Document:

Exhibit 10.21

 

SECURITY AGREEMENT

(GEORGIA MATTRESS CORP. AND ELITE MANAGEMENT TEAM, INC.)

 

This SECURITY
AGREEMENT (this “Agreement”), is entered into as of December 31,
2004, by and among GEORGIA MATTRESS CORP.,
a Georgia corporation (“GMC”), and ELITE
MANAGEMENT TEAM, INC., a Georgia corporation (“Elite”; and
together with GMC, collectively and jointly and severally, “Debtor”),
and ABLECO FINANCE LLC, a Delaware
limited liability company (“Ableco”), as collateral agent for the
below-defined Lenders (in such capacity, together with its successors, if any,
in such capacity, “Collateral Agent”), with reference to the following:

 

WHEREAS, Debtor is a party to that certain
Financing Agreement (as amended, restated, supplemented or modified from time
to time, the “Financing Agreement”), dated as of March 31, 2004,
with the below defined Lenders, Ableco, as administrative agent thereunder (in
such capacity, together with its successors, if any, in such capacity, “Administrative
Agent” and Collateral Agent, pursuant to which the below defined Lender
Group has agreed to make certain financial accommodations to Mattress Firm, Inc.,
a Delaware corporation, GMC and Elite (“Borrower”); and

 

WHEREAS, to induce the Lender Group (as
hereinafter defined) to make the financial accommodations provided to Borrower
pursuant to the Financing Agreement, Debtor desires to pledge, grant, transfer,
and assign to Collateral Agent, for the benefit of the Lender Group (as
hereinafter defined), a security interest in the Collateral (as hereinafter
defined) to secure the Secured Obligations (as hereinafter defined), as
provided herein.

 

NOW THEREFORE, in consideration of the
premises set forth above, the terms and conditions contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and each intending to be bound hereby, Collateral Agent
and Debtor agree as follows:

 

1.              DEFINITIONS AND CONSTRUCTION.

 

1.1.                            Definitions.  All initially capitalized terms
used herein and not otherwise defined herein shall have the meanings ascribed
to them in the Financing Agreement.  As
used in this Agreement, the following terms shall have the following
definitions:

 

“Ableco” shall have the meaning
specified therefor in the preamble hereto.

 

“Account” means an “account” (as that
term is defined in the Code).

 

“Account Debtor” means any Person who
is or who may become obligated under, with respect to, or on account of, an
Account, chattel paper, or a General Intangible.

 

“Administrative Agent” has the meaning
specified therefor in the recitals hereto.

 

 

“Agreement” means this Security
Agreement and any joinders, extensions, riders, supplements, notes, amendments,
or modifications to or in connection with this Security Agreement.

 

“Bankruptcy Code” means the United
States Bankruptcy Code (11 U.S.C. § 101 et seq.), as amended, and any
successor statute.

 

“Books” means all of the Debtor’s now
owned or hereafter acquired books and records (including all of its Records
indicating, summarizing, or evidencing its assets (including the Collateral) or
liabilities, all of Debtor’s Records relating to its business operations or
financial condition, and all of its goods or General Intangibles related to
such information).

 

“Borrower” has the meaning specified
therefor in the recitals hereto.

 

“Code” means the New York Uniform
Commercial Code, as in effect from time to time.

 

“Collateral” means all of Debtor’s
right, title and interest in, to and under the following personal property and
assets, whether now owned by or owing to, or hereafter acquired by or arising
in favor of Debtor, and whether owned or consigned by or to, or leased from or
to, Debtor and regardless of where located: 
all of Debtor’s Accounts, all of Debtor’s Books, all of Debtor’s
commercial tort claims, all of Debtor’s Deposit Accounts, all of Debtor’s
Equipment, all of Debtor’s General Intangibles, all of Debtor’s Inventory, all
of Debtor’s Investment Property (including all of Debtor’s securities and
securities accounts), all of Debtor’s Negotiable Collateral, money or other
assets that now or hereafter come into the possession, custody, or control of
any member of the Lender Group, and the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, real property, money, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.  Without limiting the
generality of the foregoing, the term “Collateral” includes any and all
Supporting Obligations in respect of any other Collateral.  Anything contained in this Agreement or the
other Loan Documents to the contrary notwithstanding, the term Collateral shall
not include General intangibles constituting Capital Stock issued by MFA.

 

“Collateral Access Agreement” means a
landlord waiver, mortgagee waiver, bailee letter, or acknowledgement agreement
of any warehouseman, processor, lessor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in the Equipment
or Inventory, in each case, in form and substance satisfactory to Collateral
Agent.

 

“Collateral Agent” has the meaning
therefor in the preamble hereto.

 

“Commercial Tort Claim Assignment” has
the meaning set forth in Section 2.4(b) of this Agreement.

 

“Control Agreement” means a control
agreement, in form and substance satisfactory to Collateral Agent, executed and
delivered by Debtor, Collateral Agent and the

 

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applicable securities intermediary (with
respect to a securities account) or bank (with respect to a Deposit Account) in
form and substance satisfactory to Collateral Agent.

 

“copyright” shall have the meaning
ascribed to such term in Copyright Act, and includes unregistered copyrights.

 

“Copyright Act” means the United
States Copyright Act of 1976, as amended, and any successor statute, and the rules promulgated
thereunder.

 

“Debtor” shall have the meaning
specified therefor in the preamble hereto.

 

“Deposit Account” means any “deposit
account” (as that term is defined in the Code).

 

“Equipment” means “equipment” (as that
term is defined in the Code) and includes machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), computer
hardware, tools, parts, and goods (other than consumer goods, farm products, or
Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.

 

“Event of Default” has the meaning
specified therefor in Section 6.

 

“Financing Agreement” has the meaning
specified therefor in the recitals hereto.

 

“General Intangibles” means “general
intangibles” (as that term is defined in the Code), including payment
intangibles, contract rights, rights to payment, rights arising under common
law, statutes, or regulations, choses or things in action, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, software, literature, reports, catalogs, money, deposit
accounts, insurance premium rebates, tax refunds, and tax refund claims, and
any other personal property other than goods, Accounts, Investment Property,
and Negotiable Collateral.

 

“Indemnitees” has the meaning
specified therefor in Section 9.3.

 

“Insolvency Proceeding” means any
proceeding commenced by or against any Person under any provision of the
Bankruptcy Code or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, extensions
generally with creditors, or proceedings seeking reorganization, arrangement,
or other similar relief.

 

“Inventory” means “inventory” (as that
term is defined in the Code).

 

“Investment Property” means “investment
property” (as that term is defined in the Code).

 

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“Lenders” means, individually and
collectively, each of the Lenders identified on the signature pages of the
Financing Agreement, and any other Person made a party thereto in accordance with
the provisions of Section 12.07 thereof (together with their
respective successors and assigns).

 

“Lender Group” means, individually and
collectively, each of the Lenders, Administrative Agent and Collateral Agent.

 

“Lender Group Expenses” means all (a) costs
or expenses (including taxes, and insurance premiums) required to be paid by
Debtor under any of the Loan Documents that are paid or incurred by the Lender
Group, (b) fees or charges paid or incurred by Collateral Agent in
connection with the Lender Group’s transactions under the Loan Documents with
Debtor, including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement or the Financing
Agreement), real estate surveys, real estate title policies and endorsements,
and environmental audits, (c) costs and expenses incurred by Collateral
Agent in the disbursement of funds to Borrower (by wire transfer or otherwise),
(d) charges paid or incurred by Collateral Agent resulting from the
dishonor of checks, (e) costs and expenses paid or incurred by the Lender
Group to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit
fees and expenses of Collateral Agent related to audit examinations of the
Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement or the Financing Agreement, (g) costs
and expenses of third party claims or any other suit paid or incurred by the
Lender Group in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or the Lender Group’s
relationship with Debtor, (h) Collateral Agent’s, Administrative Agent’s
and each Lender’s reasonable fees and expenses (including reasonable attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Collateral Agent’s, Administrative
Agent’s and each Lender’s reasonable fees and expenses (including attorneys
fees) incurred in terminating, enforcing (including reasonable attorneys fees
and expenses incurred in connection with a “workout,” a “restructuring,” or an
Insolvency Proceeding concerning Debtor or in exercising rights or remedies
under the Loan Documents), or defending, the Loan Documents, irrespective of
whether suit is brought, or in taking any Remedial Action concerning the
Collateral.

 

“Negotiable Collateral” means letters
of credit, letter of credit rights, notes, drafts, instruments, promissory
notes, documents, chattel paper (including electronic chattel paper and
tangible chattel paper), Debtor’s Books relating to any of the foregoing.

 

“Permitted Protest” means the right of
Debtor to protest any Lien (other than any such Lien that secures the Secured
Obligations), any taxes (other than payroll taxes or taxes that are the subject
of a United States federal tax lien), or any rental payment, provided that (a) a

 

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reserve with respect to such obligation is
established on the books of Debtor in an amount that is reasonably satisfactory
to Collateral Agent, (b) any such protest is instituted and diligently
prosecuted by Debtor in good faith, and (c) Collateral Agent is satisfied
that, while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the Liens of Collateral Agent
in and to the Collateral for the benefit of the Lender Group.

 

“Record” means information that is
inscribed on a tangible medium or which is stored in an electronic or other
medium and is retrievable in perceivable form.

 

“Secured Obligations” shall mean all
liabilities, obligations, or undertakings (including the Obligations) owing by
Debtor to the Lender Group of any kind or description arising out of or
outstanding under, advanced or issued pursuant to, or evidenced by the
Financing Agreement, this Agreement, or tiny of the other Loan Documents,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest, costs, fees
(including attorneys fees), and expenses and any and all other amounts
(including any portion thereof that accrues after the commencement of an
Insolvency Proceeding, whether or not allowed or allowable in whole or in part
as a claim in any such Insolvency Proceeding) which Debtor is required to pay
pursuant to any of the foregoing, by law, or otherwise.

 

“Supporting Obligation” means a
letter-of-credit right or secondary obligation that supports the payment or
performance of an Account, chattel paper, document, General Intangible,
instrument, or Investment Property.

 

“Voidable Transfer” has the meaning
specified therefor in Section 15.8.

 

1.2.                            Code.  Any terms used in this Agreement
which are defined in the Code shall be construed and defined as set forth in
the Code unless otherwise defined herein.

 

1.3.                            Construction.  The definitions of terms herein
shall apply equally to the singular and plural forms of the term defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  The term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or”.  Unless the context requires otherwise, (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document from time to time amended, supplemented or otherwise modified (subject
to any restrictions on such amendments, supplements or modifications set forth
herein), (b) any reference herein to any Person shall be construed to
include such Person’s successors and assigns, (c) the words “herein”, “hereof’
and “hereunder”, and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof., (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement, (e) the words “asset” and “property” shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities,

 

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accounts and contract rights, and (f) any
reference herein to the repayment in full of the Secured Obligations shall mean
the repayment in full in cash of all Secured Obligations other than contingent
indemnification Secured Obligations. 
References in this Agreement to “determination” by any Agent include
estimates honestly made by such Agent (in the case of quantitative
determinations) and beliefs honestly held by such Agent (in the case of
qualitative determinations).  In the
event of a direct conflict between the terms and provisions of this Agreement
and the Financing Agreement, it is the intention of the parties hereto that
both such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. 
In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of the Financing Agreement
shall control and govern; provided, however, that the inclusion
herein of additional obligations on the part of Debtor and supplemental rights
and remedies in favor of Collateral Agent, in each case in respect of the
Collateral, shall not be deemed a conflict with the Financing Agreement.  Any requirement of a writing contained herein
or in the other Loan Documents shall be satisfied by the transmission of a
Record and any Record transmitted shall constitute a representation and warranty,
as the accuracy and completeness of the information contained therein.

 

1.4.                            Schedules and Exhibits.  All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.

 

2.              CREATION OF SECURITY INTEREST.

 

2.1.                            Grant of Security Interest.

 

(a)                                  Debtor, in order to secure the prompt payment of all of
Debtor’s Secured Obligations and the prompt performance of all covenants and
duties of Debtor under the Loan Documents, hereby grants to Collateral Agent,
for the benefit of the Lender Group, continuing security interests in all of
Debtor’s respective right, title, and interest in and to any and all currently
existing and hereafter acquired or arising Collateral.

 

(b)                                 Collateral Agent’s security interests in the Collateral
for the benefit of the Lender Group shall attach to all Collateral without
further act on the part of the Lender Group or Debtor.

 

(c)                                  Except as expressly set forth in this Agreement or any
other Loan Document, Debtor has no authority, press or implied, to dispose of
any item or portion of the Collateral.

 

2.2.                            Negotiable Collateral.  In the event that any Collateral of
Debtor, including proceeds thereof, is evidenced by or consists of Negotiable
Collateral, Debtor shall, immediately upon the request of Collateral Agent,
endorse and assign such Negotiable Collateral to Collateral Agent and deliver
physical possession of such Negotiable Collateral to Collateral Agent.

 

2.3.                            Collection of Accounts, General
Intangibles, Negotiable Collateral.  At any time that an Event of Default has occurred
or is continuing, Collateral Agent or Collateral Agent’s designee may:  (a) notify customers or Account Debtors
of Debtor that the Accounts, General Intangibles, or Negotiable Collateral that
constitute Collateral have been

 

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assigned to Collateral Agent or that
Collateral Agent has a security interest therein for the benefit of the Lender
Group; and (b) collect the Accounts, General Intangibles, and Negotiable
Collateral that constitute Collateral directly and charge, or cause
Administrative Agent to charge for the benefit of Collateral Agent, the
collection costs and expenses incurred by Collateral Agent in connection with
any such collection of the Accounts to the Loan Account.  Debtor agrees that at any time that an Event
of Default has occurred or is continuing, upon notice from, Collateral Agent it
will hold in trust for Collateral Agent, as Collateral Agent’s trustee, any
cash receipts, checks, and other items of payment (including, insurance proceeds,
proceeds of cash sales, rental proceeds, and tax refunds) that Debtor receives
and immediately will deliver said cash receipts, checks, and other items of
payment to Collateral Agent in their original form as received by Debtor.

 

2.4.                            Delivery of Additional Documentation Required.

 

(a)                                  Debtor authorizes Collateral Agent to file any
statement necessary or desirable to effectuate the transactions contemplated
herein and by the other Loan Documents, and any continuation statement or
amendment with respect thereto (including without limitation any financing
statements that (i) indicate the Collateral (A) as all assets of
Debtor or words of similar effect, regardless of whether any particular asset
of Debtor falls within the scope of Article 9 of the Code or whether any
portion of the assets of Debtor constitute part of the Collateral, or (B) as
being of an equal or lesser scope or with greater detail, and (b) contain
any other information required by part f of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement or
amendment, including (x) whether Debtor is an organization, the type of
organization and an organization identification number issued to Debtor, and
(y) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates), in
any appropriate filing office without the signature of Debtor where permitted
by applicable law.  Debtor hereby
ratifies the filing of any financing statement filed without the signature of
Debtor prior to the date hereof.

 

(b)                                 If Debtor acquires any commercial tort claim after the
date hereof, Debtor shall promptly (but in any event within 10 days after any
officer of Debtor having knowledge or having received notice thereof) deliver
to Collateral Agent a written description of such commercial tort claim and
shall, upon request of Collateral Agent, promptly deliver a written agreement,
in form and substance reasonably satisfactory to Collateral Agent, pursuant to
which Debtor to the extent not prohibited by law, grant a security interest in
such commercial tort claim to Collateral Agent, as security for the Secured
Obligations (a “Commercial Tort Claim Assignment”).

 

(c)                                  At any time upon the request of Collateral Agent Debtor
shall execute and deliver to Collateral Agent, any and all financing
statements, original financing statements in lieu of continuation statements,
fixture filings, security agreements, pledges, assignments, Commercial Tort
Claim Assignments, endorsements of certificates of title, and all other
documents (collectively, the “Additional Documents”) that Collateral
Agent may request, in form and substance reasonably satisfactory to Collateral
Agent to create, perfect, and continue perfected or to better perfect the
Collateral Agent’s Liens in the assets of Debtor (whether now owned or
hereafter arising or acquired, tangible or intangible, real or personal), to
create and

 

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perfect Liens in favor of Collateral Agent in
any real property acquired by Debtor after the Effective Date, and in order to
fully consummate all of the transactions contemplated hereby and under the
other Loan Documents.  To the maximum
extent permitted by applicable law, if Debtor has not any Additional Document
Collateral Agent is entitled to obtain hereunder after Collateral Agent has
made an appropriate request therefor, Debtor authorizes Collateral Agent to execute
any such Additional Documents in Debtor’s name and authorizes Collateral Agent
to file such executed Additional Documents in any appropriate filing
office.  In addition, on such periodic
basis as Collateral Agent shall require, Debtor shall (i) provide
Collateral Agent with a report of all new patents, trademarks, or copyrights
(or applications therefor) acquired or generated by Debtor during the prior
period, (ii) cause all material patents, copyrights, and trademarks
acquired or generated by Debtor that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered with such appropriate filing office in
a manner sufficient to impart constructive notice of Debtor’s ownership
thereof, and (iii) cause to be prepared, executed, and delivered to
Collateral Agent supplemental schedules to the applicable Loan Documents to
identify such patents, copyrights, and trademarks as being subject to the
security interests created thereunder.

 

2.5.                            Power of Attorney.  Debtor hereby irrevocably makes,
constitutes, and appoints Collateral Agent (and any of Collateral Agent’s
officers, employees, or (including Administrative Agent) designated by
Collateral Agent) as Debtor’s true and lawful attorney with power to:  (a) if Debtor refuses to, or fails
timely to execute and deliver any of the documents described in Section 2.4,
sign the name of Debtor on any of the documents described in Section 2.4;
(b) at any time that an Event of Default has occurred and is continuing or
the Lender Group, or Collateral Agent on behalf thereof, deems itself insecure
(in accordance with Section 1-208 of the Code), sign Debtor’s name on any
invoice or bill of lading relating to any Account, drafts against Account
Debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to Account Debtors; (c) send requests for verification of
Accounts; (d) endorse Debtor’s name on any checks, notices, acceptances,
money orders, drafts, or other item of or security that may come into
Collateral Agent’s or any other member of the Lender Group’s possession; (e) at
any time that an Event of Default has occurred and is continuing or the Lender
Group, or Collateral Agent on behalf thereof, deems itself insecure (in
accordance with Section 1-208 of the Code), notify the post office
authorities to change the address for delivery of Debtor’s mail to an address
designated by Collateral Agent, to receive and open all mail addressed to
Debtor, and to retain all mail relating to the Collateral and forward all other
mail to Debtor; (f) at any time that an Event of Default has occurred and
is continuing or the Lender Group, or Collateral Agent on behalf thereof, deems
itself insecure (in accordance with Section 1-208 of the Code), make,
settle, and adjust all claims under Debtor’s policies of insurance; and (g) at
any time that an Event of Default has occurred and is continuing or the Lender
Group, or Collateral Agent on behalf thereof, deems itself insecure (in accordance
with Section 1-208 of the Code), settle and adjust disputes and claims
respecting Debtor’s Accounts, chattel paper or General Intangibles that
constitute Collateral directly with Account Debtors, for amounts and upon terms
which Collateral Agent determines to be reasonable, and Collateral Agent may
cause to be executed and delivered any documents and releases which Collateral
Agent determines to be necessary.  The
appointment of Collateral Agent as Debtor’s attorney, and each and every one of
Collateral Agent’s rights and powers, being coupled with an interest, is
irrevocable until all of the Secured Obligations have fully and finally
performed and paid in

 

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cash and the obligations of the Lender Group
to extend credit under the Financing Agreement have been irrevocably
terminated.

 

2.6.                            Right to Inspect.  Collateral Agent (through any of
its officers, employees, or agents) shall have the right, from time to time
during normal business hours, at the expense of the Borrower, hereafter to
inspect Debtor’s Books and make copies or abstracts thereof and to check, test,
and appraise the Collateral, or any portion thereof, in order to verify Debtor’s
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.

 

2.7.                            Control Agreements.  Debtor agrees that it will not, and
will not permit its Subsidiaries, if any, to transfer assets out of any of
their Deposit Accounts or securities accounts; provided, however,
that so long as (x) no Event of Default has occurred that is continuing or
would result therefrom, and (y) Collateral Agent has not provided notice
to Debtor of its election, in its sole and absolute discretion, to the
contrary, Debtor and its respective Subsidiaries, if any, may use such assets
(and the proceeds thereof) to the extent not prohibited by this Agreement or
the other Loan Documents and, if the transfer is to an account of Debtor, or
any Subsidiary thereof, at another bank or securities intermediary, so long as
Debtor (or its Subsidiary, applicable), Collateral Agent, and the substitute
bank or securities intermediary have entered into a Control Agreement.  Debtor agrees that it will and will cause its
Subsidiaries, if any, to take any or all reasonable steps that Collateral Agent
request to obtain control in accordance with Sections 9-104, 9-105, 9-106, and 9-107
of the Code with respect to any of its or their Securities Accounts, Deposit
Accounts, electronic chattel paper, Investment Property, and letter-of-credit
rights.  No arrangement contemplated
hereby or by any Control Agreement in respect of any securities accounts or
other Investment Property shall be modified by Debtor without the prior written
consent of Collateral Agent.  Upon the occurrence
and during the continuance of an Event of Default, Collateral Agent may notify
any bank or securities intermediary to liquidate the applicable Deposit Account
or securities account or any related Investment Property maintained or held
thereby and remit the proceeds thereof to the Administrative Agent Account.

 

3.              REPRESENTATIONS AND WARRANTIES.

 

Debtor represents and warrants as follows:

 

3.1.                            No Prior Encumbrances.  Debtor has good and marketable
title to its Collateral, free and clear of all Liens except Permitted Liens.

 

3.2.                            Place of Business/Chief Executive
Office; FEIN.  The chief
executive office of Debtor and all other locations at which Debtor has a place
of business are set forth on Schedule 1 hereto.  Debtor’s FEIN and organizational identification
number are set forth on Schedule 1 hereto.

 

3.3.                            Inventory.  As to each item of Inventory that
is identified by Borrower as Eligible Inventory in a borrowing base report
submitted to either Agent, such Inventory is (a) of good and merchantable quality,
free from known defects, and (b) not excluded

 

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as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Inventory.

 

3.4.                            Location of Inventory and Equipment.  Except as set forth on Schedule 6.01(ff)
of the Financing Agreement, the Inventory and Equipment are not stored with a
bailee, warehouseman, or similar party (without Collateral Agent’s prior
written consent) and are located only at the locations identified on Schedule 6.01(ff)
of the Financing Agreement or otherwise permitted by the Financing Agreement.

 

3.5.                            Inventory Records.  Debtor now keeps, and hereafter at
all times shall keep, correct and accurate records itemizing and describing the
kind, type, quality, and quantity of the Inventory, and Debtor’s cost therefor.

 

3.6.                            Reliance by Collateral Agent;
Cumulative.  The warranties,
representations, and agreements set forth herein shall be conclusively presumed
to have been relied upon by Collateral Agent and the Lender Group, and shall be
cumulative and in addition to any and all other warranties, representations,
and agreements which Debtor shall now or hereinafter give, or cause to be
given, to Collateral Agent or the Lender Group.

 

4.              AFFIRMATIVE COVENANTS.

 

Debtor covenants and agrees that, until
payment in full in cash of the Secured Obligations, and unless Collateral Agent
shall otherwise consent in writing, Debtor shall do all of the following:

 

4.1.                            Location of Inventory and Equipment.  Keep the Inventory and Equipment
only at the locations identified on Schedule 6.01(ff) of the
Financing Agreement or otherwise permitted by the Financing Agreement.

 

4.2.                            Title to Equipment.  Upon Collateral Agent’s request,
deliver to Collateral Agent, properly endorsed, any and all evidences of
ownership of, certificates of title, or applications for title to any items of
Equipment.

 

4.3.                            Maintenance of Equipment.  Keep and maintain the Equipment in
good operating condition and repair (ordinary wear and tear excepted), and make
all necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved.  Debtor shall not permit any item of its
Equipment to become a fixture to real estate or an accession to other property,
and the Equipment is now and shall at all times remain personal property.

 

4.4.                            Taxes.  Cause all assessments and taxes,
whether real, personal, or otherwise, due or payable by, or imposed, levied, or
assessed against Debtor or any of Debtor’s property to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest. Debtor shall make due and timely payment or deposit of all
taxes, assessments, or contributions required of it by law, and will execute
and deliver to Collateral Agent, on demand, appropriate certificates attesting
to the payment or deposit thereof.  Subject
to Permitted Protests, Debtor will make timely payment or deposit of all tax
payments and withholding taxes required

 

10

 

of it by applicable laws, and will, upon
request, furnish Collateral Agent with proof satisfactory to Collateral Agent
indicating that Debtor has made such payments or deposits, other than
assessments or taxes that are the subject of a Permitted Protest.  Debtor shall delivery satisfactory evidence
of payment of applicable excise taxes in each jurisdictions in which (a) it
conducts business or is required to pay any such excise tax, (b) where its
failure to pay any such applicable excise tax would result in a Lien on the
properties or assets of Debtor, or (c) where its failure to pay any such
applicable excise tax would constitute a Material Adverse Effect.

 

4.5.                            Lender Group Expenses.  Debtor shall immediately and
without demand reimburse Collateral Agent for all sums expended by Collateral
Agent which constitute Lender Group Expenses and Debtor hereby authorizes and
approves all advances and payments by Collateral Agent for items constituting
Lender Group Expenses.

 

5.              NEGATIVE COVENANTS.

 

Debtor covenants and agrees that until payment in full of the Secured
Obligations, it will not (unless otherwise permitted under the Financing
Agreement) do any of the following without the prior written consent of the
Collateral Agent:

 

5.1.                            Change Name.  Change its name, FEIN, business
structure, or identity, or add any new fictitious name.

 

5.2.                            Nature of Business.  Make any change in the principal
nature of its business.

 

5.3.                            Inventory and Equipment with Bailees.  Except as set forth on Schedule 6.01(ff)
of the Financing Agreement, allow or cause any of the Inventory or Equipment to
be stored with a bailee, warehouseman, or similar party without Collateral
Agent’s prior written consent.

 

6.              EVENTS OF DEFAULT.

 

The occurrence of an Event of Default (as
defined in the Financing Agreement) shall each constitute an “Event of Default”
under this Agreement.

 

7.              COLLATERAL AGENTS RIGHTS AND REMEDIES.

 

7.1.                            Rights and Remedies.  Upon the occurrence, and during the
continuation, of an Event of Default, to Collateral Agent may, and at the
request of the Required Lenders shall (at their election but without notice of
their election and without demand), do one or more of the following, all of
which arc authorized by Debtor:

 

(a)                                  Proceed directly and at once, without notice, against
Debtor to collect an recover the full amount or any portion of the Secured
Obligations, without first proceeding against any security or collateral for
the Secured Obligations;

 

(b)                                 Without notice to Debtor (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation

 

11

 

(within the meaning of the Code), set off and
apply to the Secured Obligations any and all (i) balances and deposits of
Debtor held by the Lender Group (including any amounts received in any blocked
accounts or any lockbox accounts) or (ii) any indebtedness at any time
owing to or for the credit or the account of Debtor by any member of the Lender
Group;

 

(c)                                  Hold or cause to be held, as cash collateral, any and
all balances and deposits of Debtor held by the Lender Group, and any amounts
received in any blocked accounts or any lockbox accounts, to secure the full
and final repayment in cash of all of the Secured Obligations;

 

(d)                                 Exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein and in the Financing Agreement
and the other Loan Documents or otherwise available to it, all the rights and
remedies available to it at law (including those of a secured party under the
Code) or in equity;

 

(e)                                  Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Collateral Agent considers
advisable, and in such cases, Collateral Agent shall credit, or shall cause
Administrative Agent to credit, the Loan 
Account with only the net amounts received by Collateral Agent in
payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;

 

(f)                                    Cause Debtor to hold all returned Inventory in trust
for Collateral Agent, segregate all returned Inventory from all other property
of Debtor or in Debtor’s possession and conspicuously label said returned
Inventory as the property of Collateral Agent;

 

(g)                                 Without notice or demand, make such payments and do
such acts as Collateral Agent considers necessary or reasonable to protect its
security interest in the Collateral. 
Debtor agrees to assemble the Collateral if Collateral Agent so
requires, and to make the Collateral available to Collateral Agent as
Collateral Agent may designate.  Debtor
authorizes Collateral Agent to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or lien
which in Collateral Agent’s determination appears to conflict with the Collateral
Agent’s Liens and to pay all expenses incurred in connection therewith.  With respect to Debtor’s owned premises,
Debtor hereby grants Collateral Agent a license to enter into possession of
such premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Collateral Agent’s rights or
remedies provided herein, at law, in equity, or otherwise;

 

(h)                                 Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral.  Collateral
Agent is hereby granted a license or other right to use, without charge, Debtor’s
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of
advertising for sale and selling any Collateral, and Debtor’s rights under all
licenses and all franchise agreements shall inure to the Lender Group’s
benefit;

 

12

 

(i)                                     Sell all or any part of the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Debtor’s premises) as Collateral Agent determines is commercially
reasonable.  It is not necessary that the
Collateral be present at any such sale. 
Collateral Agent on behalf of the Lender Group shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption of Debtor, which right or
equity is hereby waived or released to the extent permitted by law;

 

(j)                                     Give notice of any disposition of the Collateral as
follows:

 

(i) Collateral Agent shall give Debtor
and each holder of a security interest in the Collateral who has filed with
Collateral Agent a written request for notice, a notice in writing of the time
and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then the
time on or after which the private sale or other disposition is to be made;

 

(ii) The notice shall be personally
delivered or mailed, postage prepaid, to Debtor as provided in Section 12.01
of the Financing Agreement, at least 5 days before the date fixed for the sale,
or at least 5 days before the date on or after which the private sale or other
disposition is to be made; no notice needs to be given prior to the disposition
of any portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market.
Notice to Persons other than Debtor claiming an interest in the Collateral,
shall be sent to such addresses as they have furnished in writing to Collateral
Agent;

 

(iii) If the sale is to be a public
sale, Collateral Agent also shall give notice of the time and place by
publishing a notice one time at least 5 days before the date of the sale in a
newspaper of general circulation in the county in which the sale is to be held;

 

(k)                                  Credit bid and purchase any Collateral at any public
sale;

 

(l)                                     By an instrument in writing, appoint a receiver (which
term shall include a receiver and manager) of all or any part of the Collateral
and may remove or replace such receiver from time to time or may institute
proceedings in any court of competent jurisdiction for the appointment of such
receiver;

 

(m)                               Require Debtor to establish one or more lockbox or
other restricted accounts satisfactory to Collateral Agent for the collection
of Accounts of Debtor, General Intangibles, or Negotiable Collateral that
constitute Collateral;

 

(n)                                 Notify customers or Account Debtors of Debtor that the
Accounts of Debtor, General Intangibles, or Negotiable Collateral that
constitute Collateral have been assigned to Collateral Agent or that Collateral
Agent has a security interest therein;

 

(o)                                 Collect Debtor’s Accounts, General Intangibles, and
Negotiable Collateral that constitute Collateral directly, and charge the
collection costs and

 

13

 

expenses as Lender Group Expenses; but,
unless and until the Lender Group does so or gives Debtor other written
instructions, Debtor shall collect all of its Accounts, General Intangibles,
and Negotiable Collateral that constitute Collateral for the Lender Group,
which payments, from and after the receipt of a notice from Collateral Agent,
shall be held in trust by the Debtor as the Lender Group’s trustee, and shall
be immediately delivered to Administrative Agent for the benefit of the Lender
Group in their original form as received from such Account Debtor; and

 

(p)                                 Any deficiency which exists after disposition of the
Collateral as provided above will be paid immediately by Debtor up to the
maximum amount, if any, of Debtor’s aggregate liability under the Financing
Agreement or any other Loan Document. Any excess will be returned to Debtor,
without interest and subject to the rights of third parties, by Collateral
Agent as provided in the Loan Documents.

 

Except as required by law, Collateral Agent
may take any or all of the foregoing action without demand, presentment,
protest, advertisement or notice of any kind to or upon Debtor or any other
Person.

 

7.2.                            Remedies Cumulative.  The rights and remedies of
Collateral Agent and the Lender Group under this Agreement, the Loan Documents,
and all other agreements shall be cumulative. 
Collateral Agent and the Lender Group shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in
equity. No exercise by Collateral Agent or the Lender Group of one right or
remedy shall be deemed an election, and no waiver by Collateral Agent or the
Lender Group of any Event of Default on Debtor’s part shall be deemed a
continuing waiver or a waiver of any other Event of Default on any other Debtor’s
part (if any).  No delay by Collateral
Agent or the Lender Group shall constitute a waiver, election, or acquiescence
by it.

 

8.                                      TAXES
AND EXPENSES REGARDING THE COLLATERAL. 
If Debtor fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third persons or entities, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then in Collateral Agent’s
discretion and without prior notice to Debtor, Collateral Agent may do any or
all of the following:  (a) make
payment of the same or any part thereof; (b) set up, or cause
Administrative Agent to set up, such reserves in the Loan Account as Collateral
Agent deems necessary to protect the Lender Group from the exposure created by
such failure; or (c) obtain and maintain insurance policies insuring
Debtor’s ownership and use of the Collateral, and take any action with respect
to such policies as Collateral Agent deems prudent.  Any amounts paid or deposited by Collateral
Agent shall constitute Lender Group Expenses, shall immediately become
additional Secured Obligations, shall bear interest at the applicable rate
described in the Financing Agreement, and shall be secured by the Collateral.  Any payments made by Collateral Agent shall
not constitute an agreement by Collateral Agent to make similar payments in the
future or a waiver by Collateral Agent of any Event of Default under this
Agreement.  Collateral Agent need not inquire
as to, or contest the validity of, any such expense, tax, security interest,
encumbrance, or lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.  Collateral Agent shall use its
reasonable efforts to provide notice Debtor of any action taken by it under
this Section 8.

 

14

 

9.              WAIVERS; INDEMNIFICATION.

 

9.1.                            Demand; Protest; etc.  To the extent permitted by law,
Debtor waives demand, protest notice of protest, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees at any time held by
Collateral Agent on which Debtor may in any way be liable.

 

9.2.                            Collateral Agent’s Liability for
Collateral.  So long as
Collateral Agent complies with its obligations, if any, under the Code,
Collateral Agent shall not in any way or manner be liable or responsible
for:  (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof;
or (d) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other Person.  All risk of
loss, damage, or destruction of the Collateral shall be borne by Debtor.

 

9.3.                            Indemnification.  Debtor agrees to defend, indemnify,
save, and hold harmless Collateral Agent and all of its respective officers,
directors, employees, consultants and agents (collectively, the “Indemnittees”)
from and against:  (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person, and (b) all losses (including reasonable attorneys fees and
disbursements) in any way suffered, incurred, or paid by Collateral Agent or
any of the Indemnities as a result of or in any way arising out of, following,
or consequential to transactions with Debtor, whether under this Agreement, the
Financing Agreement, the other Loan Documents or otherwise, but excluding any
obligations, demands, claims, liabilities, and losses caused by Collateral
Agent’s gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. 
This provision shall survive the termination of this Agreement.

 

10.       NOTICE.

 

All notices and other communications
hereunder to Collateral Agent shall be in writing and shall be mailed, sent or
delivered in accordance with the Financing Agreement and all notices and other
communications hereunder to Debtor shall be in writing and shall be mailed,
sent or delivered in care of Borrower in accordance with the Financing
Agreement.

 

11.       GOVERNING LAW.

 

THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

 

12.                               CONSENT TO JURISDICTION, SERVICE OF PROCESS AND VENUE.

 

ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION

 

15

 

AND DELIVERY OF THIS
AGREEMENT, DEBTOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  DEBTOR HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND DOCUMENTS IN ANY
SUIT, ACTION, OR PROCEEDING BROUGHT IN THE UNITED STATES OF AMERICA ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT BY THE MAILING (BY REGISTERED MAIL OR
CERTIFIED MAIL, POSTAGE PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO
DEBTOR.  DEBTOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING HEREIN SHALL
AFFECT THE RIGHT OF COLLATERAL AGENT OR ANY MEMBER OF THE LENDER GROUP TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST DEBTOR IN ANY OTHER JURISDICTION.  DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE JURISDICTION ON OR LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  TO THE EXTENT THAT DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, DEBTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT.

 

13.       WAIVER OF JURY TRIAL, ETC.

 

DEBTOR AND THE LENDER
GROUP HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT,
WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN
THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY
FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE
THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.  DEBTOR CERTIFIES
THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF COLLATERAL AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT COLLATERAL AGENT ON BEHALF OF THE
LENDER GROUP WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM,
SEEK TO ENFORCE THE FOREGOING WAIVERS. 
DEBTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR COLLATERAL

 

16

 

AGENT’S ENTERING INTO
THIS AGREEMENT ON BEHALF OF THE LENDER GROUP.

 

14.       DESTRUCTION OF DEBTOR’S DOCUMENTS.

 

All written information, schedules, agings,
reports or similar papers delivered to Collateral Agent may be destroyed or
otherwise disposed of Collateral by Collateral Agent four (4) months after
they are delivered to or received by Collateral Agent, unless Debtor requests
in writing, prior to the expiration of such four (4) month period, the
return of said documents, schedules or other papers and makes arrangements, at
Debtor’s expense, for their return.

 

15.       GENERAL PROVISIONS.

 

15.1.                     Effectiveness.  This Agreement shall be binding and
deemed effective when executed by Debtor and accepted and executed by
Collateral Agent.

 

15.2.                     Successors and Assigns.  This Agreement shall bind and inure
to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Debtor may assign this Agreement
or any rights or duties hereunder without prior written consent of the Lender
Group and any prohibited assignment shall be absolutely void.  No consent to an assignment by the Lender
Group shall release Debtor from its Secured Obligations.  On behalf of the Lender Group, Collateral Agent
may assign this Agreement and its rights and duties hereunder in accordance
with the Financing Agreement and no consent or approval by Debtor is required
in connection with any such assignment.

 

15.3                        Section Headings.  Headings and numbers have been set
forth herein for convenience only and shall not constitute a part of this
Agreement, or be given substantive effect. 
Unless the contrary is compelled by the context, everything contained in
each section applies equally to this entire Agreement.

 

15.4.                     Interpretation.  Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
Collateral Agent, the Lender Group, or Debtor, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of all parties hereto.

 

15.5.                     Severability of Provisions.  Any provision if this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

 

15.6.                     Amendments in Writing.  This Agreement can only be amended
by a writing signed by both Collateral Agent and Debtor.

 

15.7.                     Counterparts; Telefacsimile Execution.  This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts,

 

17

 

each of which, when executed and delivered,
shall be deemed to be an original, but all of which taken together shall constitute
one and the same agreement.  Delivery of
an executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart
of this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Agreement.

 

15.8.                     Revival and Reinstatement of Secured
Obligations.  If the
incurrence or payment of the Secured Obligations by Debtor or the transfer by
Debtor to Collateral Agent or the Lender Group of any property of Debtor should
for any reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property (collectively,
a “Voidable Transfer”), and if Collateral Agent or the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount the thereof that Collateral Agent or the
Lender Group is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Collateral Agent or the
Lender Group related thereto, the liability of the Debtor automatically shall
be revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.

 

[Signature page follows.]

 

18

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered as of the date first above
written.

 

	
   

  	
  GEORGIA MATTRESS CORP.,

  
	
   

  	
  a Georgia
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  
	
   

  	
  Name:  Jim R. Black

  
	
   

  	
  Title:    Secretary

  
	
   

  	
   

  
	
   

  	
  ELITE MANAGEMENT TEAM, INC.,

  
	
   

  	
  a Georgia
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  
	
   

  	
  Name:  Jim R. Black

  
	
   

  	
  Title:    Secretary

  

 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

 

S-1

 

SCHEDULE I TO SECURITY AGREEMENT

 

(GMC and EMT)

 

	
  Name of Entity

  	
   

  	
  Org. I.D.

  	
   

  	
  Places of
  Business

  	
   

  	
  Chief
  Executive

  Officer

  	
   

  	
  F.E.I.N

  
	
  Georgia Mattress Corp.

  	
   

  	
  0474065

  	
   

  	
  See Schedule 6.01(ff) to Financing
  Agreement

  	
   

  	
  5815 Gulf Freeway Houston, TX 77023

  	
   

  	
  20-2062519

  
	
  Elite Management Team, Inc.

  	
   

  	
  K535725

  	
   

  	
  See Schedule 6.01(ff) to Financing
  Agreement

  	
   

  	
  1075 Northfield Court, Suite 300
  Roswell, GA 30076

  	
   

  	
  76-0487084Exhibit 10.22

 

PLEDGE
ADDENDUM

 

This Pledge
Addendum, dated as of December 31, 2004, is delivered pursuant to that
certain Pledge Agreement, dated as of March 31, 2004 (as from time to time
amended, modified, supplemented, renewed, extended, or restated, the “Pledge
Agreement”), among MATTRESS HOLDING CORP.,
a Delaware corporation, MATTRESS FIRM, INC.,
a Delaware corporation, MATTRESS FIRM
INVESTMENT MANAGEMENT, INC., an Arizona corporation, FESTRO INC., a Texas corporation, TEAMEXCEL MANAGEMENT COMPANY, a Texas
corporation, MATTRESS FIRM OPERATING, LTD.,
a Texas limited partnership, MATTRESS VENTURE
INVESTMENT MANAGEMENT, LLC, an Arizona limited liability company, FESTRO II, LLC, a Texas limited liability
company, THE MATTRESS VENTURE, L.P.,
a Texas limited partnership (each of the foregoing, a “Pledgor” and
collectively, jointly and severally, the “Pledgors”), and ABELCO FINANCE LLC, a Delaware limited
liability company, as the collateral agent for the lenders under that certain
Financing Agreement dated as of March 31, 2004 (in such capacity, together
with its successors and assigns, if any, in such capacity, “Collateral Agent”).  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Pledge
Agreement.

 

Collateral
Agent and each Pledgor hereby agree:  (a) that
this Pledge Addendum is intended to supplement the Pledge Agreement; (b) Schedule A
to this Pledge Addendum is intended to supplement Schedule A to the
Pledge Agreement; and (c) Collateral Agent is hereby authorized to attach
this Pledge Addendum to the Pledge Agreement, and Schedule A
attached thereto, respectively.  This
Pledge Addendum is a Loan Document.

 

[signature pages to
follow]

 

[SIGNATURE PAGE TO PLEDGE
ADDENDUM]

 

S-2

 

IN WITNESS
WHEREOF, the parties hereto have duly executed this Pledge Addendum, as of the
date first above written.

 

	
   

  	
  MATTRESS HOLDING CORP.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM, INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM INVESTMENT

  
	
   

  	
  MANAGEMENT, INC.,

  
	
   

  	
  an Arizona
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Marc Leder

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  FESTRO, INC.,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  TEAMEXCEL MANAGEMENT COMPANY,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  

 

[SIGNATURE PAGE TO PLEDGE
ADDENDUM]

 

S-1

 

	
   

  	
  MATTRESS FIRM OPERATING, LTD.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By: Festro, Inc.,
  its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS VENTURE INVESTMENT

  
	
   

  	
  MANAGEMENT, LLC,

  
	
   

  	
  an Arizona
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc
  Leder

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  FESTRO II, LLC

  
	
   

  	
  a Texas
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  THE MATTRESS VENTURE, L.P.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By: Festro
  II, LLC, its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  
	
   

  	
  Title:

  	
  Treasurer &
  Secretary

  

 

S-2

 

	
   

  	
  ABLECO FINANCE LLC,

  
	
   

  	
  a Delaware
  limited liability company, as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alexander
  J. Ornstein

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President

  

 

S-3

 

SCHEDULE A

 

TO

 

STOCK PLEDGE
AGREEMENT

 

Pledgor:  Mattress Holding Corp.

 

Pledged
Interests

 

	
  Issuer

  	
   

  	
  Number

  of Shares

  	
   

  	
  Class

  	
   

  	
  Certificate

  Number(s)

  	
   

  	
  Former Name,

  if any, in which

  Certificate Issued

  	
   

  	
  Pledgor’s

  Percentage

  Ownership

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Certificated/

  Uncertificated

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Georgia Mattress Corp.

  	
   

  	
  100

  	
   

  	
  Common

  	
   

  	
  C-1

  	
   

  	
  None

  	
   

  	
  100

  	
  %

  	
  Georgia

  	
   

  	
  Certificated

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]