
      this
Article X
      as an adjustment to the Purchase Price for federal, state, local and foreign
      income Tax purposes.

     

    10.8  Exclusive
      Remedy.
      From and after the Closing, the sole and exclusive remedy for any breach or
      failure to be true and correct, or alleged breach or failure to be true and
      correct, of any representation or warranty or any covenant or agreement in
      this
      Agreement, shall be indemnification in accordance with this Article
      X,
      except with respect to claims resulting from fraud, criminal wrongdoing or
      willful breach. In furtherance of the foregoing, the parties hereby waive,
      to
      the fullest extent permitted by applicable Law, any and all other rights, claims
      and causes of action (including rights of contributions, if any) known or
      unknown, foreseen or unforeseen, which exist or may arise in the future, that
      it
      may have against Holdings, Simmons or Purchaser, as the case may be, arising
      under or based upon any federal, state or local Law (including any such Law
      relating to environmental matters or arising under or based upon any securities
      Law, common Law or otherwise). Notwithstanding the foregoing, this Section
      10.9
      shall not operate to interfere with or impede the operation of the provisions
      of
Article
      III
      providing for the (i) resolution of certain disputes relating to the Purchase
      Price between the parties and/or by the Arbiter and (ii) limit the rights
      of the parties to seek equitable remedies (including specific performance or
      injunctive relief), including under Section
      8.11.

     

    ARTICLE
      XI  

     

    


     

    MISCELLANEOUS

     

    11.1  Payment
      of Sales, Use or Similar Taxes.
      All sales, use, transfer, intangible, recordation, documentary stamp or similar
      Taxes or charges, of any nature whatsoever (collectively, the “Transfer
      Taxes”),
      applicable to, or resulting from, the transactions contemplated by this
      Agreement shall be borne 50% by Simmons and 50% by Purchaser; provided,
      however,
      that Purchaser shall be responsible for any and all Transfer Taxes resulting
      from the consummation of the transactions contemplated by this Agreement
      (including, without limitation, the Conversion) which Taxes would not have
      arisen had the transaction been structured as a transfer of stock of a
      corporation to the Purchaser in a transaction pursuant to which an election
      under Section 338(h)(10) of the Code had been made; provided,
      further,
      it is acknowledged and agreed by the parties that Purchaser shall not be
      responsible for any Transfer Taxes arising out of the transfer of real property
      or improvements thereon.

     

    11.2  Expenses.
      Except as otherwise provided in this Agreement, each of Holdings and Simmons
      (with respect to their and the Company’s expenses) and Purchaser shall bear its
      own expenses incurred in connection with the negotiation and execution of this
      Agreement and each other agreement, document and instrument contemplated by
      this
      Agreement and the consummation of the transactions contemplated hereby and
      thereby; provided,
      however,
      that Purchaser shall bear all pre-Closing expenses related to the Conversion,
      including obtaining consents from the Board of Directors and the sole
      stockholder of the Company and the filing of a certificate of conversion with
      the Delaware Secretary of State (which shall be performed by Simmons or its
      counsel) and obtaining or seeking to obtain any rulings requested by Purchaser
      from any Taxing Authorities with respect to the Conversion (which shall be
      performed by Purchaser or its counsel), as well as any post-Closing expenses
      related to the Conversion, including filing fees or other costs and expenses
      associated with assigning Intellectual Property and filing notices of name
      changes with any Governmental Body (which shall be performed by Purchaser or
      its
      counsel). Purchaser shall be responsible for all filing fees required in
      connection with compliance with the HSR Act.

     

    11.3  Submission
      to Jurisdiction; Consent to Service of Process.

     

    (a)  The
      parties hereto hereby irrevocably submit to the non-exclusive jurisdiction
      of
      any federal or state court located within Seattle, Washington over any dispute
      arising out of or relating to this Agreement or any of the transactions
      contemplated hereby and each party hereby irrevocably agrees that all claims
      in
      respect of such dispute or any suit, action proceeding related thereto may
      be
      heard and determined in such courts. The parties hereby irrevocably waive,
      to
      the fullest extent permitted by applicable law, any objection which they may
      now
      or hereafter have to the laying of venue of any such dispute brought in such
      court or any defense of inconvenient forum for the maintenance of such dispute.
      Each of the parties hereto agrees that a judgment in any such dispute may be
      enforced in other jurisdictions by suit on the judgment or in any other manner
      provided by law.

     

    (b)  Each
      of the parties hereto hereby consents to process being served by any party
      to
      this Agreement in any suit, action or proceeding by the delivery of a copy
      thereof in accordance with the provisions of Section
      11.7.

     

    11.4  Entire
      Agreement; Amendments and Waivers.
      This Agreement (including the schedules and exhibits hereto) and the
      Confidentiality Agreement represent the entire understanding and agreement
      between the parties hereto with respect to the subject matter hereof and
      thereof. This Agreement can be amended, supplemented or changed, and any
      provision hereof can be waived, only by written instrument making specific
      reference to this Agreement signed by the party against whom enforcement of
      any
      such amendment, supplement, modification or waiver is sought. No action taken
      pursuant to this Agreement, including any investigation by or on behalf of
      any
      party, shall be deemed to constitute a waiver by the party taking such action
      of
      compliance with any representation, warranty, covenant or agreement contained
      herein. The waiver by any party hereto of a breach of any provision of this
      Agreement shall not operate or be construed as a further or continuing waiver
      of
      such breach or as a waiver of any other or subsequent breach. No failure on
      the
      part of any party to exercise, and no delay in exercising, any right, power
      or
      remedy hereunder shall operate as a waiver thereof, nor shall any single or
      partial exercise of such right, power or remedy by such party preclude any
      other
      or further exercise thereof or the exercise of any other right, power or
      remedy.

     

    11.5  Governing
      Law.
      This Agreement shall be governed by and construed in accordance with the laws
      of
      the State of Delaware applicable to contracts made and performed in such State
      without giving effect to the choice of law principles of such State that would
      require or permit the application of the laws of another
      jurisdiction.

     

    11.6  Notices.
      All notices and other communications under this Agreement shall be in writing
      and shall be deemed given (i) when delivered personally by hand (with written
      confirmation of receipt), (ii) when sent by facsimile (with written confirmation
      of transmission) or (iii) one business day following the day sent by overnight
      courier (with written confirmation of receipt), in each case at the following
      addresses and facsimile numbers (or to such other address or facsimile number
      as
      a party may have specified by notice given to the other party pursuant to this
      provision):

     

    If
      to Holdings or Simmons, to:

     

    c/o
      Simmons Bedding Company

    One
      Concourse Parkway, Suite 800

    Atlanta,
      GA 30328

    Facsimile: (770)
      206-2669

    Attention:
       Chief
      Financial Officer and General Counsel

     

    With
      copies (which shall not constitute notice) to:

     

    Thomas
      H. Lee Partners, L.P.

    100
      Federal Street, 35th Floor

    Boston,
      MA 02110

    Facsimile: (617)
      227-3514

    Attention:
       Scott
      Schoen

    Todd
      Abbrecht

    George
      Taylor

    


    and

     

    Weil,
      Gotshal & Manges LLP

     

    100
      Federal Street, 34th Floor

     

    Boston,
      MA 02110

     

    Facsimile:
       (617)
      772-8333

     

    Attention:
       Marilyn
      French, Esq.

     

    If
      to Purchaser, to:

     

    ST
      San Diego, LLC

     

    8391
      Auburn Boulevard

     

    Citrus
      Heights, CA 95610

     

    Facsimile: (916)
      735-1382

     

    Attention: Dale
      Carlsen

     

    


     

    With
      a copy to:

     

    


     

    Shartsis
      Friese LLP

     

    One
      Maritime Plaza, 18th Floor

     

    San
      Francisco, CA 94111

     

    Facsimile: (415)
      421-2922

     

    Attention: Derek
      Wilson, Esq.

     

    


     

    11.7  Severability.
      If any term or other provision of this Agreement is invalid, illegal, or
      incapable of being enforced by any law or public policy, all other terms or
      provisions of this Agreement shall nevertheless remain in full force and effect
      so long as the economic or legal substance of the transactions contemplated
      hereby is not affected in any manner materially adverse to any party. Upon
      such
      determination that any term or other provision is invalid, illegal, or incapable
      of being enforced, the parties hereto shall negotiate in good faith to modify
      this Agreement so as to effect the original intent of the parties as closely
      as
      possible in an acceptable manner in order that the transactions contemplated
      hereby are consummated as originally contemplated to the greatest extent
      possible.

     

    11.8  Binding
      Effect; Assignment.
      This Agreement shall be binding upon and inure to the benefit of the parties
      and
      their respective successors and permitted assigns. Nothing in this Agreement
      shall create or be deemed to create any third party beneficiary rights in any
      person or entity not a party to this Agreement except as provided below. No
      assignment of this Agreement or of any rights or obligations hereunder may
      be
      made by either Holdings, Simmons or Purchaser, directly or indirectly (by
      operation of law or otherwise), without the prior written consent of the other
      parties hereto and any attempted assignment without the required consents shall
      be void. No assignment of any obligations hereunder shall relieve the parties
      hereto of any such obligations. Upon any such permitted assignment, the
      references in this Agreement to Purchaser shall also apply to any such assignee
      unless the context otherwise requires.

     

    11.9  Non-Recourse.
      Excluding fraud or criminal wrongdoing, no past, present or future director,
      officer, employee, incorporator, member, partner, stockholder, Affiliate, agent,
      attorney or representative of Holdings, Simmons or the Company or any of their
      respective Affiliates shall have any liability for any obligations or
      liabilities of Holdings, Simmons or the Company under this Agreement of or
      for
      any claim based on, in respect of, or by reason of, the transactions
      contemplated hereby and thereby.

     

    11.10  Counterparts.
      This Agreement may be executed in one or more counterparts, each of which will
      be deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement.

     

    **
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    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective authorized officers, as of the date first written
      above.

    

      

         


        

          
            	 	
                    ST
                      SAN DIEGO, LLC

                  
	 	 
	
                    By:

                  	
                    /s/
                      Dale R. Carlsen

                  	 
	 	
                    Name:

                  	
                    Dale
                      R. Carlsen

                  
	 	
                    Title:

                  	
                    Managing
                      Member

                  
	 	 
	 	
                    SLEEP
                      COUNTRY USA, INC.

                  
	 	 
	
                    By:

                  	
                    /s/
                      William S. Creekmuir

                  	 
	 	
                    Name:

                  	
                    William
                      S. Creekmuir

                  
	 	
                    Title:

                  	
                    Executive
                      Vice President, Assistant Treasurer and Assistant
                      Secretary

                  
	 	 
	 	
                    SC
                      HOLDINGS, INC.

                  
	 	 
	
                    By:

                  	
                    /s/
                      William S. Creekmuir

                  	 
	 	
                    Name:

                  	
                    William
                      S. Creekmuir

                  
	 	
                    Title:

                  	
                    Executive
                      Vice President, Assistant Treasurer and Assistant
                      Secretary

                  
	 	 
	 	
                    SIMMONS
                      BEDDING COMPANY

                  
	 	 
	
                    By:

                  	
                    /s/
                      Charles R. Eitel

                  	 
	 	
                    Name:

                  	
                    Charles
                      R. Eitel

                  
	 	
                    Title:

                  	
                    Chief
                      Executive Officer

                  


          

        


        

           

        

      

    

     

     

     

    



    
      
        
          


        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



    Guarantee

    


    The
      Sleep Train, Inc., a California corporation (“Sleep
      Train”)
      and an affiliate of the Purchaser, hereby guarantees to Simmons the payment
      and
      performance of all obligations and covenants of Purchaser under this Unit
      Purchase Agreement dated as of July 24, 2006 among ST San Diego, LLC, Sleep
      Country USA, Inc., SC Holdings, Inc. and Simmons Bedding Company (the
“Agreement”),
      it being acknowledged that Simmons need not exhaust its remedies against
      Purchaser in order to enforce this guarantee. Capitalized terms used herein
      but
      not defined shall have the meanings set forth in the Agreement.

     

    Sleep
      Train hereby represents and warrants (and agrees to indemnify Simmons for any
      losses arising out of any breach of such representation and warranties) to
      Simmons the following:

     

    1.  Organization
      and Good Standing.
      Sleep Train is a corporation duly organized, validly existing and in good
      standing under the laws of the State of California and has all requisite limited
      liability power and authority to own, lease and operate properties and carry
      on
      its business.

     

    2.  Authorization
      of Guarantee.
      Sleep Train has full corporate power and authority to execute and deliver this
      Guarantee and to perform its obligations hereunder. The execution, delivery
      and
      performance by Sleep Train of this Guarantee have been duly authorized by all
      necessary limited liability company action on behalf of Sleep Train. This
      Guarantee has been duly executed and delivered by Sleep Train and this Guarantee
      constitutes the legal, valid and binding obligation of Sleep Train, enforceable
      against Sleep Train in accordance with its terms, subject to applicable
      bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
      creditors’ rights and remedies generally, and subject, as to enforceability, to
      general principles of equity, including principles of commercial reasonableness,
      good faith and fair dealing (regardless of whether enforcement is sought in
      a
      proceeding at law or in equity).

     

    3.  Conflicts;
      Consents of Third Parties.

     

    (a)  None
      of the execution, delivery and performance by Sleep Train of this Guarantee
      will
      conflict with, or result in any violation of or default (with or without notice
      or lapse of time, or both) under, or give rise to a right of termination or
      cancellation under, any provision of (i) the certificate of incorporation
      or by-laws of Sleep Train; (ii) any Contract or Permit to which Sleep Train
      is a party or by which Sleep Train or its properties or assets are bound; (iii)
      any Order of any Governmental Body applicable to Sleep Train or by which any
      of
      the properties or assets of Sleep Train are bound; or (iv) any applicable
      Law.

     

    (b)  No
      consent, waiver, approval, Order, Permit or authorization of, or declaration
      or
      filing with, or notification to, any Person or Governmental Body is required
      on
      the part of Sleep Train in connection with the execution and delivery of this
      Guarantee or the performance of its obligations hereunder. 

     

    4.  Litigation.
      There are no Legal Proceedings pending or, to the actual knowledge of Sleep
      Train (without any docket or other electronic search having been conducted)
      threatened, that are reasonably likely to prohibit or restrain the ability
      of
      Sleep Train to enter into this Guarantee or perform its obligations
      hereunder.

     

    This
      Guarantee shall be governed by and construed in accordance with the laws of
      the
      State of Delaware applicable to contracts made and performed in such State
      without giving effect to the choice of law principles of such State that would
      require or permit the application of the laws of another
      jurisdiction.

     


    
      
         

         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    

       


      
        	 	
                THE
                  SLEEP TRAIN, INC.

              
	 	 
	
                By:

              	
                /s/
                  Dale R. Carlsen

              	 
	 	
                Name:

              	
                Dale
                  R. Carlsen

              
	 	
                Title:

              	
                President

              


      



     

    
      
         

         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Schedule
      1

    


    “Adjusted
      EBITDA”
      means the earnings before interest, income taxes, depreciation and amortization
      of the Company (“EBITDA”),
      but including to the extent not already added or deducted in EBITDA, (a) as
      an add-back, that portion of the annual management fee payable by the Company
      to
      Simmons equal to (i) the total management fee for the last full 12-month period
      ended on July 1, 2006 less
      (ii) $115,000, representing that portion of the fee attributable to recurring
      costs of the Company (e.g., audits fees, insurance and tax preparation), (b)
      as
      add-backs, any bonus expense for Senior Executives for that portion of the
      2005
      fiscal year from January 1, 2005 through June 30, 2005 as if bonuses
      for 2005 were accrued in 12 equal installments during the year, (c) as
      deductions, bonus expense for Senior Executives as if the anticipated bonus
      expense for such executives for that portion of the 2006 fiscal year up to
      and
      including the Closing Date (based on the Company’s projection’s for bonus
      expense for fiscal year 2006) were accrued in 12 equal installments during
      the
      year, (d) as a deduction, $20,000 relating to equity incentive compensation,
      (e)
      as a deduction, $100,000 relating to Simmons’ one-time rebate fees, and (f) as
      add-backs, business and occupation taxes.

     


    
      
         

         

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Exhibit
      A

    


    Closing
      Date Working Capital Statement

    


    A
      Closing Date Working Capital Statement will be provided prior to Closing (the
      Preliminary Closing Date Working Capital Statement), at Closing (the Estimated
      Working Capital Statement) and post-Closing (the Actual Closing Date Working
      Capital Statement) pursuant to Article III. 

    


    Closing
      Date Current
      Assets include
      the sum of the following items ($ in thousands):

    


    Cash $

     

    Accounts
      Receivable, Net of Allowances $

     

    Co-op
      Receivable $

     

    Inventory $

     

    Prepaids
      & Short Term Deposits $

     

    TOTAL
      CURRENT ASSETS $

     

    LESS:

     

    Closing
      Date Current Liabilities includes
      the sum of the following items
      ($ in thousands):

    


     

    Accounts
      Payable $

     

    Accrued
      Liabilities $

     

    Customer
      Deposits $

     

    Salaries,
      Wages, Commissions & 

     

    Bonuses
      Payable $

     

    Benefits
      & Payroll Taxes Payable $

     

    401(k)
      Profit Sharing Contribution $

     

    State
      Sales and Local Taxes $

     

    Intercompany
      Liabilities, Net $

     

    TOTAL
      CURRENT LIABILITIES $

     

    


     

    EQUALS:

    


    WORKING
      CAPITAL $________________