Document:

Exhibit 10.34

 

Kohlberg Kravis Roberts & Co.
L.P.

9 West 57th Street

New York, New York 10019

 

September __, 2005

Sealy Mattress Company 

One Office Parkway

Trinity, North Carolina 27370

 

Ladies and Gentlemen:

 

Reference is made to the
letter agreement (the “Fee Letter”) dated April 6, 2004, between Sealy Mattress
Company (the “Company”) and Kohlberg Kravis Roberts & Co. L.P. (“KKR”). Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Fee Letter.

 

In consideration of the
premises and agreements contained herein and of other good and valuable
consideration, the sufficiency of which are hereby acknowledged, the parties
agree as follows:

 

1.             Pursuant to paragraph 9 of the Fee
Letter and notwithstanding paragraph 13 thereof, each of KKR and the Company
agree to terminate the Fee Letter and
the Company’s preexisting obligation to pay the Annual Fee in consideration for
the payment of the Termination Fee (as defined below) to KKR, such termination
to be effective upon the consummation of the initial public offering of the
Company’s common stock (the date of such consummation, the “IPO Closing Date”)
and the payment of the Termination Fee referred to below.

2.             The Company agrees to pay KKR a fee equal to ten million
five-hundred thousand dollars ($10,500,000) (the “Termination Fee”), such fee
to be payable in immediately available funds on the IPO Closing Date.

3.             For the avoidance of doubt, it is expressly understood
that paragraphs 4-6, 8, 11 and 12 of Fee Letter will survive in their entirety.

4.             If any term or provision of this letter agreement or the
application thereof shall, in any jurisdiction and to any extent, be invalid
and unenforceable, such term or provision shall be ineffective, as to such
jurisdiction, solely to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable any remaining terms or provisions
hereof or affecting the validity or enforceability of such term or provision in
any other jurisdiction.  To the extent
permitted by applicable law, the parties hereto waive any provision of law that
renders any term or provision of this letter agreement invalid or unenforceable
in any respect.

5.             Each party hereto waives all right to trial by jury in
any action, proceeding or counterclaim (whether based upon contract, tort or
otherwise) related to or arising out of our retention pursuant to, or our
performance of the services contemplated by this letter agreement.

6.             This letter agreement may be executed in counterparts,
each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.

7.             This letter agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.

[Remainder of page intentionally left blank]

 

 

 

If the foregoing
sets forth the understanding between us, please so indicate on the enclosed
signed copy of this letter in the space provided therefor and return it to us,
whereupon this letter shall constitute a binding agreement among us.

	
   

  	
   Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Kohlberg
  Kravis Roberts & Co. L.P. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
   

  	
  Authorized
  Signatory

  

 

 

 

 

 

AGREED TO AND ACCEPTED BY:

 

	
  Sealy Mattress Company

  
	
   

  
	
   

  
	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  

 

 

 

2Exhibit 10.35

 

Note:  Material has been omitted from this Supply
Agreement pursuant to a request for confidential treatment and such material
has been filed separately with the Securities and Exchange Commission.  Material omitted has been replaced with an
asterisk.

 

 

EXECUTION
VERSION

 

 

SUPPLY
AGREEMENT

 

 

BETWEEN

 

SEALY,
INC.

 

AND

 

NOMACO
INC.

 

 

 

Effective: February 18,
2003

 

 

TABLE OF CONTENTS

 

	
  (1)

  	
  ADMINISTRATION

  	
   

  
	
  (2)

  	
  TERM AND TERMINATION

  	
   

  
	
  (3)

  	
  PRODUCTION, SUPPLY,
  PURCHASES AND DELIVERY

  	
   

  
	
  (4)

  	
  PRICING AND PAYMENT TERMS

  	
   

  
	
  (5)

  	
  PRICE INCREASES/DECREASES

  	
   

  
	
  (6)

  	
  TERMINATION PAYMENT

  	
   

  
	
  (7)

  	
  VOLUME DISCOUNT

  	
   

  
	
  (8)

  	
  PERFORMANCE
  METRICS/STANDARDS/SPECIAL INSTRUCTIONS

  	
   

  
	
  (9)

  	
  INVENTIONS

  	
   

  
	
  (10)

  	
  NOMAFOAM LICENSE

  	
   

  
	
  (11)

  	
  INFRINGEMENT OF INTELLECTUAL
  PROPERTY RIGHTS

  	
   

  
	
  (12)

  	
  CHANGE IN MATERIAL, PROCESS
  AND PROCEDURE

  	
   

  
	
  (13)

  	
  SERVICES/ WARRANTIES/
  SPECIFICATIONS

  	
   

  
	
  (14)

  	
  DISASTER RECOVERY

  	
   

  
	
  (15)

  	
  E-COMMERCE

  	
   

  
	
  (16)

  	
  CONFLICT OF INTEREST

  	
   

  
	
  (17)

  	
  REVIEW RIGHTS

  	
   

  
	
  (18)

  	
  INDEMNIFICATION

  	
   

  
	
  (19)

  	
  INSURANCE

  	
   

  
	
  (20)

  	
  SEALY’S AFFILIATES

  	
   

  
	
  (21)

  	
  WESTERN FACILITY

  	
   

  
	
  (22)

  	
  INDEPENDENT CONTRACTOR

  	
   

  
	
  (23)

  	
  COMPLIANCE

  	
   

  
	
  (24)

  	
  EXCLUSIVITY

  	
   

  
	
  (25)

  	
  CONFIDENTIALITY

  	
   

  
	
  (26)

  	
  NOTICES

  	
   

  
	
  (27)

  	
  USE OF MINORITY ENTERPRISES

  	
   

  
	
  (28)

  	
  ASSIGNMENT

  	
   

  
	
  (29)

  	
  GOVERNING LAW

  	
   

  

 

i

 

	
  (30)

  	
  DISPUTE
  RESOLUTION

  	
   

  
	
  (31)

  	
  SEVERABILITY

  	
   

  
	
  (32)

  	
  SURVIVAL OF OBLIGATIONS

  	
   

  
	
  (33)

  	
  MISCELLANEOUS

  	
   

  
	
  (34)

  	
  GUARANTY

  	
   

  

 

ii

 

EXHIBITS

 

	
  EXHIBIT A –
  PRODUCTS/PRICING

  
	
  EXHIBIT B –
  APPLICATION PRODUCTS

  
	
  EXHIBIT C –
  FORECASTS AND CAPS

  
	
  EXHIBIT D –
  PRODUCT SPECIFICATIONS

  
	
  EXHIBIT E –
  PERFORMANCE METRICS/STANDARDS/SPECIAL INSTRUCTIONS

  
	
  EXHIBIT F –
  AFFILIATES

  
	
  EXHIBIT G –
  NOMACO MARKS/MARKETS

  
	
  EXHIBIT H –
  INITIAL QUANTITIES OF PRODUCTS

  
	
  EXHIBIT I –
  LICENSE AGREEMENT

  

 

iii

 

SEALY, INC. SUPPLY AGREEMENT

 

THIS
AGREEMENT (“Agreement”), made as of February 18, 2003 (the “Effective Date”),
by and between SEALY, INC., a North Carolina corporation, with its principal
offices at One Office Parkway, Trinity, NC 27370 (hereinafter referred to as “SEALY”),
and NOMACO INC., a North Carolina corporation with offices at 501 NMC Drive,
Zebulon, North Carolina 27597 (hereinafter referred to as “NOMACO”).

 

WHEREAS,
NOMACO has developed and manufactures certain products set forth in Exhibit A
(the “Products”); and

 

WHEREAS,
SEALY desires to purchase the Products from NOMACO upon the terms and
conditions set forth herein for the purpose of using the Products to
manufacture certain new application products set forth in Exhibit B
(the “Application Products”).

 

WHEREAS, Sealy Mattress
Company, a Delaware corporation and the parent corporation of SEALY (“GUARANTOR”),
joins this Agreement as a party for the purpose set forth in Section 34.

 

NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties agree as follows:

 

(1)                                 ADMINISTRATION

 

All
orders for Products during the Term of this Agreement shall be evidenced by (i) written
purchase orders delivered by SEALY to NOMACO specifying the identity of the
Products, the requested quantity of the Products and the requested delivery
date and (ii) a confirmation, including confirmed quantity and delivery
date, issued by NOMACO to SEALY.  NOMACO
shall exercise it best efforts be able to deliver Products to SEALY within 104
days after the Effective Date but shall not be deemed in breach of this
Agreement so long as NOMACO is able to deliver Products within 166 days after
the Effective Date.   Notwithstanding the
delivery schedule set out above, NOMACO shall deliver to SEALY the
quantity of the Products specified on Exhibit H for training and
marketing.  The terms and conditions of
each order shall be as set forth is this Agreement which shall take precedence
over the terms and conditions contained in any purchase order, confirmation,
quotation invoice or other document exchanged between the parties.  Each party shall provide such personnel as it
reasonably determines is necessary to perform in accordance with this
Agreement.  Such personnel may be employees
of NOMACO, independent contractors under the supervision or direction of NOMACO
and employees of SEALY designated by SEALY to consult with NOMACO with respect
to the development, manufacture and delivery of the Products (collectively, the
“Personnel”).  Each party shall be
responsible for all costs, wages and other expenses of its respective employees
and consultants engaged in connection with this Agreement and performance
hereunder.

 

1

 

(2)                                 TERM AND TERMINATION

 

(a)                                  The initial term of this Agreement shall commence on
the Effective Date, and unless sooner terminated as otherwise provided in this Section 2
of this Agreement, shall be in effect until the fourth (4th)
anniversary of the Effective Date (the “Initial Term”).  Thereafter, this Agreement shall continue on
a year-to-year basis unless and until terminated by either party giving the
other party at least one hundred eighty (180) days’ written notice; provided,
that SEALY may, if SEALY is in compliance with this Agreement and has
purchased the Minimum Purchases established pursuant to Section 2(e) for
each applicable period, extend the Term in
accordance with this Section 2(a) below in the event of an Adverse
Change of Control (as defined below). 
Any such renewal and together with the Initial Term is referred to
herein as the “Term.”  In the event of an
Adverse Change of Control, the Term of this Agreement shall, at the option of
SEALY be automatically extended, if necessary, to ensure at least 24 calendar months remain in the then current Term.  As used herein, “Adverse Change in Control”
shall mean any of the following:  (i) the
sale to an Adverse Party (as defined below) of more than fifty percent (50%) of
the ownership interests of NOMACO; (ii) the sale to an Adverse Party of
substantially all of the assets of NOMACO; or (iii) a merger, exchange,
consolidation or other business combination involving NOMACO and an Adverse
Party after which the shareholders of NOMACO immediately before the transaction
own or control less than fifty percent (50%) of the surviving entity.  An “Adverse Party” means entity that
generates at least * in net revenue (determined for the fiscal year ending
immediately prior to any change of control) directly from the sale of bedding
materials, supplies or products in the United States in the capacity of either
a manufacturer or supplier in the bedding industry.  Following any such Adverse Change
of Control, the prices of the Products shall not change without the express
written consent of SEALY except pursuant to the adjustments contemplated by Section 5.  For purposes of this Section 2(a), “control”
means the possession, directly or indirectly, of the power to vote more than
50% of the securities or other equity interests
of a person or entity having ordinary voting power.

 

(b)                                 This Agreement may be terminated prior to the
expiration of the Term as follows: (i) by either party in the event that
the other party materially breaches or fails to perform any of its material
obligations under this Agreement and such breach or failure continues for a
period of ninety (90) days after receipt of written notice thereof from the
non-breaching party without cure or commencement by the breaching party of
actions reasonably calculated to cure such breach in a reasonable period of
time; provided, that such cure period shall be 30 days with respect to
any failure of SEALY to pay any amounts due NOMACO under this Agreement or
breach of Section 6(b); provided, further, that such cure
period shall be five (5) days in the event SEALY has failed to timely pay
any amount due under this Agreement twice in any three-month period; provided,
further that, notwithstanding anything herein to the contrary, any violation by
NOMACO of Sections 16 (conflict of interest) and 27 (minority enterprises)
shall not be deemed material violations of this Agreement; (ii) by either
party if the other party (A) is

 

2

 

or
becomes a party to any bankruptcy or receivership proceeding or any similar
action affecting its financial condition or property, if such proceeding (if
not filed or initiated by such other party) has not been dismissed within
thirty (30) days, (B) the general assignment by either party for the
benefit of its creditors or (C) the appointment of a receiver for either
party; or (iii) by NOMACO immediately upon written notice to SEALY in the event SEALY fails to purchase the Minimum
Purchases (as defined in Section 2(e)) subject to the provisions of
Section 6(b) or in the event GUARANTOR terminates, repudiates or
otherwise attempts to terminate the guaranty contained in Section 34 of
this Agreement.

 

(c)                                  Upon any termination of this Agreement by NOMACO in
accordance with Section 2(b) above prior to the expiration of the
Term, SEALY agrees that (i) NOMACO shall be released from any obligation
to deliver all purchase orders or portions thereof placed by SEALY under this
Agreement which have not been delivered by NOMACO; (ii) within 10 days of
such termination, SEALY shall purchase from NOMACO all inventory of the
Products and related work in process at the purchase price for completed
Products established under this Agreement then in effect at the date of
termination; and (iii) SEALY shall pay immediately to NOMACO in
immediately available funds the applicable Termination Fee (as defined in Section 6(a)),
any unpaid invoices or any other amounts due to NOMACO under this Agreement.

 

(d)                                 Upon any termination of this Agreement by SEALY in
accordance with Section 2(b) above prior to the expiration of the
Term, NOMACO agrees that (i) SEALY shall be released from any obligation
to purchase additional Products under this Agreement, except open purchase
orders placed by SEALY for Products delivered by NOMACO in accordance with this
Agreement, and (ii) NOMACO shall pay immediately to SEALY any amounts due
to SEALY under this Agreement; provided, that upon any termination of
this Agreement by SEALY in accordance with Section 2(b)(i) above
prior to the expiration of the Term, NOMACO agrees immediately upon such
termination to execute and deliver to
SEALY a temporary license in the form
attached hereto as Exhibit I.

 

(e)                                  In consideration of and as a material inducement for
the significant investment required of NOMACO to perform its requirements
hereunder, SEALY agrees to immediately pay NOMACO upon any termination of this
Agreement the applicable Termination Fee, if any, in accordance with Section 6
in the event SEALY does not purchase Products
from NOMACO and make payment therefore in the aggregate which equal or exceed
the applicable “Minimum Purchases” set forth
below.  Minimum Purchases shall be based on net sales of Products to SEALY in
dollars under the Agreement after the Effective Date determined on an aggregate
basis from the first purchase of Products net of any taxes, service charges,
levies, freight, insurance, shipping, handling, discounts, rebates, credits,
returns or other allowances of any kind (other than the volume rebate pursuant
to Section 7 of this Agreement). 
For purposes of satisfying the Minimum Purchases for the period ending December 31,
2003, SEALY

 

3

 

shall be credited for all polyethylene foam products (including the
Products and Nonproprietary Products as defined in Section 3) purchased by
SEALY from NOMACO beginning January 1, 2003 and ending December 31,
2003.

 

	
  Purchase Period

  	
   

  	
  Minimum Purchases (Aggregate

  From Effective Date)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Through December 31, 2003

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
  Through December 31, 2004

  	
   

  	
  $

  	
  30,000,000

  	
   

  
	
  Through December 31, 2005

  	
   

  	
  $

  	
  50,000,000

  	
   

  
	
  Through December 31, 2006

  	
   

  	
  $

  	
  70,000,000

  	
   

  
	
  After December 31, 2006

  	
   

  	
  Not Applicable

  	
   

  

 

(f)                                    The acceptance by either party of any order for any
Products after the giving of notice of termination of this Agreement shall not
be construed as a renewal or extension of this Agreement, nor as a waiver of
termination, but in the absence of a written agreement otherwise, all such
orders shall be governed by provisions identical to the applicable provisions
of this Agreement.

 

(g)                                 Within thirty (30) days after the effective date of
termination of this Agreement, each party to this Agreement shall return to the
other party, in accordance with the other party’s instructions, all materials
of such other party related to the Products or the Application Products,
including each party’s Confidential Information (as defined below).

 

(h)                                 Upon any termination of this Agreement by either party
hereto, the obligations of the parties under Sections 2, 6, 9, 10, 11, 13, 18,
25, 26, 28, 29, 30, 31, 32, 33 and 34 of this Agreement shall survive the termination of
this Agreement for any reason.  

 

(i)                                     In the event of any termination of this Agreement, the
party terminating the Agreement shall be entitled (i) to pursue such
remedies as are available to it in law or in equity, (ii) to recover from
the other party reasonable attorneys’ fees, costs or other amounts incurred by
the party terminating the Agreement in connection therewith (including any
costs of collection of amounts due under this Agreement) and (iii) to
recover any other amounts due from the other party under this Agreement.

 

(3)                                 PRODUCTION, SUPPLY, PURCHASES AND DELIVERY

 

(a)                                  NOMACO agrees to sell and deliver to SEALY, and SEALY
agrees to purchase and receive from NOMACO, during the Term of this Agreement
all of SEALY’s total requirements for the Products for use in the business of
SEALY for the manufacture of beds and bedding related products, including
without limitation, with

 

4

 

respect
to the Application Products, subject to caps on such requirements determined
pursuant to Section 3(c) and Exhibit H.  During the Term of this Agreement, SEALY shall also purchase all of SEALY’s total requirements
for all other polyethylene foam products which are not included within the
Products (the “Nonproprietary Products”) as long as NOMACO’s pricing, quality, and specifications for such
Nonproprietary Products are competitive with other polyethylene foam product
suppliers.  SEALY shall provide written
notification and substantiate to NOMACO
concerning the supplier(s) and criteria in respect to which SEALY has determined that NOMACO is not competitive for such Nonproprietary Products
and may purchase such polyethylene foam products identified in such notice from
the identified supplier(s) on the terms identified therein unless and until NOMACO offers such terms to SEALY.

 

SEALY
may not cancel or change an order once placed with and accepted by NOMACO if
the order has already left NOMACO’s facility.

 

(b)                                 Subject to the limitations of Section 3(c),
NOMACO will maintain sufficient production capacity and redundancy to satisfy
the forecasted requirements of SEALY under Section 3(c) through a
normal five (5) day work week. NOMACO will increase its capacity to meet
reasonable forecasted increased requirements of SEALY, subject to reasonable
lead times to implement the new capacity. 
Commencing as soon as commercially practicable after the Effective Date,
NOMACO will maintain in its inventory at least 21 days of supply of the
Products to meet the reasonably forecasted purchases of SEALY in accordance
with Section 3(c).

 

(c)                                  Attached hereto as Exhibit C is the best
estimate of the forecasted purchase requirements for the Products on a monthly
basis during the Initial Term.  Forecasts
for the 2004 calendar year shall serve as the forecasts for each year
thereafter during the Term unless the parties otherwise agree in writing.  The maximum amount of Products which NOMACO
will be required to deliver under this Agreement during any calendar month
shall not exceed 110% of the forecasted requirements for such calendar month,
as set forth in Exhibit C. 
SEALY may submit to NOMACO a proposed increase to the forecasts on Exhibit C
and NOMACO will respond to such proposal within thirty (30) days, including
with such response a proposed time frame.

 

(d)                                 All deliveries shall be F.O.B. (as such term is
defined in the Uniform Commercial Code in effect from time to time in the State
of North Carolina) Destination/Pre-Pay
and Add. 
All deliveries shall be made via common carrier or some other reasonable
means chosen by NOMACO.  NOMACO shall
prepay all related freight costs (including applicable insurance, taxes, fees
or other changes) as may be required by such carrier on behalf of SEALY who
shall reimburse NOMACO for all such costs in a reasonable time (not to exceed
thirty (30) days).  NOMACO may add all
such related freight cost and charges for each order to the related invoice,
and SEALY will pay such amount pursuant to such invoice.  Orders for the Products may be delivered in
part or all at one time as determined by NOMACO; provided, that if
partial delivery is to be made,

 

5

 

NOMACO
shall obtain the prior consent of SEALY. 
Upon delivery of the Products to SEALY by such common carrier, all risk of loss to the Products shall pass to
SEALY.  To the extent that a SEALY
Affiliate fails to pay NOMACO or averages in any six (6)  month period
more than 10 days past due on its payable, NOMACO may demand that SEALY
guarantee the payments of any future deliveries made to that Affiliate or
NOMACO can refuse to ship additional Products to that Affiliate.

 

(e)                                  No party to this Agreement shall be deemed to be in
breach or default of any provisions hereof by reason of delay or failure in the
discharge or performance of any duty or obligation hereunder due to strikes,
lock-outs, natural calamity, war, terrorist activity, government laws or
regulations, civil disorder, government embargoes, force majeure or any other
cause beyond the reasonable control of the party so affected; provided,
however, that the party so affected gives prompt written notice to the other
party of the facts and circumstances relating to any such delay or failure and
takes all commercially reasonable actions within its power to promptly remove
the basis for any such delay or failure, so as to resume such discharge or
performance as soon as possible.  The
foregoing shall not be construed to limit the duties of NOMACO pursuant to Section 14
of this Agreement.  To the extent
that any such force majeure affects SEALY’s continuous supply of polyethylene
foam products from NOMACO as contemplated by this Agreement and substitute
products are available and deliverable to SEALY in the marketplace (such as in
the instance of a strike at NOMACO’s facility, or a strike at a third party
transportation company where product cannot be supplied from one location, but
could be supplied from another), after reasonable written notice to NOMACO,
SEALY may cover its reasonable requirements for the duration of such force
majeure in the market without breaching this Agreement.  At such time as NOMACO restores its ability
to manufacture and delivery polyethylene foam products to SEALY, both parties
will be required to abide by the terms of the Agreement, but appropriate
considerations will be given to re-set the Minimum Purchases established in
this Agreement.

 

(4)                                 PRICING AND PAYMENT TERMS

 

(a)                                  SEALY shall pay directly for Products purchased, in
accordance with the rates and charges set forth in Exhibit A
attached hereto as a part hereof, or rates which may be provided in any
supplemental schedule agreed to in writing by the parties and attached
hereto as a part of this Agreement, as evidenced by written signature thereto
by duly authorized officers of each party hereto.  Pricing will be firm and fixed until January 15,
2004, and only then subject to price increase or decrease as required by Section 5
of this Agreement.

 

(b)                                 Payment terms shall be net 30 days upon tender of
delivery of the Products F.O.B. Destination. 
NOMACO shall not sell, assign or transfer SEALY’s payables hereunder to
any third party factor for collection; provided, that NOMACO shall be
entitled to pledge its interest therein in connection with a secured credit
facility

 

6

 

and
collaterally assign all rights under this Agreement to its senior lenders.  If SEALY fails to pay the amounts due with
respect to any invoices within such period, NOMACO may, in its sole discretion
without prejudice to any other remedy, do any one or more of the
following:  (i) postpone delivery of
any other purchase orders; (ii) alter payment terms; (iii) terminate
shipments; or (iv) terminate this Agreement in accordance with Section 2(b).

 

(c)                                  Prices payable for the Products pursuant to this
Agreement shall not include sales, use, excise, privilege, or any similar tax
levied by any federal, state, local or other governmental authority and SEALY
shall pay, and be obligated to pay, any such applicable tax.

 

(5)                                 PRICE INCREASES/DECREASES

 

(a)                                  For purposes of this Section 5, the following
terms have the definitions set forth below:

 

(i)                                     “Adjustment Date” means each January 15 and July 15
during the Term of this Agreement beginning on January 15, 2004.

 

(ii)                                  “Adjustment Period” means the six month period ending
on the last day of the calendar month immediately preceding the applicable
Adjustment Date.

 

(iii)                               “Base Price” shall initially be $0.504/lb. and shall
thereafter be increased or decreased to an amount equal to the Period Average
LDPE for any Adjustment Period in which there is an adjustment to the price of
the Products under Section 5(b).

 

(iv)                              “LDPE” means the Chemical Market Associates Index for
Low Density Polyethylene. In the event such information ceases to be published
during the Term, the parties shall cooperate in good faith to identify and
agree upon a replacement index that achieves substantially the same accuracy
and intent as the price adjustment procedures set forth in this Section 5.

 

(v)                                 “Period Average LDPE” shall be an amount equal to the
quotient of (A) the sum of the lowest reported amount of the LDPE for each
of the six months in the applicable Adjustment Period divided  by (B) six
(6).

 

(b)                                 Pricing for all Products set forth on Exhibit A
purchased under this Agreement will be firm until January 15, 2004.  On and after January 15, 2004, prices
for the Products will be adjusted (up or down) on each Adjustment Date, if
required by this Section 5(b), with respect to purchase orders placed and
confirmed consistent with forecasts after such Adjustment Date in an amount
equal to the product of (i) the “Adjustment Percentage” determined in
accordance with the formula set forth below and

 

7

 

(ii) the
prices then currently in effect for the Products set forth on Exhibit A;
provided, that no such adjustment shall be made unless the
difference between the Period Average LDPE for the applicable Adjustment Period
and the then current Base Price is equal to or greater than $0.04.  In the event of any adjustment to prices
pursuant to this Section 5(b), then the parties shall prepare a new Exhibit A
which shall specify the Adjustment Percentage, the new Base Price, the
applicable Adjustment Date and the adjusted prices for the Products and shall
be signed by duly authorized officers of each party.  The new price shall become the new Base
Price, and the Base Price will not change unless there is an adjustment in the
price pursuant to the terms of this Section 5(b).

 

	
  ADJUSTMENT

  	
  =

  	
  (Period Average LDPE -
  Base Price)

  	
   

  	
  x *

  
	
  PERCENTAGE

  	
  Base Price

  

 

Example
1:  This example reflects the initial adjustment
analysis under this Section 5(b) after six months under this
Agreement assuming the Effective Date is January 1, 2003 and the LDPE’s
referenced below.

 

	
  LDPE

  MONTH

  	
   

  	
  $

  	
   

  
	
  Jan. 03

  	
   

  	
  0.43

  	
   

  
	
  Feb. 03

  	
   

  	
  0.44

  	
   

  
	
  Mar. 03

  	
   

  	
  0.47

  	
   

  
	
  Apr. 03

  	
   

  	
  0.47

  	
   

  
	
  May 03

  	
   

  	
  0.51

  	
   

  
	
  June 03

  	
   

  	
  0.53

  	
   

  

 

Period
Average LDPE = $0.475

Beginning
Base Price = $0.504

Difference
= $0.029 ($0.04 trigger not satisfied)

Ending
Base Price (for next Adjustment Date) = $0.504

 

Example
2:  This example reflects the adjustment analysis
under this Section 5(b) after the second six months under this
Agreement assuming the Effective Date is January 1, 2003, the changes
resulting from Example 1 above and the LDPE’s referenced below.

 

8

 

	
  LDPE

  MONTH

  	
   

  	
  $

  	
   

  
	
  Jul. 03

  	
   

  	
  0.42

  	
   

  
	
  Aug. 03

  	
   

  	
  0.45

  	
   

  
	
  Sept. 03

  	
   

  	
  0.44

  	
   

  
	
  Oct. 03

  	
   

  	
  0.43

  	
   

  
	
  Nov. 03

  	
   

  	
  0.43

  	
   

  
	
  Dec. 03

  	
   

  	
  0.48

  	
   

  

 

Period
Average LDPE = $0.442

Beginning
Base Price = $0.504

Difference
= $0.062  ($0.04  trigger satisfied)

 

	
  Adjustment Percentage

  	
  =

  	
  ($.442-$.504)

  	
   

  	
  x * = *

  
	
  $.504

  

 

Ending
Base Price (for next Adjustment Period) = *

 

Based on the foregoing, the Adjustment Dates and Adjustment Periods are
as follows:

 

	
   

  	
   

  	
  Adjustment Date

  	
   

  
	
   

  	
   

  	
  15-Jan-04

  	
   

  	
  15-Jul-04

  	
   

  	
  15-Jan-05

  	
   

  	
  15-Jul-05

  	
   

  	
  15-Jan-06

  	
   

  	
  15-Jul-06

  	
   

  
	
   

  	
   

  	
  Jul-03

  	
   

  	
  Jan-04

  	
   

  	
  Jul-04

  	
   

  	
  Jan-05

  	
   

  	
  Jul-05

  	
   

  	
  Jan-06

  	
   

  
	
   

  	
   

  	
  Aug-03

  	
   

  	
  Feb-04

  	
   

  	
  Aug-04

  	
   

  	
  Feb-05

  	
   

  	
  Aug-05

  	
   

  	
  Feb-06

  	
   

  
	
  Months Reviewed

  	
   

  	
  Sep-03

  	
   

  	
  Mar-04

  	
   

  	
  Sep-04

  	
   

  	
  Mar-05

  	
   

  	
  Sep-05

  	
   

  	
  Mar-06

  	
   

  
	
   

  	
   

  	
  Oct-03

  	
   

  	
  Apr-04

  	
   

  	
  Oct-04

  	
   

  	
  Apr-05

  	
   

  	
  Oct-05

  	
   

  	
  Apr-06

  	
   

  
	
   

  	
   

  	
  Nov-03

  	
   

  	
  May-04

  	
   

  	
  Nov-04

  	
   

  	
  May-05

  	
   

  	
  Nov-05

  	
   

  	
  May-06

  	
   

  
	
   

  	
   

  	
  Dec-03

  	
   

  	
  Jun-04

  	
   

  	
  Dec-04

  	
   

  	
  Jun-05

  	
   

  	
  Dec-05

  	
   

  	
  Jun-06

  	
   

  

 

(6)                                 TERMINATION PAYMENT

 

(a) SEALY acknowledges and agrees that NOMACO will invest
significant capital and other resources in connection with preparation and
performance by NOMACO under this Agreement in anticipation of supplying the
total requirements for SEALY of all Products during the Term.  As a material inducement for NOMACO to enter
into this Agreement, SEALY hereby agrees to immediately pay NOMACO, in addition
to any other amounts due NOMACO pursuant to this Agreement, as liquidated
damages the amount set forth below as the “Termination Fee” corresponding to
the date SEALY terminates this Agreement other than as permitted pursuant to Section 2(b)(i) hereof
(“SEALY Termination Breach”) or the date NOMACO
first delivers written

 

9

 

notice
to SEALY in accordance with Section 26 (“Termination Notice”) of its
desire to terminate this Agreement prior to the expiration of the Initial Term
for any reason other than due to a termination by SEALY pursuant to Section 2(b)(i).  The amounts specified below as the applicable
Termination Fee are agreed upon as liquidated damages and not as a penalty. The
parties hereto have computed, estimated and agreed upon such amounts as an
attempt to make a reasonable forecast of probable actual loss to be incurred by
NOMACO because of the difficulty of estimating with exactness the damages that
will result.  The Termination Fee shall
be due and payable within fifteen (15) days after a SEALY Termination
Breach or delivery of a Termination Notice subject to right of SEALY to cure
any failure to purchase the Minimum Purchases pursuant to Section 6(b).  The Termination Fee shall be determined solely by the date of the SEALY
Termination Breach or the Termination Notice
(as the case may be) irrespective of any delay
in terminating this Agreement or payment of the Termination Fee.  In the event
SEALY fails to pay any Termination Fee due hereunder when due, SEALY shall pay
to NOMACO interest on the amount of such Termination Fee at an annual rate
equal to the prime rate as is printed in the Wall Street
Journal on the last business day of any month that there is an
outstanding amount under this Agreement plus 2%, compounded monthly, based on a 360-day year.  Any such interest shall accrue commencing on
the date of the SEALY Termination Breach
or the Termination Notice (as the case
may be).

 

	
  Date of Termination Notice or
  SEALY Termination Breach

  	
   

  	
  Termination Fee ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  On or before January 15, 2004

  	
   

  	
  *

  	
   

  
	
  After January 15, 2004 and on or before
  January 15, 2005

  	
   

  	
  *

  	
   

  
	
  After January 15, 2005 and on or before January 15,
  2006

  	
   

  	
  *

  	
   

  
	
  After January 15, 2006 and on or before
  January 15, 2007

  	
   

  	
  *

  	
   

  
	
  After January 15, 2007

  	
   

  	
  *

  	
   

  

 

(b)           In the event NOMACO delivers a
Termination Notice as contemplated by Section 6(a), SEALY may cure such
failure to purchase the Minimum Purchases in respect to any period specified in
Section 2(e), above, by timely taking the following actions (subject to
the limitations set forth immediately below):

 

10

 

(i)            deliver
written notice to NOMACO within three (3) days of the Termination Notice
of its intent to cure in accordance with this Section 6(b); (ii) pay
within fifteen (15) days of the Termination Notice to NOMACO in immediately
available funds an amount equal to the deficit in Minimum Purchases (less the
amount paid to NOMACO per any order issued pursuant to clause (iii)); and/or (iii) submit
an order to NOMACO for Products with an invoice amount equal to the amount of
such deficit in Minimum Purchases (less the amount of any cash paid to NOMACO pursuant
to clause (ii)) and pay the invoice for such order in full in immediately
available funds within fifteen (15) days of the date of such order.  The following limitations shall apply with
respect to any action as may be taken by SEALY to cure the failure to make
Minimum Purchases:

 

(A)          Any curative order per clause (iii) above
may not exceed the lesser of $1,000,000 or one month’s forecast for the
applicable year;

 

(B)           No curative order or payment shall be
applied towards satisfaction of the Minimum Purchases for any prior period
other than the calendar year immediately preceding such curative order or
payment; and

 

(D)          Any curative order or payment with
respect to the period ending December 31, 2006 shall be placed and paid in
full within ten (10) days after the fourth anniversary of the Effective
Date.

 

If SEALY has cured its
failure to purchase the Minimum Purchases in accordance with this Section 6(b) to
the reasonable satisfaction of NOMACO, then SEALY shall be considered to have
purchased the Minimum Purchase for the applicable period subject to the cure
and NOMACO shall withdraw its Termination Notice and this Agreement shall
remain in full force and effect.  In the
event SEALY fails to comply strictly with each of the requirements established
by this Section 6(b), then the Agreement shall be terminated in accordance
with Section 2(b)(iii) and SEALY shall pay NOMACO the applicable
Termination Fee in accordance with the terms set forth above in Section 6(a),
together with interest thereon, and any other amounts due under this Agreement.

 

(7)                                 VOLUME DISCOUNT

 

Provided
that SEALY is in compliance with the provisions of this Agreement and has
purchased the Minimum Purchases established pursuant to Section 2(e) for
each applicable period, NOMACO will pay to SEALY an annual rebate within 60
days after the end of each calendar year based upon the aggregate net sales of
Products to SEALY in dollars under the Agreement during such calendar year net
of any taxes, service

 

11

 

charges,
levies, freight, insurance, shipping, handling, discounts, rebates, credits,
returns or other allowances of any kind, other than the volume rebate pursuant
to Section 7 of this Agreement, calculated in
accordance with the following scale:

 

	
  SEALY

  Net Purchase Level ($MM)

  	
   

  	
  Rebate Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  0.0-30.0

  	
   

  	
  *

  	
   

  
	
  30-34.9

  	
   

  	
  *

  	
   

  
	
  35-39.9

  	
   

  	
  *

  	
   

  
	
  40+

  	
   

  	
  *

  	
   

  

 

Any
rebate earned by SEALY in any calendar year will be cumulative and the
respective Rebate Percentage for any Net Purchase Level shall apply back to the
first dollar.  Any rebate will be paid
directly to SEALY within 60 days of the end of each calendar year in which it
was earned.  By way of example, SEALY
would be entitled to a rebate of * with aggregate net sales during any calendar
year of $32.0 million (calculated as * of the entire $32.0 million).

 

(8)                                 PERFORMANCE METRICS/STANDARDS/SPECIAL INSTRUCTIONS

 

NOMACO
shall manufacture and deliver to SEALY the Products consistent in all material respects with the performance
metrics, standards and other special instructions set forth in Exhibit E
attached hereto.

 

(9)                                 INVENTIONS

 

(a)                                  With respect to the Application Products, all work
product, procedures, know-how, ideas, conceptions, developments, inventions
(patentable or unpatentable), techniques, algorithms, concepts, software,
programs, enhancements, designs, documents (including without limitation
schedules, time lines, drawings and specifications), marks, names and
improvements conceived of, made, devised, created, generated or developed by SEALY,
by NOMACO or by any of the Personnel with respect to the Application
Products in the course of research or
development of the Application Products or performance by the parties under
this Agreement, whether before or after the Effective Date, shall be and remain
the property of SEALY (including, without limitation as to use or application,
the welding technology used by SEALY in its operations applied to the
Application Products), subject to the intellectual property rights of NOMACO pursuant to Section 9(b) to
the intellectual property related to the Products or any other polyethylene
products, including any improvements
thereof; provided, however, that NOMACO shall retain and own any such
intellectual property or improvements thereon related to the process for
manufacturing or producing the Products or the Application Products.  SEALY may, at
its own expense, prepare and prosecute applications for copyright

 

12

 

registration,
trademark registration, service mark registration, trade name registration or
letters patent, or may take such other actions that it deems necessary or
appropriate to protect its intellectual property or other rights with respect
to the aforementioned items. NOMACO agrees to cooperate with SEALY in such
actions and in enforcing and protecting the intellectual property rights of
SEALY hereunder, provided that SEALY shall reimburse NOMACO for all reasonable
cost and expenses related thereto.

 

(b)                                 With respect to the Products or any other polyethylene
products, all work product, procedures, know-how, ideas, conceptions,
developments, inventions (patentable or unpatentable), techniques, algorithms,
concepts, software, programs, enhancements, designs, documents (including
without limitation schedules, time lines, drawings and specifications), marks,
names and improvements conceived of, made, devised, created, generated or
developed by NOMACO, by SEALY or by any of the Personnel with respect to
the Products in the course of research or development
of the Products or performance by the parties under this Agreement, whether
before or after the Effective Date, shall be and remain the property of
NOMACO.  NOMACO may, at its own expense,
prepare and prosecute applications for copyright registration, trademark
registration, service mark registration, trade name registration or letters
patent, or may take such other actions that it deems necessary or appropriate
to protect its intellectual property or other rights with respect to the
aforementioned items.   SEALY agrees to
cooperate with NOMACO in such actions and in enforcing and protecting the
intellectual property rights of NOMACO hereunder,  provided that NOMACO shall reimburse SEALY
for all reasonable costs and expenses related thereto.

 

(10)                          NOMAFOAM LICENSE

 

(a)                                  So long as SEALY is in compliance with this Agreement
and SEALY offers the Application Products in accordance with the quality
standards and specification approved by NOMACO as set forth below, NOMACO
hereby grants to SEALY an exclusive, royalty free license to use the trademarks
or trade names of NOMACO listed on Exhibit G (the “NOMACO Marks”)
for the marketing and sale of the Application Products in the geographic and
product markets specified in Exhibit G (the “Markets”) until the
expiration or termination of this Agreement. 
SEALY may market
and sell the Application Products in the Markets under the NOMACO Marks only if they contain the Products to which the NOMACO
Marks relate.  SEALY shall not use or permit the use of any NOMACO Marks in connection with any other products and use of the NOMACO Marks shall at all times be in accordance with NOMACO’s reasonable written trademark, trade name or service mark use policies in effect from time to
time.  Notwithstanding the foregoing, SEALY may market and sell Application
Products under SEALY’s own trademarks,
trade names or service mark.  Except for exclusive use of the NOMACO Marks
with the Application Products in the Markets, the license granted hereunder
shall in no way limit NOMACO’s use, or right to license to any other person or
entity, of the NOMACO Marks for use in any markets or with respect to any
products.  NOMACO agrees not to use, or
grant a license to any person to use, the NOMACO Marks for the

 

13

 

Markets
in respect to products directly competitive with the Application Products for a
period of one (1) year following any expiration or termination of this
Agreement, other than termination of this Agreement by NOMACO pursuant to Section 2(b).

 

(b)                                 SEALY acknowledges that title and ownership in the
NOMACO Marks and the goodwill associated therewith are and shall at all times
remain in NOMACO and that, by this Agreement, SEALY is not acquiring any title,
ownership, or other interest in the NOMACO Marks.  All uses of the NOMACO Marks by SEALY and all
goodwill generated thereby shall inure exclusively and completely to the
benefit of NOMACO.

 

(c)                                  SEALY agrees that the Application Products identified
by one or more of the NOMACO Marks shall meet the quality control requirements
of NOMACO; provided, however, that so long as the Application
Products are provided at or above the quality
levels established by NOMACO immediately prior to the Effective Date of this
Agreement, SEALY shall be deemed to be in compliance with NOMACO’s quality
standards.

 

(d)                                 SEALY agrees to inform NOMACO of the use of any marks
or names similar to any of the NOMACO
Marks and any potential infringements of any of the NOMACO Marks which come to its attention.

 

(11)                          INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS

 

(a)                                  Subject to Section 18 hereof, NOMACO shall
defend, indemnify and hold harmless SEALY, its employees, officers, directors,
partners, members, shareholders, agents, successors and permitted assigns from
and against all Losses (as defined below) arising out of any claim by a third
party asserting that any Product(s) infringes such third party’s patent,
copyright, trademark, trade secret, confidentiality or other right, provided
that SEALY notifies NOMACO in writing within a reasonable time after SEALY
first receives written notice of the claim and gives NOMACO reasonable
assistance, at NOMACO’s costs, in the defense or settlement of the claim.  No settlement intended to bind SEALY shall be
made by NOMACO without SEALY’s prior written authorization. NOMACO agrees to
inform SEALY of any actual or potential infringements of any of SEALY’s
intellectual property which come to its attention.

 

(b)                                 Subject to Section 18 hereof, SEALY shall defend,
indemnify and hold harmless NOMACO, its employees, officers, directors,
shareholders, partners, members, agents, successors and permitted assigns from
and against all Losses arising out of any claim by a third party asserting that
any Application Product(s) infringes such third party’s patent, copyright,
trademark, trade secret, confidentiality or other right, provided that NOMACO
notifies SEALY in writing within a reasonable time after NOMACO first receives
written notice of the claim and gives SEALY reasonable assistance, at SEALY’s costs,
in the defense or settlement of the claim. 
No settlement intended to bind NOMACO shall be made by SEALY without
NOMACO’s prior written authorization.

 

14

 

SEALY
agrees to inform NOMACO of any actual or potential infringements of any of
NOMACO’s intellectual property which come to its attention.

 

(12)                          CHANGE IN MATERIAL, PROCESS AND PROCEDURE

 

Prior to
making any significant changes in raw materials or methods of manufacture
employed in producing the Products hereunder, other than as may be necessary as
determined by NOMACO on a commercially reasonable basis, NOMACO shall provide
30 days prior written notice to SEALY of NOMACO’s intent prior to implementing
such change.   If any such significant
change is reasonably unsuitable to SEALY, SEALY shall immediately (and in any
event within 10 days) notify NOMACO in writing of such concern.   The parties agree to cooperate in good faith
to resolve any such reasonable concern of SEALY with respect to such significant
change to the mutual satisfaction of each party.  If SEALY objects to any such change after
expiration of the aforementioned notice period, then SEALY shall reimburse
NOMACO for all reasonable costs and expenses incurred by NOMACO in designing
and implementing such change to the extent it is abandoned or modified to
address SEALY’s concern.

 

(13)                          SERVICES/ WARRANTIES/ SPECIFICATIONS

 

(a)                                  SEALY shall perform an inspection, conducted in a
normal and customary manner for the industry, of the Products produced and
delivered by NOMACO to SEALY hereunder to verify conformity with the
specifications set forth in Exhibit D, attached hereto as a part
hereof.   Within thirty (30) days after
SEALY’s receipt of the Products, SEALY must give written notice to NOMACO of
any claim by SEALY based upon the patent condition, delay, quantity or patent
grade of the Products or of any patent nonconformity with SEALY’s
specifications set forth in Exhibit D.  SEALY’s failure to timely comply with this Section 13(a) shall
constitute irrevocable acceptance by SEALY of such Products and shall bind
SEALY to pay to NOMACO the full price of such Products.  Such acceptance does not interfere with any
rights of SEALY in the event that a latent defect is later discovered or
claimed (after acceptance).  Neither
SEALY nor any Affiliate may hold back or set-off any amounts owed to NOMACO in
satisfaction of any claims asserted by SEALY, or any Affiliate, against
NOMACO.  Accepted Products shall not be
returned without NOMACO’s prior written consent.

 

(b)                                 NOMACO WARRANTS THAT THE PRODUCTS SHALL AT THE TIME
PLACED WITH THE CARRIER FOR SHIPMENT TO SEALY OR ITS AFFILIATE CONFORM WITH
THE PRODUCT SPECIFICATIONS SET FORTH IN EXHIBIT D AND EXCEPT FOR
SUCH SPECIFICATIONS ON EXHIBIT D, NOMACO HAS NOT MADE, DOES NOT
MAKE AND WILL NOT MAKE ANY ADDITIONAL REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, WRITTEN OR ORAL, ARISING BY LAW, OUT OF ANY COURSE OF DEALING OR
PERFORMANCE, CUSTOM, INDUSTRY STANDARD OR OTHERWISE, AS TO ANY MATTER
WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE

 

15

 

PRODUCTS,
THE CONDITION, QUALITY, SAFETY, PERFORMANCE OR RESULTS OF THE PRODUCTS, THEIR
MERCHANTABILITY OR THEIR FITNESS FOR ANY PARTICULAR PURPOSE OR USE OR OTHERWISE
IN ANY MANNER WITH RESPECT TO THE PRODUCTS, WHETHER USED SINGLY OR IN
COMBINATION WITH OTHER PRODUCTS OR SUBSTANCES OR IN ANY PROCESS, ALL OF WHICH
ARE HEREBY EXPRESSLY DISCLAIMED.  THE
FOREGOING WARRANTY DOES NOT APPLY TO ANY PRODUCTS WHICH HAVE BEEN SUBJECT TO
UNAUTHORIZED MODIFICATION, MISUSE, NEGLECT OR ACCIDENT BY ANY PERSON OR ENTITY
OTHER THAN NOMACO.

 

(c)                                  NOMACO agrees to promptly replace, at no additional
charge to SEALY, any Products supplied to SEALY hereunder, which do not comply
with the specifications. SEALY shall, at the direction of NOMACO, either return
any such Products to NOMACO for disposal or dispose of such products in
accordance with all applicable laws; provided, that NOMACO shall
reimburse SEALY for any related reasonable expenses upon submission of
satisfactory documentation to NOMACO.

 

(d)                                 NOMACO agrees to include with each shipment of
Products delivered to SEALY quality assurance and certification documents
confirming that NOMACO has conducted commercially reasonable sampling and testing
to assure that the Products in such shipment comply with the specifications set
forth in Exhibit D.

 

(e)                                  NEITHER PARTY SHALL IN ANY EVENT BE LIABLE UNDER ANY
CIRCUMSTANCES, TO THE OTHER PARTY OR ANY AFFILIATE, OR ANYONE CLAIMING THROUGH
ANY PARTY OR ANY AFFILIATE, WHETHER BASED IN CONTRACT, TORT (INCLUDING
NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES OR LOSSES, WHETHER SUCH DAMAGES ARISE OUT OF THE
PURCHASE, USE, FAILURE OF, DEFECTS IN, DELAY IN DELIVERY OF OR NONDELIVERY OF,
OR INFRINGEMENT BY, THE PRODUCTS, EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, OTHER THAN IN THE CASE OF NOMACO, THE TERMINATION
FEE PAYABLE PURSUANT TO SECTION 6 OF THIS AGREEMENT.

 

(14)                          DISASTER RECOVERY

 

Within 60
days from the Effective Date, NOMACO will deliver to SEALY a written disaster recovery plan designed to ensure a reliable supply of Products to the extent commercially
reasonable.  Within 180 days after
the Effective Date, NOMACO

 

16

 

will implement such disaster recovery plan, to the extent commercially
reasonable, which shall be comprised of the
following:  (i) maintenance of at
least 21 days inventory of the Products consistent with forecasts at its
production facility or other location as soon as reasonably practical after the
Effective Date (subject to applicable caps under Section 3(c)); (ii) maintenance and storage at an off-site
safe facility of at least one set of duplicate dies for each Product as
specified on Exhibit A; (iii) establishment of duplicate
production capabilities at no less than one additional plant of NOMACO for
production of the Products, including necessary equipment and processes; (iv) maintenance
of supply contracts with critical raw material suppliers that provide for
maintenance of at least 60 days inventory which can be delivered within ten (10) days
to NOMACO’s manufacturing facilities; (v) development of a formal raw
material supply strategy to include at least two manufacturers of resin; and (vi) procurement
and maintenance by NOMACO of a commercially reasonable level of manufacturing
equipment to ensure sufficient redundant capacity.  So long as SEALY is in compliance with the
terms of this Agreement and has purchased the Minimum Purchases established
pursuant to Section 2(e) for any applicable, NOMACO agrees that SEALY
will receive priority during any capacity or manufacturing problems at NOMACO
on a commercially reasonable basis for the manufacture of Products for SEALY
under this Agreement.  NOMACO agrees that
in the event of a disaster recovery situation it will use its best efforts to
ensure that SEALY maintains its necessary supply of the Products in accordance
with this Agreement.

 

(15)                          E-COMMERCE

 

NOMACO
will work with SEALY on SeS (SEALY eProcurement System) Business Applications
as it intends to supply SEALY with Product(s). 
Subject to the commercially reasonable efforts of NOMACO, the key
elements of this include:

 

•                                          NOMACO must have reliable Internet access.

•                                          Ability to receive EDI 850 Purchase Order via SMTP,
FTP or Web Based Mailbox

•                                          Ability to generate EDI 855 Acknowledgement within 3
business hours of receipt of EDI 850.

•                                          By
Second Quarter 2003, an 856 ASN will be rquired.

•                                          Ability to receive EDI 860 Purchase Order Change for
the purpose of canceling an order that has not been shipped.  Orders that are cancelled must be confirmed
with an EDI 865.

 

(16)                          CONFLICT OF INTEREST

 

(a)                                  During the Term, no director, employee, or agent of
NOMACO shall give or receive any fee, rate, gift, or entertainment of
significant cost or value in connection with this Agreement, or enter into any
business arrangement in any way related to the

 

17

 

Products
or the Application Products with any director, employee or agent of SEALY or
any affiliate other than as a representative of SEALY or its affiliate, without
prior written notification thereof to SEALY. 
Any representative(s) authorized by SEALY may review the entertainment
and other related records of NOMACO with respect to the SEALY relationship
hereunder, to the extent permitted by law, for the sole purpose and extent
necessary to determine whether there has been compliance with this Section 16.

 

(b)                                 Each month during the Term, NOMACO will provide SEALY
a report in mutually satisfactory form and substance of substantially all
SEALY/NOMACO meetings, including but not limited to onsite meetings,
conferences, dinners, entertainment, golf, and other similar events.  The report will include SEALY and NOMACO
representatives’ names, brief description of purpose of meeting and location of
meeting.  The report will be delivered on
a monthly basis to the SEALY’s Vice President of Supply Management.  All entertainment of SEALY personnel will be
included within the report even if SEALY covers the costs of the entertainment.

 

(17)                          REVIEW RIGHTS

 

SEALY
shall have the right to engage an independent third party accounting firm,
acceptable to NOMACO, that does not have a material relationship with SEALY or
any of its Affiliates to review the business records of NOMACO pertaining to
performance by NOMACO under Exhibit A of this Agreement to ensure
compliance by NOMACO with respect to its performance thereunder; provided,
that (a) the cost of such review will be paid by SEALY; (b) the
report of the accounting firm to SEALY (a copy of which shall be provided to
NOMACO) shall be limited to a statement regarding compliance or noncompliance
with the material terms of this Agreement and a brief description of any
noncompliance under Exhibit A; (c) the review shall be limited
to only those records reasonably determined necessary to establish material
compliance with Exhibit A of this Agreement; (d) the
accounting firm shall be required to execute a nondisclosure agreement
satisfactory to NOMACO; (e) any such review shall be conducted only upon
15 business days prior written notice to NOMACO and occur no more frequently
than once in any twelve month period and (f) such review shall occur only
during normal business hours at a site and in a manner reasonably determined by
NOMACO to minimize any interference with the business of NOMACO and the
activities of it employees.  The parties
shall cooperate in good faith to resolve any material noncompliance identified
by the accounting firm.

 

(18)                          INDEMNIFICATION

 

(a)                                  Subject to the limiations of Section 13(e), SEALY
agrees to indemnify and hold NOMACO, its directors, officers, employees,
agents, representatives, successors and assigns, harmless from and against any
and all losses, claims, causes of action, judgments, demands, penalties,
liabilities, damages, fees, costs and expenses, including, without limitation,
reasonable attorneys’ fees and court costs (collectively, “Losses”) in

 

18

 

any
manner arising out of, relating to or in connection with (i) any wrongful
or negligent act or violation of any law, regulation or rule by SEALY, any
Affiliate or their agents or employees; (ii) any breach or violation by
SEALY, any Affiliate or their agents or employees of any provision of this
Agreement or the Exhibits attached hereto; (iii) any use, sale or
disposition of the Products that does not conform to the recommended usage set
forth in the applicable specifications for such Products; (iv) any use,
sale or disclosure by SEALY of any information, including Confidential Information,
furnished to SEALY by NOMACO or its agents under or in respect to this
Agreement other than as permitted under Section 25; (v)  the design,
manufacture, sales or marketing of any products manufactured by SEALY or any
Affiliate (including the Application Products) or the specifications by SEALY
concerning the Products; or (vi) the sales or marketing of the Products.

 

(b)                                 Subject to the limiations of Section 13(e),
NOMACO agrees to indemnify and hold SEALY, its directors, officers, employees,
agents, representatives, successors and assigns, harmless from and against any
and all Losses in any manner arising out of, relating to or in connection with (i) any
wrongful or negligent act or violation of any law, regulation or rule by
NOMACO or its agents or employees; (ii) any breach or violation by NOMACO
or its agents or employees of any provision of this Agreement or the Exhibits
attached hereto; (iii) any use, sale or disclosure by NOMACO of any
information, including Confidential Information, furnished to NOMACO by SEALY
or its agents under or in respect to this Agreement other than as permitted
under Section 25; or (iv) a customer claim against SEALY regarding
the design or manufacturing of the Products or the failure of any Product to
meet the Product specifications set forth in Exhibit D.

 

(c)                                  If a third party commences a lawsuit or arbitration (a
“Third-Party Claim”) against any person or entity (the “Indemnified Party”)
with respect to any matter that the Indemnified Party might make a claim for
indemnification against any party (the “Indemnifying Party”) under this Section 18,
then the Indemnified Party must notify the Indemnifying Party thereof in
writing of the existence of such Third-Party Claim and must deliver copies of
any documents served on the Indemnified Party with respect to the Third-Party
Claim; provided, however, that any failure to notify the Indemnifying
Party or deliver copies will not relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is materially prejudiced by such failure. 
Upon receipt of the notice described above, the Indemnifying Party will
have the right to defend the Indemnified Party against the Third-Party Claim
with counsel reasonably satisfactory to the Indemnified Party so long as (i) within
ten (10) days after receipt of such notice, the Indemnifying Party
notifies the Indemnified Party in writing that the Indemnifying Party will,
subject to the limitations of this Section 18, indemnify the Indemnified Party
from and against any Losses the Indemnified Party may incur arising out of,
relating to or in connection with the Third-Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to

 

19

 

defend
against the Third-Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Indemnifying Party is not a party to the applicable
proceeding or the Indemnified Party has determined in good faith that there
would be no conflict of interest or other inappropriate matter associated with
joint representation, (iv) the Third-Party Claim does not involve, and is
not likely to involve, any claim by any governmental body or authority, (v) the
Third-Party Claim involves only money damages and does not seek an injunction
or other equitable relief, (vi) settlement of, or an adverse judgment with
respect to, the Third-Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or practice
adverse to the continuing business interests of the Indemnified Party, (vii) the
Indemnifying Party conducts the defense of the Third-Party Claim actively and
diligently and (viii) the Indemnifying Party keeps the Indemnified Party
apprised of all developments, including settlement offers, with respect to the
Third-Party Claim and permits the Indemnified Party to participate in the
defense of the Third-Party Claim.  So
long as the Indemnifying Party is conducting the defense of the Third-Party
Claim in accordance with the conditions set forth above (A) the
Indemnifying Party will not be responsible for any attorneys’ fees incurred by
the Indemnified Party regarding the Third-Party Claim (other than attorneys’
fees incurred prior to the Indemnifying Party’s assumption of the defense) and (B) neither
the Indemnified Party nor the Indemnifying Party will consent to the entry of
any judgment or enter into any settlement with respect to the Third-Party Claim
without the prior written consent of the other party, which consent will not be
withheld unreasonably.  If any condition
set forth above is or becomes unsatisfied, (W) the Indemnified Party may defend
against the Third-Party Claim in any manner it may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith), (X) the Indemnifying Party will
remain responsible for any Losses the Indemnified Party may incur relating to
or arising out of the Third-Party Claim to the fullest extent provided in this Section 18
and (Y) the Indemnified Party may consent to the entry of any judgment or enter
into any settlement with respect to such Third-Party Claim only with the
written conet of the Indemnifiying Party, such consent not to be unreasonably
withheld if such settlment provides for complete release of the Indemnifying
Party.

 

(19)                          INSURANCE

 

Without
in any way limiting NOMACO’s or SEALY’s indemnity obligation under Section 18
of this Agreement, both SEALY and NOMACO shall take out and maintain, at the
respective party’s sole cost and expense, during the Term of this Agreement the
insurance specified below with respect to NOMACO’s and SEALY’s operations in
connection with this Agreement:

 

	
  COVERAGE

  	
   

  	
  LIMITS

  
	
   

  	
   

  	
   

  
	
  1.   Workers’ Compensation

  	
   

  	
  Statutory

  

 

20

 

	
  2.   Employer’s Liability

  	
   

  	
  $1,000,000 each accident

  $1,000,000 disease — each employee

  $1,000,000 disease — policy limit

  
	
   

  	
   

  	
   

  
	
  3.   Commercial General Liability
  (Bodily Injury, Property Damage and contractual liability on an occurrence
  form of policy naming SEALY/NOMACO Products as an additional insured)

  	
   

  	
  $2,000,000 each occurrence, combined single limit

  
	
   

  	
   

  	
   

  
	
  4.   Comprehensive or Commercial
  Automobile Liability (Bodily Injury or Property Damage including coverage for
  all owned, non-owned and hired vehicles naming SEALY/NOMACO as an additional
  insured)

  	
   

  	
  $1,000,000 each occurrence, combined single limit

  
	
   

  	
   

  	
   

  
	
  5.   Umbrella Liability Insurance
  affording excess coverage over the underlying primary insured required by
  subsections 2, 3 and 4 hereof, and naming SEALY/NOMACO as an additional
  insured

  	
   

  	
  $10,000,000 each occurrence and annual aggregate

  

 

Prior to
delivery of any Products under this Agreement, NOMACO shall obtain and furnish
to SEALY and SEALY shall obtain and provide to NOMACO certificates of insurance
evidencing the coverage required herein and stating that with respect to
Commercial General Liability and Umbrella Liability Insurance no reduction,
cancellation or expiration of such insurance coverage shall become effective
until thirty (30) days from the date written notice thereof is mailed to SEALY.  Additionally, during the Term of this
Agreement, NOMACO and SEALY shall provide further certificates to the other
party as may be reasonably requested from time to time by SEALY or NOMACO
evidencing that the insurance required herein is in effect.

 

(20)                          SEALY’S AFFILIATES

 

So long
as SEALY is in compliance with the terms of this Agreement and has purchased
the Minimum Purchases established pursuant to Section 2(e), NOMACO agrees
to offer to each of SEALY’s Affiliates (defined below) the same prices offered
SEALY under this Agreement from time to time for the Products based on F.O.B.
origin, subject to such other terms and conditions covering the sale of the
Products as any such Affiliate and NOMACO shall mutually agree; provided
however that any sales of the Product by NOMACO to an Affiliate shall be solely
for internal manufacturing use by the

 

21

 

Affiliate in the
manufacture of mattresses.  “Affiliates” as used herein shall mean (a) each
of the entities specifically named in Exhibit F hereto so long as
such entity is the designated payer of the goods or (b) a subsidiary,
joint venture, licensees, or other entity in which SEALY owns more than 50%
interest.  Acceptance of any purchase
order or delivery of any Products by NOMACO is subject to any such Affiliate
maintaining credit satisfactory to NOMACO.

 

(21)                          WESTERN FACILITY

 

Subject
to performance by SEALY under this Agreement and its satisfaction of the
applicable Minimum Purchases of Products pursuant to Section 2(e) and
the reasonably anticipated continuation of such performance and satisfaction,
NOMACO will commit to the operation of a facility in the western portion of the
United States (the “Western Facility”) at a site and of a design determined by
NOMACO which is reasonably sufficient to satisfy the substantiated business
needs of SEALY for such facility.  SEALY
may invoke the Nomaco Western Facility commitment during the period from January 1,
2004 to June 1, 2004 by written notice to NOMACO which substantiates the
commercially reasonable business needs of SEALY for the Western Facility.  In the event of such notice from SEALY and
subject to a proposal by NOMACO to otherwise reasonably satisfy the
substantiated business needs of SEALY set forth in the notice, NOMACO will
commence the planning and implementation of the Western Facility within 30 days
of such notice and thereafter commence operations at the Western Facility no
later than eleven (11) months after such notice.

 

(22)                          INDEPENDENT CONTRACTOR

 

NOMACO
shall be and remain an independent contractor in the performance of the
services hereunder and nothing herein contained shall be construed to be
inconsistent with this relationship or status. 
NOMACO shall be responsible for selecting, assigning, supervising and
directing the activities of all persons required for the performance of the
services and shall be responsible for all wages, salaries, payroll records,
withholding taxes, FICA taxes, benefits (if any) and unemployment insurance
payments for all such persons assigned to the services or any part thereof,
other than employees of SEALY or any Affiliate.

 

(23)                          COMPLIANCE

 

Each
party shall at all times comply in all material respects with all applicable
local, state and Federal laws, ordinances, rules and regulations
(including but not limited to those relating to protection of the environment)
respectively relating in the case of NOMACO to the production and sale of
Products and in the case of SEALY to the production and sale of Application Products.

 

22

 

(24)                          EXCLUSIVITY

 

So long
as SEALY is in compliance with the terms of this Agreement and has purchased
the applicable Minimum Purchases established pursuant to Section 2(e), during
the Term NOMACO will not (a) sell the Products directly to any bedding
manufacturer with its primary facilities located in North America which intends
to use the Products to manufacture bedding products that directly compete with
the Application Products in North America (a “Competing Manufacturer”) other
than SEALY and any Affiliate or (b) through its employees directly solicit
any relationship with, or discuss the Products with, any Competing Manufacturer
concerning the use of the Products in connection with any products that
directly compete with the Application Products in North America other than
SEALY and any Affiliate;  provided,
that the restrictions imposed by this Section 24 shall not (i) limit
or restrict in any manner the right of NOMACO to sell or distribute polyethylene
foam products exclusive of the polyethylene foam products identified at Items 1
through 21 in Exhibit A to any manufacturer or distributor in the bedding
industry provided NOMACO provides no material assistance in the design and
engineering of mattress side support systems using polyethylene foam products
in respect to the sale and distribution of products to any such manufacturer or
distributor; or (ii) limit or restrict in any manner the right of NOMACO to
design, sell, or distribute plank polyethylene foam products to any manufacturer
or distributor.

 

(25)                          CONFIDENTIALITY AND NONSOLICIT

 

(a)           Each party acknowledges that it may
receive or receive access to Confidential Information (as defined below) of the
other party in connection with this Agreement. 
Each party agrees to hold in confidence and not to, directly or
indirectly, use or disclose to any other person or entity any Confidential
Information of the other party, except to the extent expressly permitted
hereunder in connection with the performance of this Agreement, including,
without limitation, to reverse engineer or attempt to reverse engineer any
products manufactured by the other party. 
Each party may disclose Confidential Information of the other party to
its lenders, employees, advisors and representatives who have a need to know
such Confidential Information in connection with the transactions described
herein and who agree to be bound by the terms hereof.

 

(b)           “Confidential Information” means,
confidential, non-public or proprietary information that is disclosed or made
available by a party to the other party in connection with this Agreement
(whether before or after the Effective Date), including, without limitation,
specifications and technical information, inventions, developments, ideas,
know-how, data, formulae, compositions, designs, processes, business and
product plans, research and development plans or results and other information
relating to the business, operations, finances, sales, marketing, customers,
products or technology of such party, in each case whether disclosed or made
available in oral, written, electronic, graphic or any other form. Confidential
Information includes all copies, reproductions, notes and repositories thereof,
whether in written, electronic, graphic or any other form.

 

23

 

Notwithstanding
the foregoing, “Confidential Information” shall not include: (i) information
which is or becomes available to the general public through no breach of this
Agreement; (ii) information which is possessed by the receiving party at
the time of disclosure (and acquired with no breach of any confidentiality
limitation); (iii) information which is subsequently acquired from a third
party who has a bona fide right to make such information available to the
receiving party without any restriction; (iv) information which is
independently developed by the receiving party without use of Confidential
Information of the other party as demonstrated by reasonable written evidence
thereof; or (v) information which is required to be disclosed by court
order or applicable law or regulation, including, without limitation, the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder, and the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (except that the
party required to make disclosure shall promptly notify the other party of such
court order, law or regulation and cooperate with the other party to limit the
scope of disclosure required, to the extent such limitation is permitted by law
or regulation).

 

(c)                                  Upon the termination of this Agreement for any reason,
each party shall return to the other party all Confidential Information of the
other party.

 

(d)                                 The obligations of the parties under this Section 25
shall survive the termination of this Agreement for a period of five (5) years,
except that the obligations of the parties under this Section 25 shall
survive the expiration of such five (5) year period and thereafter
continue to remain in effect with respect to Confidential Information that is a
trade secret under applicable law.

 

(e)                                  Each party hereby acknowledges the importance and
value to the other party of the other party’s Confidential Information.  In the event that either party violates or
breaches any provision of this Section 25, the non-breaching party shall
be entitled to enjoin such violation or breach and any further violation or
breach and to recover from the breaching party reasonable attorneys’ fees
incurred by the non-breaching party in enforcing the provisions of this Section 25
in addition to any other recoveries to which the non-breaching party shall be
entitled at law or in equity.

 

(f)                                    During
the term of this Agreement, including any renewal or extensions, and the one
year period following the termination thereof, each party hereto agrees it will
not, directly or indirectly through or on behalf of any other individual or
entity, (a) solicit, generally or personally, any Covered Employee of the
other party hereto for hire, employment or other engagement, (b) endeavor
to cause any Covered Employee of the other party hereto to leave his or her
employment or induce or attempt to induce any Covered Employee of the other
party hereto to breach his or her employment agreement, if any, with his or her
employer or (c) hire, employ or otherwise engage any current or former
Covered Employee of the other party hereto following the voluntary or
involuntary termination of such Covered Employee’s employment or other
engagement with such party for any reason whatsoever.  With respect to SEALY, “Covered Employees”
shall include any officer,

 

24

 

manager or other employee
of SEALY.  With respect to NOMACO, “Covered
Employees” shall include any officer, manager or other employee of NOMACO.

 

(26)                          NOTICES

 

All
notices which may be given in connection with this Agreement shall be in
writing and shall be sent, and deemed received and delivered, upon five (5) days
after mailing, by either party to the other by U.S. Registered Mail, or upon
one (1) business day if sent by facsimile with confirming copy delivered
or upon one (1) business day if sent by nationally recognized courier
service via overnight next day delivery, addressed to the addresses as follows:

 

If to
NOMACO :

 

501 NMC Drive

Zebulon, North Carolina 27597

Attention:  Ed Nelson, President

Facsimile:  (919) 269-7936

 

If to
SEALY:

 

One Office Parkway

Trinity, North Carolina 27370

Attention:  Kenneth
Walker, Esq., Vice President

Facsimile: (336) 861-3786

 

(27)                          USE OF MINORITY ENTERPRISES

 

It is
SEALY’s desire that certified minority and women business enterprises (“M/WBE”)
shall have the maximum practicable opportunity to participate in the work
contemplated by this Agreement.  NOMACO
recognizes that SEALY has established a 5% M/WBE utilization goal.   To the extent reasonably practicable given
the terms and conditions and performance requirements under this Agreement,
NOMACO agrees to use its commercially reasonable efforts to carry out this
desire by extending certified M/WBE’s known by NOMACO an equitable opportunity
to compete for subcontracts and purchase orders applicable to the work.  Notwithstanding anything herein to the
contrary, SEALY shall not be entitled to terminate this Agreement for any
alleged breach of this Section 27.

 

25

 

As used
in this Section 27, the term “minority and women business enterprise
(M/WBE)” means a business certified as a Minority or Woman Owned Business
Enterprise by National Minority Suppliers Development Council (NMSDC) or one of
its regional affiliates.  NOMACO shall
submit to SEALY as requested during the Term of this Agreement a written
report, not more frequently than quarterly, setting forth the names of vendors
certified as M/WBE’s and which are used by NOMACO in the performance of the
work hereunder and the services and/or goods provided in connection with the
work and the dollar amount expended by NOMACO for such goods and/or services.

 

(28)                          ASSIGNMENT

 

Neither
Party may assign, delegate or transfer this Agreement, in whole or in part, or
any interest arising hereunder, without the prior written consent of the other
party hereto, and any attempted assignment of this Agreement without such
consent shall be null and void; provided, that NOMACO shall be entitled
to pledge, hypothecate or collaterally assign any interest in this Agreement to
a senior lender; provided, further that, subject to the rights of SEALY
contained in Section 2(a), either party may assign this Agreement without
the other party’s consent to any third party which directly or indirectly
acquires substantially all of the business and assets of (a) NOMACO
related to the manufacture of the Products or (b) SEALY related to the
manufacture of the Application Products.

 

(29)                          GOVERNING LAW

 

The laws
of the State of North Carolina hereunder shall govern the interpretation,
construction and performance of this Agreement and the rights and remedies of
the parties.

 

(30)                          DISPUTE RESOLUTION

 

(a)                                  Each party agrees that their long term mutual
interests will be best served by effecting a rapid and fair resolution of any
disputes between the parties relating to this Agreement.  Therefore, each party agrees to use all
reasonable efforts to resolve all such disputes as rapidly as possible on a
fair and equitable basis in accordance with this Section 30.  If either party has or becomes aware of a
dispute, such party shall promptly notify the other party in writing (the “Dispute
Notice”) specifying the general nature of the dispute.  The parties shall meet in person or by
telephone within ten (10) days of delivery of the Dispute Notice and seek
to resolve the dispute by negotiation between the appropriate officers of each
party, with the resolution of the dispute being passed to each officer at the
next higher level of authority, in turn. 
Such meetings shall be attended in person or by telephone by individuals
with decision-making authority to attempt in good faith to negotiate a resolution
of the dispute prior to pursuing other available remedies.

 

26

 

(b)                                 If the parties have not succeeded in negotiating a
resolution of the dispute within thirty (30) days after the date of the Dispute
Notice, either party may submit the dispute to non-binding mediation conducted
in Raleigh, North Carolina by such person as shall be mutually acceptable to
the parties and who shall have experience in commercial supply arrangements and
the matters subject to dispute in accordance with the commercial mediation rules of
the American Arbitration Association (“AAA”).  Each of the parties shall pay one-half of the
mediator’s fees and expenses.  All other
costs and expenses related to the mediation, including, without limitation,
attorneys fees and expenses, shall be paid by the party incurring such cost or
expense.  If mediation does not reach a
settlement of the dispute within thirty (30) days, either party may submit the
dispute for binding arbitration pursuant to Section 30(c).

 

(c)                                  The parties agree that if the dispute is not resolved
within the earlier of thirty (30) days after it is submitted to mediation or
forty (40) days after the Dispute Notice, either party may terminate mediation
or other discussions pursuant to this Section 30 and submit the dispute
for settlement exclusively by final and binding arbitration in accordance with
the commercial rules of the AAA in Raleigh, North Carolina, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction.  Any such arbitration shall
be conducted by three (3) arbitrators knowledgeable in commercial supply
arrangements and the matter subject to dispute, who are not at that time and
never were affiliated with or related to either party and who have not acquired
a detailed prior knowledge of the matters in dispute, that are mutually
agreeable to the parties.  If the parties
cannot agree on the three arbitrators within 20 days after submission of the
dispute to arbitration, then each party shall promptly select one arbitrator
and each such arbitrator shall select a third arbitrator.  If the parties’ respective arbitrators cannot
agree on a third arbitrator, such third arbitrator shall be selected in
accordance with the rules of the AAA. 
The decision and award of the arbitrators shall be rendered within 90
days after final submission of the parties and shall be final and binding and
shall be in writing, signed and served upon the parties.  All costs and expenses (including without
limitation arbitrators’ fees and expenses and attorney’s fees and expenses) of
the prevailing party shall be borne by the losing party or, in the event that
the prevailing party has not prevailed entirely on its claim(s), then such
costs and expenses shall be awarded in proportion to the award as the
arbitrator(s), in their sole discretion, may determine, but guided by the
concept that the “losing party pays.” 
The arbitration award shall be final and binding upon the parties and
shall not be subject to further review. 
In no event whatsoever shall such an arbitration award include any award
of punitive or consequential damages, and the parties hereby waive the right to
recover punitive or consequential damages or damages otherwise in excess of the
limitations set forth at Section 13(e).

 

(d)                                 Notwithstanding anything herein to the contrary,
NOMACO shall be entitled at any time, without any delay, mediation, notice or
other discussions pursuant to this Section 30, to deliver a Termination
Notice pursuant to Section 6.

 

27

 

(e)                                  All statements, correspondence, memorandum, briefs,
decisions, testimony, communications, and materials, whether written or oral,
submitted to or generated by the arbitrators and/or mediators in connection
with the processes set forth above shall be deemed to be in furtherance of
settlement negotiations and shall be privileged and shielded from production
and disclosure in any subsequent litigation. 
Notwithstanding the foregoing, documents prepared in the normal course
of business, such as invoices, waybills and freight bills, shall be subject to
discovery in subsequent litigation in accordance with applicable law.  The parties agree to toll any applicable
statutes of limitations during the pendency of any of the above dispute
resolution proceedings.  Nothing in this Section 30
shall prevent any party from seeking injunctive relief in a judicial proceeding
if interim relief from a court is necessary to preserve the status quo pending
resolution or to prevent serious and irreparable injury to that party or
others.  The parties shall continue to
perform all obligations under this Agreement pursuant and subject to the terms
hereof pending the above-described dispute resolution proceedings, subject to
full reservation of rights at law, in equity and under this Agreement.

 

(31)                          SEVERABILITY

 

If any
provision of this Agreement should be construed or held to be void, invalid or
unenforceable, by order, decree or judgment of a court of competent
jurisdiction, the remaining provisions of this Agreement shall not be affected
thereby, but shall remain in full force and effect. The parties agree that any
provision(s) found invalid or unenforceable shall be deemed modified to the
minimum extent necessary to make such provisions consistent with applicable
law.  Those provisions of this Agreement
which would require that they survive the termination of this Agreement in
order to give them full force and effect shall survive the termination of this
Agreement for any reason, regardless of the date, cause or manner of such
termination.

 

(32)                          SURVIVAL OF OBLIGATIONS

 

The
rights, obligation and remedies accrued by the parties to the Agreement under
these terms and conditions, including wihtout limitation, the obligation
to pay any amounts due under this Agreement,
shall survive any modification, amendment, suspension or termination of the
Agreement.

 

(33)         MISCELLANEOUS; PUBLIC ANNOUNCEMENTS

 

The section headings
in this Agreement are inserted for convenience only and are in no way to be
construed as part of this Agreement or as a limitation or enlargement of the
scope or meaning of the particular sections to which they refer, and shall not
affect the interpretation or any provisions of this Agreement.  This Agreement constitutes the sole agreement
between the parties hereto respecting the within subject matter and supersedes
and cancels any and all oral or written agreements or understandings between

 

28

 

or
assumed by the parties or either of them with respect to the subject of this
Agreement. No modification or amendment of this Agreement shall be effective
unless submitted and agreed to in writing by the duly authorized
representatives of the parties hereto. 
No course of dealing, delay or failure of any party to enforce strictly
any term, right or condition of the Agreement shall be construed as a waiver of
that term, right or condition.  No
express waiver of any term, right or condition of the Agreement shall operate
as a waiver of any other term, right or condition.  The provisions of the Agreement are intended
for the sole benefit of parties hereto, and there are no third party
beneficiaries other than successors by operation of law, permitted assigns or
as expressly stated herein in Sections 11 and 18.  The preparation of the Agreement has been a
joint effort of the parties and the resulting document shall not be construed
more severely against one of the parties than against the other.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

No press
release, public announcement or other disclosure with respect to this Agreement
shall be issued or made by either party hereto without the prior consent of the
other party, except with prior notice to the other party as may be necessary in
the opinion of counsel to either party to meet the requirements of any
applicable law, rule or regulations, the requirements of any governmental
agency or the requirements of any stock exchange or inter-dealer quotation
system on which the securities of such party or any of its affiliates may be
listed.

 

(34)                          GUARANTY

 

The
parties, including GUARANTOR, acknowledge that NOMACO has agreed to make
significant investments in the development and purchase of expanded
manufacturing capacity in order to supply the total requirements of SEALY in
accordance with this Agreement.  As a
requirement for NOMACO to enter into this Agreement, NOMACO has required that
GUARANTOR, the parent company of SEALY, guarantee the payment and performance
of all obligations of SEALY under this Agreement in as much as GUARANTOR has a
present, vested pecuniary interest in SEALY and will realize a present, direct
pecuniary benefit from execution and performance of this Agreement by the
parties.  GUARANTOR hereby
unconditionally guarantees to NOMACO the timely payment and performance of all
obligations of SEALY under this Agreement, including without limitation payment
of the Termination Fee.  This is a
guaranty of payment and not merely of collection.  GUARANTOR shall have no right of setoff with
any transaction.  The guaranty of
GUARANTOR in this Section 34 shall remain in full force and effect until
90 days after all obligations of SEALY under this Agreement have been
discharged.  GUARANTOR hereby waives
diligence, presentment, demand of payment, protest, all notices (whether of
nonpayment, acceleration, dishonor, protest or otherwise), notice of acceptance
of this guaranty, all

 

29

 

demands whatsoever, and
all rights to require NOMACO to proceed against SEALY or any other person.

 

[SIGNATURES
TO FOLLOW ON NEXT PAGE]

 

30

 

IN WITNESS WHEREOF, the parties have executed this Agreement by signature of their
respective duly authorized representatives as of the day and year first above
written.

 

	
  SEALY, INC.

  	
  NOMACO INC.

  
	
  (“SEALY”)

  	
  (“NOMACO”)

  

 

	
  By:

  	
  /s/ David J. McIlquham

  	
   

  	
  By:

  	
  /s/ Edward W. Nelson

  	
   

  
	
  Name:

  	
  David J. McIlquham

  	
   

  	
  Name:

  	
  Edward
  W. Nelson

  	
   

  
	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  President

  	
   

  
	
  Date:

  	
  February
  19, 2003

  	
   

  	
  Date:

  	
  February
  18, 2003

  	
   

  
								

 

	
   

  	
   

  
	
  SEALY MATTRESS COMPANY

  	
   

  
	
  (“GUARANTOR”)

  	
   

  

 

	
  By:

  	
  /s/ David J. McIlquham

  	
   

  
	
  Name:

  	
  David J. McIlquham

  	
   

  
	
  Title:

  	
  CEO

  	
   

  
	
  Date:

  	
  February
  19, 2003

  	
   

  
				

 

31

 

Exhibit A

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Products/Pricing

 

From
time to time during the term, SEALY and NOMACO agree to jointly discuss product
life cycle costing for the Products and agree to review areas for potential
cost improvements. NOMACO will establish mutually satisfactory parameters and
targets for improvement on or before November 15, 2003.  The parties expect NOMACO will initially
focus on areas such as formulation changes, product design changes,
manufacturing or fabrication methods, packaging, handling, scrap and other
similar areas.

 

NOMACO
in its sole and absolute discretion will allocate technical resources to define
and implement improvement projects targeted to reduce costs associated with
production of the Products by NOMACO. 
NOMACO shall set in its reasonable discretion goals for each improvement
project and track progress related thereto. 
Once NOMACO has recovered all costs, fees, expenses or investments
related to improvement projects and implementation thereof,  NOMACO and SEALY agree to cooperate in good
faith to share equally (e.g. fifty
percent (50%) each) the resulting net economic benefit determined after fully
implementing any such improvements by NOMACO.

 

Prices
for base planks are quoted floor loaded with no external packaging.  Prices for K-guards are quoted as bagged (not
boxed).  Initial shipments will be boxed
at NOMACO’s expense.  As logistics
methods can be developed the packaging will evolve to reduce, or eliminate,
boxes.

 

A-1

 

Each of the Products are
listed below and correspond to the specifications for each such Product on Exhibit D.  Prices are supplied on a per unit basis.

 

KEYGUARDS (Items 1 - 12)

 

	
  640 Mattress

  	
   

  	
  11 leg side

  	
   

  	
  10 leg side

  	
   

  	
  8 leg side

  	
   

  	
  7 leg side

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Price Each

  	
   

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
											

 

	
  600
  Mattress

  	
   

  	
  11 leg side

  	
   

  	
  10 leg side

  	
   

  	
  7 leg side

  	
   

  	
  6 leg side

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Price Each

  	
   

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
											

 

	
  Ends
  Common

  	
   

  	
  7 leg end

  	
   

  	
  6 leg end

  	
   

  	
  5 leg end

  	
   

  	
  4 leg end

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Price Each

  	
   

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
											

 

EverEdgeRoll with KeyCorner(Items
13 - 21)

 

	
  Part

  Description

  	
   

  	
  Side 72

  	
   

  	
  Side 67.75

  	
   

  	
  Side 62.75

  	
   

  	
   

  	
   

  	
  KeyCorner

  	
   

  
	
  Price Each

  	
   

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
   

  	
   

  	
  *

  	
   

  
													

 

	
  Part

  Description

  	
   

  	
  End 26.5

  	
   

  	
  End 41.25

  	
   

  	
  End 48.25

  	
   

  	
  End 60.5

  	
   

  	
  End 64.25

  	
   

  
	
  Price Each

  	
   

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  	
  *

  	
   

  
													

 

BASE PLANKS (1”) (Items 22 - 28)

 

	
  Mattress
  size

  	
   

  	
  Price each

  	
   

  
	
  Twin

  	
   

  	
  *

  	
   

  
	
  Twin
  XL

  	
   

  	
  *

  	
   

  
	
  Full

  	
   

  	
  *

  	
   

  
	
  Full
  XL

  	
   

  	
  *

  	
   

  
	
  Queen

  	
   

  	
  *

  	
   

  
	
  King

  	
   

  	
  *

  	
   

  
	
  King
  Cal

  	
   

  	
  *

  	
   

  

 

A-2

 

Exhibit B

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Application Products

 

The “Application Products”
consist of all finished mattress designs manufactured by SEALY which
incorporate the Products, including without limitation all mattress sizes (e.g. Twin, Twin XL, Full, Full XL, Queen, King and Cal.
King) and all mattress brands manufactured by SEALY (e.g.
Posturepedic and Crown Jewel).

 

B-1

 

Exhibit C

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date:February 18,
2003

 

Forecasts and Caps

 

Set
forth below are the forecasts and related caps for production of the Products.
Such caps reflect 110% of the forescasted amount unless otherwise specified.  The forecasts for each month after December 31,
2004 shall be the same as forecasted in 2004 unless otherwise agreed in writing
by the parties.  (See attached 4 pages).

 

C-1

 

Sealy Forecast and Caps by month

 

	
   

  	
   

  	
  Jan-03

  	
   

  	
  Feb-03

  	
   

  	
  Mar-03

  	
   

  	
  Apr-03

  	
   

  	
  May-03

  	
   

  	
  Jun-03

  	
   

  	
  Jul-03

  	
   

  	
  Aug-03

  	
   

  	
  Sep-03

  	
   

  	
  Oct-03

  	
   

  	
  Nov-03

  	
   

  	
  Dec-03

  	
   

  	
  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy Season

  	
   

  	
  7.03

  	
  %

  	
  9.45

  	
  %

  	
  7.61

  	
  %

  	
  7.13

  	
  %

  	
  9.40

  	
  %

  	
  7.93

  	
  %

  	
  8.60

  	
  %

  	
  11.13

  	
  %

  	
  8.84

  	
  %

  	
  7.31

  	
  %

  	
  8.66

  	
  %

  	
  6.92

  	
  %

  	
  100

  	
  %

  
	
  Nomaco Season

  	
   

  	
  8.08

  	
  %

  	
  7.87

  	
  %

  	
  7.90

  	
  %

  	
  7.00

  	
  %

  	
  9.10

  	
  %

  	
  7.92

  	
  %

  	
  9.74

  	
  %

  	
  9.41

  	
  %

  	
  8.76

  	
  %

  	
  8.24

  	
  %

  	
  8.52

  	
  %

  	
  7.46

  	
  %

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Forcast

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PosterpPedic

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
  0.815

  	
   

  	
  0.675

  	
   

  	
  0.4

  	
   

  	
  0.35

  	
   

  	
  0.25

  	
   

  	
  0.1

  	
   

  	
  0.1

  	
   

  	
   

  	
   

  
	
  KeyGuard

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,617

  	
   

  	
  9,979

  	
   

  	
  17,790

  	
   

  	
  17,935

  	
   

  	
  19,469

  	
   

  	
  24,173

  	
   

  	
  21,167

  	
   

  	
  115,130

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  229

  	
   

  	
  495

  	
   

  	
  882

  	
   

  	
  890

  	
   

  	
  966

  	
   

  	
  1,199

  	
   

  	
  1,050

  	
   

  	
  5,710

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  5,718

  	
   

  	
  12,357

  	
   

  	
  22,029

  	
   

  	
  22,209

  	
   

  	
  24,109

  	
   

  	
  29,934

  	
   

  	
  26,211

  	
   

  	
  142,567

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  20

  	
   

  	
  43

  	
   

  	
  76

  	
   

  	
  77

  	
   

  	
  83

  	
   

  	
  103

  	
   

  	
  90

  	
   

  	
  491

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  14,101

  	
   

  	
  30,475

  	
   

  	
  54,327

  	
   

  	
  54,770

  	
   

  	
  59,456

  	
   

  	
  73,820

  	
   

  	
  64,640

  	
   

  	
  351,589

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  3,713

  	
   

  	
  8,024

  	
   

  	
  14,304

  	
   

  	
  14,420

  	
   

  	
  15,654

  	
   

  	
  19,436

  	
   

  	
  17,019

  	
   

  	
  92,569

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  637

  	
   

  	
  1,376

  	
   

  	
  2,453

  	
   

  	
  2,473

  	
   

  	
  2,684

  	
   

  	
  3,333

  	
   

  	
  2,918

  	
   

  	
  15,872

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  29,034

  	
   

  	
  62,748

  	
   

  	
  111,860

  	
   

  	
  112,773

  	
   

  	
  122,421

  	
   

  	
  151,998

  	
   

  	
  133,095

  	
   

  	
  723,928

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1” Bases

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,650

  	
   

  	
  10,050

  	
   

  	
  17,916

  	
   

  	
  18,062

  	
   

  	
  19,607

  	
   

  	
  24,344

  	
   

  	
  21,317

  	
   

  	
  115,945

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  236

  	
   

  	
  511

  	
   

  	
  910

  	
   

  	
  918

  	
   

  	
  996

  	
   

  	
  1,237

  	
   

  	
  1,083

  	
   

  	
  5,890

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  5,824

  	
   

  	
  12,586

  	
   

  	
  22,437

  	
   

  	
  22,621

  	
   

  	
  24,556

  	
   

  	
  30,489

  	
   

  	
  26,697

  	
   

  	
  145,210

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  21

  	
   

  	
  45

  	
   

  	
  80

  	
   

  	
  81

  	
   

  	
  88

  	
   

  	
  109

  	
   

  	
  95

  	
   

  	
  519

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  14,901

  	
   

  	
  32,203

  	
   

  	
  57,409

  	
   

  	
  57,877

  	
   

  	
  62,829

  	
   

  	
  78,008

  	
   

  	
  68,307

  	
   

  	
  371,534

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,169

  	
   

  	
  9,011

  	
   

  	
  16,063

  	
   

  	
  16,194

  	
   

  	
  17,580

  	
   

  	
  21,827

  	
   

  	
  19,112

  	
   

  	
  103,955

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  793

  	
   

  	
  1,714

  	
   

  	
  3,056

  	
   

  	
  3,081

  	
   

  	
  3,344

  	
   

  	
  4,152

  	
   

  	
  3,636

  	
   

  	
  19,777

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  30,594

  	
   

  	
  66,120

  	
   

  	
  117,871

  	
   

  	
  118,833

  	
   

  	
  128,999

  	
   

  	
  160,166

  	
   

  	
  140,247

  	
   

  	
  762,830

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EverEdge Roll

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  33

  	
   

  	
  71

  	
   

  	
  126

  	
   

  	
  127

  	
   

  	
  138

  	
   

  	
  171

  	
   

  	
  150

  	
   

  	
  815

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  7

  	
   

  	
  16

  	
   

  	
  28

  	
   

  	
  28

  	
   

  	
  30

  	
   

  	
  38

  	
   

  	
  33

  	
   

  	
  180

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  106

  	
   

  	
  229

  	
   

  	
  408

  	
   

  	
  412

  	
   

  	
  447

  	
   

  	
  555

  	
   

  	
  486

  	
   

  	
  2,643

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  4

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  5

  	
   

  	
  28

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  800

  	
   

  	
  1,729

  	
   

  	
  3,082

  	
   

  	
  3,107

  	
   

  	
  3,373

  	
   

  	
  4,188

  	
   

  	
  3,667

  	
   

  	
  19,945

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  457

  	
   

  	
  987

  	
   

  	
  1,759

  	
   

  	
  1,774

  	
   

  	
  1,925

  	
   

  	
  2,391

  	
   

  	
  2,093

  	
   

  	
  11,386

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  157

  	
   

  	
  338

  	
   

  	
  603

  	
   

  	
  608

  	
   

  	
  660

  	
   

  	
  820

  	
   

  	
  718

  	
   

  	
  3,904

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1,560

  	
   

  	
  3,372

  	
   

  	
  6,011

  	
   

  	
  6,060

  	
   

  	
  6,578

  	
   

  	
  8,168

  	
   

  	
  7,152

  	
   

  	
  38,902

  	
   

  

 

C-2

 

	
   

  	
   

  	
  Jan-03

  	
   

  	
  Feb-03

  	
   

  	
  Mar-03

  	
   

  	
  Apr-03

  	
   

  	
  May-03

  	
   

  	
  Jun-03

  	
   

  	
  Jul-03

  	
   

  	
  Aug-03

  	
   

  	
  Sep-03

  	
   

  	
  Oct-03

  	
   

  	
  Nov-03

  	
   

  	
  Dec-03

  	
   

  	
  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Caps

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PosterpPedic

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  KeyGuard

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,617

  	
   

  	
  9,979

  	
   

  	
  17,790

  	
   

  	
  17,935

  	
   

  	
  21,416

  	
   

  	
  26,590

  	
   

  	
  23,283

  	
   

  	
  126,643

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  229

  	
   

  	
  495

  	
   

  	
  882

  	
   

  	
  890

  	
   

  	
  1,062

  	
   

  	
  1,319

  	
   

  	
  1,155

  	
   

  	
  6,282

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  5,718

  	
   

  	
  12,357

  	
   

  	
  22,029

  	
   

  	
  22,209

  	
   

  	
  26,520

  	
   

  	
  32,927

  	
   

  	
  28,832

  	
   

  	
  156,823

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  20

  	
   

  	
  43

  	
   

  	
  76

  	
   

  	
  77

  	
   

  	
  91

  	
   

  	
  113

  	
   

  	
  99

  	
   

  	
  540

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  14,101

  	
   

  	
  30,475

  	
   

  	
  54,327

  	
   

  	
  54,770

  	
   

  	
  65,402

  	
   

  	
  81,202

  	
   

  	
  71,104

  	
   

  	
  386,748

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  3,713

  	
   

  	
  8,024

  	
   

  	
  14,304

  	
   

  	
  14,420

  	
   

  	
  17,219

  	
   

  	
  21,380

  	
   

  	
  18,721

  	
   

  	
  101,826

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  637

  	
   

  	
  1,376

  	
   

  	
  2,453

  	
   

  	
  2,473

  	
   

  	
  2,952

  	
   

  	
  3,666

  	
   

  	
  3,210

  	
   

  	
  17,459

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  29,034

  	
   

  	
  62,748

  	
   

  	
  111,860

  	
   

  	
  112,773

  	
   

  	
  134,663

  	
   

  	
  167,197

  	
   

  	
  146,405

  	
   

  	
  796,321

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1” Bases

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,650

  	
   

  	
  10,050

  	
   

  	
  17,916

  	
   

  	
  18,062

  	
   

  	
  21,568

  	
   

  	
  26,778

  	
   

  	
  23,448

  	
   

  	
  127,539

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  236

  	
   

  	
  511

  	
   

  	
  910

  	
   

  	
  918

  	
   

  	
  1,096

  	
   

  	
  1,360

  	
   

  	
  1,191

  	
   

  	
  6,479

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  5,824

  	
   

  	
  12,586

  	
   

  	
  22,437

  	
   

  	
  22,621

  	
   

  	
  27,011

  	
   

  	
  33,537

  	
   

  	
  29,367

  	
   

  	
  159,731

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  21

  	
   

  	
  45

  	
   

  	
  80

  	
   

  	
  81

  	
   

  	
  97

  	
   

  	
  120

  	
   

  	
  105

  	
   

  	
  571

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  14,901

  	
   

  	
  32,203

  	
   

  	
  57,409

  	
   

  	
  57,877

  	
   

  	
  69,112

  	
   

  	
  85,809

  	
   

  	
  75,138

  	
   

  	
  408,688

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  4,169

  	
   

  	
  9,011

  	
   

  	
  16,063

  	
   

  	
  16,194

  	
   

  	
  19,337

  	
   

  	
  24,009

  	
   

  	
  21,024

  	
   

  	
  114,351

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  793

  	
   

  	
  1,714

  	
   

  	
  3,056

  	
   

  	
  3,081

  	
   

  	
  3,679

  	
   

  	
  4,568

  	
   

  	
  4,000

  	
   

  	
  21,754

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  30,594

  	
   

  	
  66,120

  	
   

  	
  117,871

  	
   

  	
  118,833

  	
   

  	
  141,899

  	
   

  	
  176,182

  	
   

  	
  154,272

  	
   

  	
  839,113

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EverEdge Roll

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  33

  	
   

  	
  71

  	
   

  	
  126

  	
   

  	
  127

  	
   

  	
  152

  	
   

  	
  188

  	
   

  	
  165

  	
   

  	
  896

  	
   

  
	
  XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  7

  	
   

  	
  16

  	
   

  	
  28

  	
   

  	
  28

  	
   

  	
  33

  	
   

  	
  41

  	
   

  	
  36

  	
   

  	
  198

  	
   

  
	
  Full

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  106

  	
   

  	
  229

  	
   

  	
  408

  	
   

  	
  412

  	
   

  	
  492

  	
   

  	
  610

  	
   

  	
  535

  	
   

  	
  2,907

  	
   

  
	
   XL

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  4

  	
   

  	
  4

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  6

  	
   

  	
  31

  	
   

  
	
  Queen

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  800

  	
   

  	
  1,729

  	
   

  	
  3,082

  	
   

  	
  3,107

  	
   

  	
  3,710

  	
   

  	
  4,607

  	
   

  	
  4,034

  	
   

  	
  21,940

  	
   

  
	
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  457

  	
   

  	
  987

  	
   

  	
  1,759

  	
   

  	
  1,774

  	
   

  	
  2,118

  	
   

  	
  2,630

  	
   

  	
  2,303

  	
   

  	
  12,525

  	
   

  
	
  Cal
  King

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  157

  	
   

  	
  338

  	
   

  	
  603

  	
   

  	
  608

  	
   

  	
  726

  	
   

  	
  902

  	
   

  	
  790

  	
   

  	
  4,295

  	
   

  
	
  Total
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  1,560

  	
   

  	
  3,372

  	
   

  	
  6,011

  	
   

  	
  6,060

  	
   

  	
  7,236

  	
   

  	
  8,985

  	
   

  	
  7,867

  	
   

  	
  42,792

  	
   

  

 

C-3

 

	
   

  	
   

  	
  Jan-04

  	
   

  	
  Feb-04

  	
   

  	
  Mar-04

  	
   

  	
  Apr-04

  	
   

  	
  May-04

  	
   

  	
  Jun-04

  	
   

  	
  Jul-04

  	
   

  	
  Aug-04

  	
   

  	
  Sep-04

  	
   

  	
  Oct-04

  	
   

  	
  Nov-04

  	
   

  	
  Dec-04

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.03

  	
  %

  	
  9.45

  	
  %

  	
  7.61

  	
  %

  	
  7.13

  	
  %

  	
  9.40

  	
  %

  	
  7.93

  	
  %

  	
  8.60

  	
  %

  	
  11.13

  	
  %

  	
  8.84

  	
  %

  	
  7.31

  	
  %

  	
  8.66

  	
  %

  	
  6.92

  	
  %

  	
  100

  	
  %

  
	
  Caps

  	
   

  	
  8.08

  	
  %

  	
  7.87

  	
  %

  	
  7.90

  	
  %

  	
  7.00

  	
  %

  	
  9.10

  	
  %

  	
  7.92

  	
  %

  	
  9.74

  	
  %

  	
  9.41

  	
  %

  	
  8.76

  	
  %

  	
  8.24

  	
  %

  	
  8.52

  	
  %

  	
  7.46

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PosterpPedic

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  KeyGuard

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  25,456

  	
   

  	
  24,814

  	
   

  	
  24,887

  	
   

  	
  22,047

  	
   

  	
  28,677

  	
   

  	
  24,959

  	
   

  	
  30,705

  	
   

  	
  29,649

  	
   

  	
  27,592

  	
   

  	
  25,959

  	
   

  	
  26,859

  	
   

  	
  23,519

  	
   

  	
  315,122

  	
   

  
	
  XL

  	
   

  	
  1,263

  	
   

  	
  1,231

  	
   

  	
  1,234

  	
   

  	
  1,094

  	
   

  	
  1,422

  	
   

  	
  1,238

  	
   

  	
  1,523

  	
   

  	
  1,471

  	
   

  	
  1,369

  	
   

  	
  1,288

  	
   

  	
  1,332

  	
   

  	
  1,167

  	
   

  	
  15,630

  	
   

  
	
  Full

  	
   

  	
  31,523

  	
   

  	
  30,727

  	
   

  	
  30,817

  	
   

  	
  27,301

  	
   

  	
  35,511

  	
   

  	
  30,907

  	
   

  	
  38,022

  	
   

  	
  36,715

  	
   

  	
  34,168

  	
   

  	
  32,145

  	
   

  	
  33,260

  	
   

  	
  29,123

  	
   

  	
  390,219

  	
   

  
	
   XL

  	
   

  	
  109

  	
   

  	
  106

  	
   

  	
  106

  	
   

  	
  94

  	
   

  	
  122

  	
   

  	
  106

  	
   

  	
  131

  	
   

  	
  126

  	
   

  	
  118

  	
   

  	
  111

  	
   

  	
  115

  	
   

  	
  100

  	
   

  	
  1,344

  	
   

  
	
  Queen

  	
   

  	
  77,740

  	
   

  	
  75,777

  	
   

  	
  76,000

  	
   

  	
  67,328

  	
   

  	
  87,574

  	
   

  	
  76,220

  	
   

  	
  93,768

  	
   

  	
  90,545

  	
   

  	
  84,262

  	
   

  	
  79,275

  	
   

  	
  82,023

  	
   

  	
  71,822

  	
   

  	
  962,334

  	
   

  
	
  King

  	
   

  	
  20,468

  	
   

  	
  19,951

  	
   

  	
  20,010

  	
   

  	
  17,727

  	
   

  	
  23,057

  	
   

  	
  20,068

  	
   

  	
  24,688

  	
   

  	
  23,839

  	
   

  	
  22,185

  	
   

  	
  20,872

  	
   

  	
  21,596

  	
   

  	
  18,910

  	
   

  	
  253,371

  	
   

  
	
   Cal
  King

  	
   

  	
  3,510

  	
   

  	
  3,421

  	
   

  	
  3,431

  	
   

  	
  3,039

  	
   

  	
  3,953

  	
   

  	
  3,441

  	
   

  	
  4,233

  	
   

  	
  4,088

  	
   

  	
  3,804

  	
   

  	
  3,579

  	
   

  	
  3,703

  	
   

  	
  3,242

  	
   

  	
  43,444

  	
   

  
	
  Total
  Units

  	
   

  	
  160,068

  	
   

  	
  156,027

  	
   

  	
  156,485

  	
   

  	
  138,630

  	
   

  	
  180,317

  	
   

  	
  156,939

  	
   

  	
  193,071

  	
   

  	
  186,433

  	
   

  	
  173,497

  	
   

  	
  163,228

  	
   

  	
  168,886

  	
   

  	
  147,884

  	
   

  	
  1,981,464

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1” Bases

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  25,637

  	
   

  	
  24,989

  	
   

  	
  25,063

  	
   

  	
  22,203

  	
   

  	
  28,880

  	
   

  	
  25,135

  	
   

  	
  30,922

  	
   

  	
  29,859

  	
   

  	
  27,787

  	
   

  	
  26,143

  	
   

  	
  27,049

  	
   

  	
  23,685

  	
   

  	
  317,352

  	
   

  
	
  XL

  	
   

  	
  1,302

  	
   

  	
  1,269

  	
   

  	
  1,273

  	
   

  	
  1,128

  	
   

  	
  1,467

  	
   

  	
  1,277

  	
   

  	
  1,571

  	
   

  	
  1,517

  	
   

  	
  1,412

  	
   

  	
  1,328

  	
   

  	
  1,374

  	
   

  	
  1,203

  	
   

  	
  16,122

  	
   

  
	
  Full

  	
   

  	
  32,107

  	
   

  	
  31,297

  	
   

  	
  31,389

  	
   

  	
  27,807

  	
   

  	
  36,169

  	
   

  	
  31,480

  	
   

  	
  38,727

  	
   

  	
  37,396

  	
   

  	
  34,801

  	
   

  	
  32,741

  	
   

  	
  33,876

  	
   

  	
  29,663

  	
   

  	
  397,453

  	
   

  
	
   XL

  	
   

  	
  115

  	
   

  	
  112

  	
   

  	
  112

  	
   

  	
  99

  	
   

  	
  129

  	
   

  	
  113

  	
   

  	
  138

  	
   

  	
  134

  	
   

  	
  124

  	
   

  	
  117

  	
   

  	
  121

  	
   

  	
  106

  	
   

  	
  1,420

  	
   

  
	
  Queen

  	
   

  	
  82,150

  	
   

  	
  80,076

  	
   

  	
  80,311

  	
   

  	
  71,148

  	
   

  	
  92,542

  	
   

  	
  80,544

  	
   

  	
  99,088

  	
   

  	
  95,681

  	
   

  	
  89,042

  	
   

  	
  83,772

  	
   

  	
  86,676

  	
   

  	
  75,897

  	
   

  	
  1,016,927

  	
   

  
	
  King

  	
   

  	
  22,986

  	
   

  	
  22,405

  	
   

  	
  22,471

  	
   

  	
  19,907

  	
   

  	
  25,893

  	
   

  	
  22,536

  	
   

  	
  27,725

  	
   

  	
  26,772

  	
   

  	
  24,914

  	
   

  	
  23,439

  	
   

  	
  24,252

  	
   

  	
  21,236

  	
   

  	
  284,536

  	
   

  
	
   Cal
  King

  	
   

  	
  4,373

  	
   

  	
  4,262

  	
   

  	
  4,275

  	
   

  	
  3,787

  	
   

  	
  4,926

  	
   

  	
  4,287

  	
   

  	
  5,274

  	
   

  	
  5,093

  	
   

  	
  4,740

  	
   

  	
  4,459

  	
   

  	
  4,614

  	
   

  	
  4,040

  	
   

  	
  54,131

  	
   

  
	
  Total
  Units

  	
   

  	
  168,670

  	
   

  	
  164,411

  	
   

  	
  164,894

  	
   

  	
  146,079

  	
   

  	
  190,006

  	
   

  	
  165,372

  	
   

  	
  203,446

  	
   

  	
  196,451

  	
   

  	
  182,820

  	
   

  	
  171,999

  	
   

  	
  177,962

  	
   

  	
  155,830

  	
   

  	
  2,087,941

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EverEdge Roll

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  180

  	
   

  	
  176

  	
   

  	
  176

  	
   

  	
  156

  	
   

  	
  203

  	
   

  	
  177

  	
   

  	
  217

  	
   

  	
  210

  	
   

  	
  195

  	
   

  	
  184

  	
   

  	
  190

  	
   

  	
  166

  	
   

  	
  2,231

  	
   

  
	
  XL

  	
   

  	
  40

  	
   

  	
  39

  	
   

  	
  39

  	
   

  	
  34

  	
   

  	
  45

  	
   

  	
  39

  	
   

  	
  48

  	
   

  	
  46

  	
   

  	
  43

  	
   

  	
  41

  	
   

  	
  42

  	
   

  	
  37

  	
   

  	
  492

  	
   

  
	
  Full

  	
   

  	
  584

  	
   

  	
  570

  	
   

  	
  571

  	
   

  	
  506

  	
   

  	
  658

  	
   

  	
  573

  	
   

  	
  705

  	
   

  	
  681

  	
   

  	
  633

  	
   

  	
  596

  	
   

  	
  617

  	
   

  	
  540

  	
   

  	
  7,234

  	
   

  
	
   XL

  	
   

  	
  6

  	
   

  	
  6

  	
   

  	
  6

  	
   

  	
  5

  	
   

  	
  7

  	
   

  	
  6

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  6

  	
   

  	
  6

  	
   

  	
  6

  	
   

  	
  76

  	
   

  
	
  Queen

  	
   

  	
  4,410

  	
   

  	
  4,299

  	
   

  	
  4,311

  	
   

  	
  3,819

  	
   

  	
  4,968

  	
   

  	
  4,324

  	
   

  	
  5,319

  	
   

  	
  5,137

  	
   

  	
  4,780

  	
   

  	
  4,497

  	
   

  	
  4,653

  	
   

  	
  4,074

  	
   

  	
  54,593

  	
   

  
	
  King

  	
   

  	
  2,518

  	
   

  	
  2,454

  	
   

  	
  2,461

  	
   

  	
  2,180

  	
   

  	
  2,836

  	
   

  	
  2,468

  	
   

  	
  3,037

  	
   

  	
  2,932

  	
   

  	
  2,729

  	
   

  	
  2,567

  	
   

  	
  2,656

  	
   

  	
  2,326

  	
   

  	
  31,165

  	
   

  
	
   Cal
  King

  	
   

  	
  863

  	
   

  	
  842

  	
   

  	
  844

  	
   

  	
  748

  	
   

  	
  973

  	
   

  	
  846

  	
   

  	
  1,041

  	
   

  	
  1,006

  	
   

  	
  936

  	
   

  	
  880

  	
   

  	
  911

  	
   

  	
  798

  	
   

  	
  10,687

  	
   

  
	
  Total
  Units

  	
   

  	
  8,602

  	
   

  	
  8,384

  	
   

  	
  8,409

  	
   

  	
  7,450

  	
   

  	
  9,690

  	
   

  	
  8,433

  	
   

  	
  10,375

  	
   

  	
  10,018

  	
   

  	
  9,323

  	
   

  	
  8,771

  	
   

  	
  9,075

  	
   

  	
  7,947

  	
   

  	
  106,477

  	
   

  

 

C-4

 

	
   

  	
   

  	
  Jan-04

  	
   

  	
  Feb-04

  	
   

  	
  Mar-04

  	
   

  	
  Apr-04

  	
   

  	
  May-04

  	
   

  	
  Jun-04

  	
   

  	
  Jul-04

  	
   

  	
  Aug-04

  	
   

  	
  Sep-04

  	
   

  	
  Oct-04

  	
   

  	
  Nov-04

  	
   

  	
  Dec-04

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Caps

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PosterpPedic

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  KeyGuard

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  28,002

  	
   

  	
  27,295

  	
   

  	
  27,375

  	
   

  	
  24,252

  	
   

  	
  31,544

  	
   

  	
  27,455

  	
   

  	
  33,775

  	
   

  	
  32,614

  	
   

  	
  30,351

  	
   

  	
  28,555

  	
   

  	
  29,545

  	
   

  	
  25,871

  	
   

  	
  346,634

  	
   

  
	
  XL

  	
   

  	
  1,389

  	
   

  	
  1,354

  	
   

  	
  1,358

  	
   

  	
  1,203

  	
   

  	
  1,565

  	
   

  	
  1,362

  	
   

  	
  1,675

  	
   

  	
  1,618

  	
   

  	
  1,505

  	
   

  	
  1,416

  	
   

  	
  1,465

  	
   

  	
  1,283

  	
   

  	
  17,193

  	
   

  
	
  Full

  	
   

  	
  34,675

  	
   

  	
  33,800

  	
   

  	
  33,899

  	
   

  	
  30,031

  	
   

  	
  39,062

  	
   

  	
  33,997

  	
   

  	
  41,825

  	
   

  	
  40,387

  	
   

  	
  37,584

  	
   

  	
  35,360

  	
   

  	
  36,586

  	
   

  	
  32,036

  	
   

  	
  429,241

  	
   

  
	
   XL

  	
   

  	
  119

  	
   

  	
  116

  	
   

  	
  117

  	
   

  	
  103

  	
   

  	
  135

  	
   

  	
  117

  	
   

  	
  144

  	
   

  	
  139

  	
   

  	
  129

  	
   

  	
  122

  	
   

  	
  126

  	
   

  	
  110

  	
   

  	
  1,479

  	
   

  
	
  Queen

  	
   

  	
  85,514

  	
   

  	
  83,355

  	
   

  	
  83,600

  	
   

  	
  74,061

  	
   

  	
  96,332

  	
   

  	
  83,842

  	
   

  	
  103,145

  	
   

  	
  99,599

  	
   

  	
  92,688

  	
   

  	
  87,202

  	
   

  	
  90,225

  	
   

  	
  79,005

  	
   

  	
  1,058,567

  	
   

  
	
  King

  	
   

  	
  22,515

  	
   

  	
  21,946

  	
   

  	
  22,011

  	
   

  	
  19,499

  	
   

  	
  25,363

  	
   

  	
  22,075

  	
   

  	
  27,157

  	
   

  	
  26,223

  	
   

  	
  24,404

  	
   

  	
  22,959

  	
   

  	
  23,755

  	
   

  	
  20,801

  	
   

  	
  278,708

  	
   

  
	
  Cal
  King

  	
   

  	
  3,860

  	
   

  	
  3,763

  	
   

  	
  3,774

  	
   

  	
  3,343

  	
   

  	
  4,349

  	
   

  	
  3,785

  	
   

  	
  4,656

  	
   

  	
  4,496

  	
   

  	
  4,184

  	
   

  	
  3,937

  	
   

  	
  4,073

  	
   

  	
  3,567

  	
   

  	
  47,788

  	
   

  
	
  Total
  Units

  	
   

  	
  176,075

  	
   

  	
  171,629

  	
   

  	
  172,134

  	
   

  	
  152,493

  	
   

  	
  198,349

  	
   

  	
  172,633

  	
   

  	
  212,378

  	
   

  	
  205,076

  	
   

  	
  190,847

  	
   

  	
  179,551

  	
   

  	
  185,775

  	
   

  	
  162,672

  	
   

  	
  2,179,610

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1” Bases

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  28,200

  	
   

  	
  27,488

  	
   

  	
  27,569

  	
   

  	
  24,423

  	
   

  	
  31,768

  	
   

  	
  27,649

  	
   

  	
  34,015

  	
   

  	
  32,845

  	
   

  	
  30,566

  	
   

  	
  28,757

  	
   

  	
  29,754

  	
   

  	
  26,054

  	
   

  	
  349,087

  	
   

  
	
  XL

  	
   

  	
  1,433

  	
   

  	
  1,396

  	
   

  	
  1,401

  	
   

  	
  1,241

  	
   

  	
  1,614

  	
   

  	
  1,405

  	
   

  	
  1,728

  	
   

  	
  1,669

  	
   

  	
  1,553

  	
   

  	
  1,461

  	
   

  	
  1,512

  	
   

  	
  1,324

  	
   

  	
  17,734

  	
   

  
	
  Full

  	
   

  	
  35,318

  	
   

  	
  34,426

  	
   

  	
  34,528

  	
   

  	
  30,588

  	
   

  	
  39,786

  	
   

  	
  34,628

  	
   

  	
  42,600

  	
   

  	
  41,135

  	
   

  	
  38,281

  	
   

  	
  36,015

  	
   

  	
  37,264

  	
   

  	
  32,630

  	
   

  	
  437,198

  	
   

  
	
   XL

  	
   

  	
  126

  	
   

  	
  123

  	
   

  	
  123

  	
   

  	
  109

  	
   

  	
  142

  	
   

  	
  124

  	
   

  	
  152

  	
   

  	
  147

  	
   

  	
  137

  	
   

  	
  129

  	
   

  	
  133

  	
   

  	
  117

  	
   

  	
  1,563

  	
   

  
	
  Queen

  	
   

  	
  90,365

  	
   

  	
  88,084

  	
   

  	
  88,342

  	
   

  	
  78,262

  	
   

  	
  101,796

  	
   

  	
  88,599

  	
   

  	
  108,996

  	
   

  	
  105,249

  	
   

  	
  97,946

  	
   

  	
  92,149

  	
   

  	
  95,343

  	
   

  	
  83,487

  	
   

  	
  1,118,619

  	
   

  
	
  King

  	
   

  	
  25,284

  	
   

  	
  24,646

  	
   

  	
  24,718

  	
   

  	
  21,898

  	
   

  	
  28,483

  	
   

  	
  24,790

  	
   

  	
  30,497

  	
   

  	
  29,449

  	
   

  	
  27,405

  	
   

  	
  25,783

  	
   

  	
  26,677

  	
   

  	
  23,360

  	
   

  	
  312,990

  	
   

  
	
  Cal
  King

  	
   

  	
  4,810

  	
   

  	
  4,689

  	
   

  	
  4,702

  	
   

  	
  4,166

  	
   

  	
  5,419

  	
   

  	
  4,716

  	
   

  	
  5,802

  	
   

  	
  5,602

  	
   

  	
  5,214

  	
   

  	
  4,905

  	
   

  	
  5,075

  	
   

  	
  4,444

  	
   

  	
  59,544

  	
   

  
	
  Total
  Units

  	
   

  	
  185,537

  	
   

  	
  180,852

  	
   

  	
  181,384

  	
   

  	
  160,687

  	
   

  	
  209,007

  	
   

  	
  181,909

  	
   

  	
  223,790

  	
   

  	
  216,096

  	
   

  	
  201,102

  	
   

  	
  189,199

  	
   

  	
  195,758

  	
   

  	
  171,414

  	
   

  	
  2,296,735

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EverEdge Roll

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Twin

  	
   

  	
  198

  	
   

  	
  193

  	
   

  	
  194

  	
   

  	
  172

  	
   

  	
  223

  	
   

  	
  194

  	
   

  	
  239

  	
   

  	
  231

  	
   

  	
  215

  	
   

  	
  202

  	
   

  	
  209

  	
   

  	
  183

  	
   

  	
  2,454

  	
   

  
	
  XL

  	
   

  	
  44

  	
   

  	
  43

  	
   

  	
  43

  	
   

  	
  38

  	
   

  	
  49

  	
   

  	
  43

  	
   

  	
  53

  	
   

  	
  51

  	
   

  	
  47

  	
   

  	
  45

  	
   

  	
  46

  	
   

  	
  40

  	
   

  	
  541

  	
   

  
	
  Full

  	
   

  	
  643

  	
   

  	
  627

  	
   

  	
  628

  	
   

  	
  557

  	
   

  	
  724

  	
   

  	
  630

  	
   

  	
  775

  	
   

  	
  749

  	
   

  	
  697

  	
   

  	
  656

  	
   

  	
  678

  	
   

  	
  594

  	
   

  	
  7,958

  	
   

  
	
   XL

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  6

  	
   

  	
  8

  	
   

  	
  7

  	
   

  	
  8

  	
   

  	
  8

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  6

  	
   

  	
  84

  	
   

  
	
  Queen

  	
   

  	
  4,851

  	
   

  	
  4,729

  	
   

  	
  4,743

  	
   

  	
  4,201

  	
   

  	
  5,465

  	
   

  	
  4,756

  	
   

  	
  5,851

  	
   

  	
  5,650

  	
   

  	
  5,258

  	
   

  	
  4,947

  	
   

  	
  5,118

  	
   

  	
  4,482

  	
   

  	
  60,052

  	
   

  
	
  King

  	
   

  	
  2,769

  	
   

  	
  2,699

  	
   

  	
  2,707

  	
   

  	
  2,398

  	
   

  	
  3,120

  	
   

  	
  2,715

  	
   

  	
  3,340

  	
   

  	
  3,226

  	
   

  	
  3,002

  	
   

  	
  2,824

  	
   

  	
  2,922

  	
   

  	
  2,559

  	
   

  	
  34,282

  	
   

  
	
  Cal
  King

  	
   

  	
  950

  	
   

  	
  926

  	
   

  	
  928

  	
   

  	
  822

  	
   

  	
  1,070

  	
   

  	
  931

  	
   

  	
  1,145

  	
   

  	
  1,106

  	
   

  	
  1,029

  	
   

  	
  968

  	
   

  	
  1,002

  	
   

  	
  877

  	
   

  	
  11,756

  	
   

  
	
  Total
  Units

  	
   

  	
  9,462

  	
   

  	
  9,223

  	
   

  	
  9,250

  	
   

  	
  8,194

  	
   

  	
  10,659

  	
   

  	
  9,277

  	
   

  	
  11,412

  	
   

  	
  11,020

  	
   

  	
  10,255

  	
   

  	
  9,648

  	
   

  	
  9,983

  	
   

  	
  8,741

  	
   

  	
  117,125

  	
   

  

 

C-5

 

Exhibit D

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Product Specifications

 

Bases

 

Initial
size specifications and tolerances are over-sized to SEALY’s needs and can be
reduced over time as determined by ongoing dimensional and manufacturing
analysis (both at Sealy and Nomaco).

 

Bases
are floor loaded with no external packaging.

 

Keyguards

 

Extrusion
capability analysis demonstrates that the keyguard profile width tolerance can
be achieved within a 98% confidence interval at +/- 2mm and within a 95%
confidence interval at +/- 1.5mm.

 

Product
packaging is being quoted as bagged. 
Initial shipments will be boxed at Nomaco’s expense.  As logistics methods can be developed the
packaging will evolve to reduce, or eliminate, boxes.

 

CAD Drawing
Attachments

 

Attached
hereto are 28 CAD designs for each of the Products specified on Exhibit A
setting forth the applicatble specifcations. 
Such attachements include 12 K-Guards (Items 1-7), 9  EverEdgeRolls with KeyCorner (Items 13 - 21)
and 7 base planks (one inch) (Items 22 – 28).

 

[ATTACH CAD DRAWINGS/SPECIFICATIONS].

 

D-1

 

Exhibit E

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Performance
Metric/Standards/Special Instructions

 

Packaging

 

Unless
otherwise specified, all Products will be packed in accordance with good
commercial practice to prevent damage and deterioration during shipping,
handling, and storage.  A complete
packing list shall be enclosed with all shipments.  NOMACO shall mark containers or packages with
necessary lifting, loading, and shipping information.

 

Access to
Facilities

 

Access
to facilities by duly authorized SEALY Personnel shall be permitted upon
reasonable advance request during normal business hours.

 

Minimum
Inventory

 

NOMACO
will maintain a minimum inventory of 21 days’ reasonably forecasted supply of
the Products referenced in Exhibit A.  Over time inventory will be reviewed by SEALY
and NOMACO from time to time, subject to the other provisions to this
Agreement, to optimize cost and service.

 

Invoice Accuracy

 

NOMACO
will use commercially reasonable efforts to cause its invoice to match the
packing slip and shipping documentation without errors.  All invoices must include the following
information:

 

	
  1.

  	
  Invoice
  number

  	
  7.

  	
  Purchase
  order number

  
	
  2.

  	
  Ship
  to location

  	
  8.

  	
  Invoice
  date

  
	
  3.

  	
  Payment
  terms

  	
  9.

  	
  SEALY
  vendor number

  
	
  4.

  	
  Number
  of pieces shipped

  	
  10.

  	
  Person’s
  name who entered PO

  
	
  5.

  	
  Price
  per piece

  	
  11.

  	
  Vendor
  address and telephone number.

  
	
  6.

  	
  Mode
  of transportation

  	
   

  	
   

  

 

E-1

 

On-Time Delivery

 

NOMACO
will use commercially reasonable efforts to cause the carrier engaged pursuant
to Section 3(d) to deliver all accepted orders for Products on time
to the designated SEALY location within the continental United States.  Any order delivered by such carrier more than
one (1) business day after the promised delivery date as specified in the
confirmation shall not be on time. 
NOMACO shall be in compliance with this on time delivery requirement so
long as at least 94% of all orders are delivered on time during any 30
consecutive days; provided, that such performance standard shall be increased
to 95% effective January 1, 2004 and 96% effective on January 1,
2005.  SEALY will review delivery performance
monthly and notify NOMACO of its findings.

 

Order Accuracy

 

NOMACO
will use commercially reasonably efforts to accurately fill each order for
Products.  Order accuracy will be
measured as orders shipped to SEALY at all locations per EDI acknowledgement of
NOMACO and will be measured by part quantities. 
NOMACO shall be in compliance with this order accuracy requirement so
long as at least 98% of all orders delivered in any 30 consecutive days are
accurate.  SEALY will review order
accuracy monthly and notify NOMACO of its findings.

 

Back-Order Frequency

 

Subject
to the caps for Products established pursuant to Section 3(c), NOMACO will
use commercially reasonable efforts to limit back-order frequency for orders of
the Products.  Back-order frequency will
be measured by orders shipped short to SEALY locations per the original order
sent by any SEALY location and will be measured by part.  NOMACO shall be in compliance with this
back-order frequency requirement so long as such back-order frequency does not
exceed 3% during any 30 consecutive days. 
SEALY will review back-order frequency monthly and notify NOMACO of its
findings.

 

E-2

 

EDI Acknowledgement

 

NOMACO
will use commercially reasonably efforts to generate an EDI 855 acknowledgement
within 3 business hours of receipt of EDI 850.

 

NOMACO
will use commercially reasonable efforts to generate an EDI 856 ASN (Advance
Ship Notice) when shipment has been tendered to the designated transportation
carrier.  The EDI requirement will be
implemented by second quarter 2003.  Both
parties will mutually agree to the designated format.

 

NOMACO
shall be in compliance with this requirement so long as at least 98% of all
responses to all EDI orders in any 30 consecutive days are generated within 3
business hours of receipt of EDI 850 and at least 98% of all EDI ASN’s are
transmitted 100% accurate.  SEALY will
review response rates monthly and notify NOMACO of its findings.

 

Fines

 

After
notice of any default by NOMACO of its failure to satisfy the requirements for
on-time delivery, order accuracy, back-order frequency and EDI
Acknowledgment/ASN transmissions, SEALY may charge NOMACO a fine equal to $1,500
for each month after such notice in which SEALY documents the failure of NOMACO
to satisfy the above referenced minimum targets; provided that the fine for EDI
acknowledgement shall be $500.  Such
monthly fee shall be the sole and exclusive remedy available to SEALY for any
failure of NOMACO to satisfy such targets unless such violations give rise in
the aggregate to a material breach by NOMACO as described below.  Such fee shall be payable with respect to
each of the above referenced performance measures (e.g. maximum of $$5,500 for
any single month).

 

Material Breach

 

NOMACO
shall be deemed in material breach of this Agreement if NOMACO fails to satisfy
the referenced minimum targets with respect to back-order frequency, EDI
acknowledgment or ASN transmissions, respectively, and such failure with
respect to such specific matter continues for three (3) consecutive months
or four months in any calendar year and results in a material adverse effect on
SEALY with respect to the manufacture of the Products.

 

E-3

 

Exhibit F

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effectiv Date: February 18,
2003

 

SEALY, Inc. Affiliates

 

Affiliate Name

 

Comfort
Source (Mattress Discounters)

 

SEALY
Patterson, NJ licensee

 

SEALY
Mexico

 

SEALY
Canada

 

SEALY
Puerto Rico

 

SEALY
Dominican Republic

 

SEALY
Bahamas

 

SEALY
Australia

 

SEALY
Asia

 

SEALY
Brazil

 

SEALY
Argentina

 

SEALY
Italy

 

SEALY
France

 

SEALY
Japan

 

SEALY
Korea

 

SEALY
India

 

F-1

 

Exhibit G

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Nomaco Marks/Markets

 

“NOMACO Marks” means each of the following trademarks or
trade names with respect to the identified products of NOMACO: “NomaFOAM.”

 

“Markets” means the market for sale and distribution of the
Products in North America for use in any manufactured bedding products that are
directly competitive in such geographic territory with the Application
Products.

 

F-2

 

Exhibit H

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

Initial Quantities Of Products

 

	
  Floor Samples (All Queen)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wave 1 - June 9-July 15

  	
   

  	
  16,676

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wave 2 - July 15
  - September 15

  	
   

  	
  8,232

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wave 3 - September 15
  – End of Year

  	
   

  	
  1,367

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Training Schedule

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wave 1 - March 3
  - 7

  	
   

  	
  100
  Twin

  	
   

  	
  200
  Full

  	
   

  	
  400
  Queen

  	
   

  	
  100
  King

  	
   

  
	
  Wave 2 - March 10
  - 14

  	
   

  	
  100
  Twin

  	
   

  	
  200
  Full

  	
   

  	
  400
  Queen

  	
   

  	
  100
  King

  	
   

  
	
  Wave 3 - March 17
  - 21

  	
   

  	
  100
  Twin

  	
   

  	
  200
  Full

  	
   

  	
  400
  Queen

  	
   

  	
  100
  King

  	
   

  
	
  Wave 4 - March 24
  - 28

  	
   

  	
  100
  Twin

  	
   

  	
  200
  Full

  	
   

  	
  400
  Queen

  	
   

  	
  100
  King

  	
   

  
	
  Wave 5- March 31
  - April 4

  	
   

  	
  75 Twin

  	
   

  	
  150
  Full

  	
   

  	
  300
  Queen

  	
   

  	
  75 King

  	
   

  

 

The volumes listed above
are actually completed mattress units. 
NOMACO will be required to supply all Products necessary for SEALY to
manufacture the above referenced completed mattress units in configurations
selected by SEALY.

 

H-1

 

EXHIBIT I

to

Supply Agreement

Between Sealy, Inc.

and Nomaco, Inc.

 

Effective Date: February 18,
2003

 

INTELLECTUAL PROPERTY LICENSE
AGREEMENT

 

THIS LICENSE AGREEMENT
(the “Agreement”), made as of                           ,
2      , by and between SEALY, INC., a North
Carolina corporation having a principal office at One Office Parkway, Trinity,
NC 27370 (hereinafter referred to as “SEALY”), and NOMACO INC., a North
Carolina corporation with offices at 501 NMC Drive, Zebulon, North Carolina
27597 (hereinafter referred to as “NOMACO”).

 

WHEREAS, pursuant to the
Supply Agreement between SEALY and NOMACO dated as of                       ,
2003 (the “Supply Agreement”), NOMACO agreed to supply to SEALY, and SEALY
agreed to receive from NOMACO, all of SEALY’s total requirements for certain
products; and

 

WHEREAS, NOMACO is the
owner of certain intellectual property related to SEALY’s products; and

 

WHEREAS, SEALY desires to
obtain a temporary license under certain intellectual property owned by NOMACO
to continue making and selling certain products in certain circumstances set
forth in the Supply Agreement.

 

NOW, THEREFORE, in
consideration of the foregoing premises and the mutual promises and covenants
contained herein, and to induce the parties to enter into the Supply Agreement,
NOMACO and SEALY hereby agree as follows:

 

1.                                       DEFINITIONS.

 

(a)                                  “Application
Products” shall have the meaning set forth in the Supply Agreement.

 

(b)                                 “Licensed
Territory” shall mean the United States, Canada and Mexico, including their
territories and possessions.

 

(c)                                  “Licensed
Products” shall mean and refer to any and all products identified as “Products”
in the Supply Agreement.

 

(d)                                 “NOMACO
Technology” shall mean and refer to any and all patents or other intellectual
property, owned by NOMACO, that is/are necessary to

 

I-1

 

manufacture the Licensed
Products for the purpose of manufacturing the Application Products.

 

(e)                                  “Supply
Agreement Effective Date” shall mean and refer to the effective date of the
Supply Agreement.

 

2.                                       GRANT.  NOMACO hereby grants to SEALY a limited,
non-transferable, non-exclusive license under the NOMACO Technology to make,
have made and use the Licensed Products solely for the purpose of supplying
SEALY with its total requirements for the Licensed Products with respect to the
manufacture by SEALY of the Application Products for sale and distribution in
the Licensed Territory.

 

3.                                       TERM.  This Agreement shall begin upon the
termination of the Supply Agreement and shall continue in operation until the
earlier of (i) the fourth (4th) anniversary of the Supply
Agreement Effective Date, or, if such anniversary has already passed, then
until the immediately following anniversary of the Supply Agreement Effective
Date, or (ii) the expiration of all patents included in the NOMACO
Technology.

 

4.                                       LIMITED RIGHT TO SUBLICENSE.  The license granted herein is personal to
SEALY and explicitly excludes any right to grant sublicenses or to
sub-contract, assign, transfer or otherwise delegate all or any part of such
right and license, including by way of SEALY’s merger or acquisition of, by or
with another party; provided, however, that SEALY shall have the right to grant
to a single subcontractor manufacturer approved by NOMACO a limited,
non-transferable sublicense under the NOMACO Technology to make the Licensed Products
solely for the purpose of supplying SEALY with its requirements as contemplated
in the Supply Agreement.

 

5.                                       PATENT MARKING.  For each Application Product falling within
the scope of any of the claims of any patent application or issued patent included
in the Licensed Technology, SEALY shall mark or have marked each such product
with the legend “Patent Pending” and/or the number of any or all such issued
patents, or with such other notices as may be permitted, applicable and in
compliance with U. S. law.  In this
regard, NOMACO shall advise SEALY upon the issuance of all future patents
coming within the definition of Licensed Technology so that an appropriate
legend may be marked on each such product accordingly.

 

6.                                       MISCELLANEOUS.

 

(a)                                  Independent Contractor.  NOMACO shall be and remain an independent
contractor in the performance of the services hereunder and nothing herein
contained shall be construed to be inconsistent with this relationship or
status.  NOMACO shall be responsible for
selecting, assigning, supervising and directing the activities of all persons
required for the performance of the services and shall be responsible for all
wages, salaries, payroll records, withholding taxes, FICA taxes, benefits (if
any) and unemployment insurance payments for all such persons assigned to the
services or any part thereof, other than employees of SEALY or any affiliate
thereof.

 

I-2

 

(b)                                 Entire Agreement Regarding Post-Breach License.  The parties acknowledge that this Agreement
is ancillary to the Supply Agreement between NOMACO and SEALY and that this
Agreement does not purport to include all of the terms of that relationship;
however, this Agreement does represent the entire understanding between NOMACO and
SEALY regarding the grant of any intellectual property license, from NOMACO to
SEALY, in the event of a breach of the Supply Agreement, superseding any and
all previous oral or written representations, and any and all prior and
collateral negotiations, communications, or understandings as to these matters.

 

(c)                                  Amendment.  No change, modification, alteration, or
addition to any provision hereof shall be binding unless in writing and
executed by authorized representatives of the parties.

 

(d)                                 Waiver.  None of the terms of this Agreement shall be
deemed to be waived, in whole or in part, by either party or amended or
supplemented unless such waiver, amendment, or supplement is in writing and
executed by authorized representatives of both parties.  No waiver of any provision of this Agreement
shall render unenforceable any other provision of this Agreement.

 

(e)                                  Assignment.  This Agreement is personal to SEALY and SEALY
may not assign, delegate or transfer this Agreement, in whole or in part, or
any interest arising hereunder, without the prior written consent of
NOMACO.  Any attempted assignment,
delegation or transfer not in accordance herewith shall be null and void, and
of no force or effect.

 

(f)                                    Burdens and Benefits. Subject to
the limitations of Section 6 (e), this Agreement shall be binding upon and
shall inure to the benefit of the parties and their successors .

 

(g)                                 Severability. If any provision of
this Agreement should be construed or held to be void, invalid or
unenforceable, by order, decree or judgment of a court of competent
jurisdiction, the remaining provisions of this Agreement shall not be affected
thereby, but shall remain in full force and effect. The parties agree that any
provision(s) found invalid or unenforceable shall be deemed modified to the
minimum extent necessary to make such provisions consistent with applicable
law.

 

(h)                                 Survivability.  Those provisions of this Agreement which
would require that they survive the termination of this Agreement in order to
give them full force and effect shall survive the termination of this Agreement
for any reason, regardless of the date, cause or manner of such termination.

 

(i)                                     Headings.  The headings of the Articles and Sections of
this Agreement are for convenience only and shall not be a part of or affect
the meaning or interpretation of this Agreement.

 

I-3

 

(j)                                     Compliance with Laws.  SEALY, its employees, and agents shall comply
with applicable laws, ordinances, regulations and codes, including the
identification and procurement of required permits, certificates, approvals and
inspections, in the performance of this Agreement.

 

(k)                                  Governing Law.  The laws of the State of North Carolina
hereunder shall govern the interpretation, construction and performance of this
Agreement and the rights and remedies of the parties.

 

(l)                                     Remedies.  The parties understand and agree that the
mutual promises and covenants of this Agreement are special, unique, and of
extraordinary character, and in the event of any default, breach, or threatened
breach of this Agreement by either party or any of its employees, agents or
other personnel of any covenant or provision in this Agreement applicable to
such party, the other party shall be entitled, at its sole discretion, to
institute and prosecute proceedings in any court of competent jurisdiction,
either at law or in equity, and shall be entitled to any and all such remedies
(including any damages, injunctive, specific performance, or combination
thereof) as may be available at law or in equity.

 

(m)                               Attorneys’ Fees.  In the event that either party employs
attorneys to enforce any right arising out of or relating to this Agreement,
the prevailing party shall be entitled to recover its reasonable attorneys’
fees and costs.

 

(n)                                 Notices. All notices which may be
given in connection with this Agreement shall be in writing and shall be sent,
and deemed received and delivered, upon five (5) days after mailing, by
either party to the other by U.S. Registered Mail, or upon one (1) business
day if sent by facsimile with confirming copy delivered or upon one (1) business
day if sent by nationally recognized courier service via overnight next day
delivery, addressed to the addresses as follows:

 

If to NOMACO :

 

501
NMC Drive

Zebulon,
North Carolina 27597

Attention:  Ed Nelson, President

Facsimile:  (919) 269-7936

 

If to SEALY:

 

One
Office Parkway

Trinity,
North Carolina 27370

Attention:                                          ,Vice President

Facsimile:
                                        

 

I-4

 

(o)                                 Warranty of Authority.  The parties warrant that the terms of this
Agreement are valid and binding, that entering into and performing the terms of
this Agreement does not constitute a violation of any law, regulation, contract
or understanding applicable to the parties, and that the respective undersigned
persons are authorized to execute this Agreement on behalf of the respective
parties.

 

[SIGNATURES TO
FOLLOW ON NEXT PAGE]

 

I-5

 

IN
WITNESS WHEREOF, the parties have executed this Agreement by
signature of their respective duly authorized representatives as of the day and
year first above written.

 

	
  SEALY, INC.

  	
   

  	
  NOMACO INC.

  
	
  (“SEALY”)

  	
   

  	
  (“NOMACO”)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  
											

 

I-6

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