Document:

Exhibit 10.5

 

AMENDED AND RESTATED PLEDGE AGREEMENT

 

THIS AMENDED
AND RESTATED PLEDGE AGREEMENT is dated as of March 31,
2004 (this “Agreement”) by and among Mattress Holding Corp., a Delaware
corporation (in its capacity as a stockholder of Borrower, “MHC”),
Mattress Firm, Inc, a Delaware corporation (“Borrower”), each of MHC’s
undersigned Subsidiaries identified as “Pledgors” on the signature pages to
this Agreement (such Subsidiaries, together with MHC and Borrower, each a “Pledgor”
and collectively, jointly and severally, the “Pledgors”), and SLN
Finance, LLC, a Delaware limited liability company (together with its
successors and assigns, “Lender”), with reference to the following:

 

WHEREAS, Borrower is party to that certain
Second Amended and Restated Secured Senior Subordinated Promissory Note, dated
as of the date hereof, made by Borrower in favor of Lender (the “Note”).  The Note further amends and restates that
certain Amended and Restated Secured Senior Subordinated Promissory Note, dated
as of October 18, 2002 (the “Existing Promissory Note”), made by
Borrower in favor of Mattress Holdings International, LLC (“MHI”);

 

WHEREAS, certain Pledgors and MHI entered
into that certain Pledge Agreement, dated as of October 18, 2002 (the “Existing
Pledge Agreement”);

 

WHEREAS, contemporaneously herewith, Lender
acquired from MHI all of the indebtedness evidenced by the Existing Promissory
Note (the “Debt Acquisition”);

 

WHEREAS, each Pledgor other than Borrower is
a party to that certain Amended and Restated Guaranty, dated the date hereof
(the “Guaranty”), pursuant to which each such Person has guarantied to Lender
the Obligations of Borrower under the Note;

 

WHEREAS, the terms and provisions of this
Agreement and all security interests granted in connection herewith are subject
in all respects, to the subordination provisions set forth in the Note;

 

WHEREAS, each of the Pledgors acknowledge
that a portion of the proceeds of the Note have been incurred for, and inured
to the benefit of, such Pledgor; and

 

WHEREAS, it is a condition to the
consummation of Debt Acquisition that the Pledgors amend and restate the
Existing Pledge Agreement in the manner set forth herein.

 

Accordingly, each Pledgor and the Lender
hereby agree as follows:

 

1.                                      DEFINITIONS
AND CONSTRUCTION.

 

(a)                                  Definitions.  Capitalized terms used in this Agreement but
not defined herein shall have the meanings given to such terms in the
Note.  As used herein, the following
terms shall have the following meanings:

 

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

 

 

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

 

“Borrower” shall have the meaning
specified thereof in the preamble hereto.

 

“Collateral” has the meaning set forth
in Section 2 hereof.

 

“Debt Acquisition” shall have the
meaning specified thereof in the recitals hereto.

 

“Equity Interests” means all shares,
units, options, warrants, interests, participations, or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company, or equivalent entity, whether voting or nonvoting, including
general partner partnership interests, limited partner partnership interests,
common stock, preferred stock, or any other “equity security” (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
SEC under the Exchange Act).

 

“Existing Pledge Agreement” shall have
the meaning specified thereof in the recitals hereto.

 

“Existing Promissory Note” shall have
the meaning specified thereof in the recitals hereto.

 

“Issuer” means each corporation,
partnership, limited liability company or other issuer, person or entity whose
shares, ownership interests, notes, instruments or other securities are from
time to time included in, or required under the Note to be included in, the
Collateral.

 

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

 

“Lien” shall mean any interest in
Property securing an obligation owed to, or a claim by, a Person other than the
owner of the Property, whether such interest is based on the common law,
statute or contract, and including, but not limited to, the security interest,
security title or lien arising from a security agreement, mortgage, deed of
trust, deed to secure debt, encumbrance, pledge, conditional sale or trust
receipt or a lease consignment or bailment for security purposes.  The term “Lien” shall include
reservations, exceptions, encroachments, easements, right-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property.  For the purpose of
this Agreement, Borrower shall be deemed to be the owner of any Property which
either has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.

 

“Loan Documents” shall mean this
Agreement, the Note, the Security Instruments, the Guaranties, and such other
instruments, documents, and agreements evidencing, securing, or pertaining to
the loans evidenced by the Note, which have heretofore been or hereafter are
from time to time executed and delivered to any Lender by Borrower, or any
other Person pursuant to this Agreement.

 

“MHC” shall have the meaning specified
thereof in the preamble hereto.

 

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“MHI” shall have the meaning specified
thereof in the recitals hereto.

 

“Note” shall have the meaning specified
thereof in the recitals hereto.

 

“Person” shall mean any individual,
corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated organization, government or any agency or political
subdivision thereof, or any other form of entity.

 

“Pledged Securities” has the meaning
set forth in Section 2 hereof.

 

“Pledged Stock” has the meaning set
forth in Section 2 hereof.

 

“Pledgor” and “Pledgors” shall
have the respective meanings specified therefor in the preamble hereto.

 

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

 

“Security Agreement” shall mean the
Amended and Restated Security Agreement dated as of the date hereof and executed
in connection with the Note.

 

“Security Interests” means the
security interests in the Collateral granted hereunder securing the Secured
Obligations.

 

“UCC” means the Uniform Commercial
Code as from time to time in effect in the State of New York; provided that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of a security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection; and provided further that
to the extent that the UCC is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or
Division 9 shall govern.

 

“Voidable Transfer” has the meaning
set forth in Section 19 hereof.

 

(b)                                 Construction.

 

(i)                                     The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include

 

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the corresponding masculine,
feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  The term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase
“and/or”.  Unless the context requires
otherwise, (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the
words “herein”, “hereof’ and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement, (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights, and (f) any reference herein to the repayment in
full of the Secured Obligations shall mean the repayment in full in cash of all
Secured Obligations other than contingent indemnification Secured
Obligations.  References in this
Agreement to “determination” by the Lender include estimates honestly made by
the Lender (in the case of quantitative determinations) and beliefs honestly
held by Lender (in the case of qualitative determinations).  In the event of a direct conflict between the
terms and provisions of this Agreement and the Note, it is the intention of the
parties hereto that such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable
conflict that cannot be resolved as aforesaid, the terms and provisions of the
Note shall control and govern; provided, however, that the inclusion herein of
additional obligations on the part of any Pledgor and supplemental rights and
remedies in favor of Lender, in each case in respect of the Collateral, shall
not be deemed a conflict with the Note. 
Any requirement of a writing contained herein or in the other Loan
Documents shall be satisfied by the transmission of a record and any record
transmitted shall constitute a representation and warranty, as the accuracy and
completeness of the information contained therein.

 

2.                                      PLEDGE
AND SECURITY INTEREST.

 

For the benefit of the Lender, as security
for the prompt payment and performance in full of the Secured Obligations by
the Pledgors when due, whether at stated maturity, by acceleration or otherwise
(including any portion thereof that accrues after the commencement of an
Insolvency Proceeding, whether or not allowed or allowable in whole or in part
as a claim in any such Insolvency Proceeding), and as security for the prompt
performance by each Pledgor of such Pledgor’s covenants and duties under each
Loan Document to which such Pledgor is a party, each Pledgor hereby transfers,
hypothecates, pledges, sets over and delivers unto the Lender, and grants to
the Lender a security interest in, all right, title and interest such Pledgor
now has or hereafter acquires in (a) the shares of capital stock and other
ownership interests of each Issuer set forth on Schedule A and all
shares of capital stock, partnership interests, membership interests, other
ownership interests and other securities and instruments of each Issuer
(including without limitation options, warrants and subscription rights with
respect to any such ownership interests, securities and instruments) now owned
or obtained in the future by such Pledgor and the certificates representing or
evidencing all such shares or other interests or

 

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securities, in each case other
than Capital Stock issued by MFA (the “Pledged Stock”), (b) all other
property which may be delivered to and held by the Lender pursuant to the terms
hereof, (c) all payments of principal or interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of, in exchange for or upon the conversion of the
securities, instruments, other ownership interests and other items referred to
in clause (a) or clause (b) above, (d) except as provided in Section 5 below,
all rights and privileges of such Pledgor with respect to the securities and
other property referred to in clauses (a), (b) and (c) above, and (e) all
proceeds of any of the foregoing (the items referred to in clauses (a) through
(e) being collectively called the “Collateral”).  Upon delivery to the Lender, (A) any share certificates,
notes or other securities or instruments now or hereafter included in the
Collateral (the “Pledged Securities”) shall be duly endorsed to the
Lender or accompanied by stock powers duty executed in blank or other
instruments of transfer satisfactory to the Lender and by such other
instruments and documents as the Lender may reasonably request, and (B) all
other property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by each Pledgor and such other
instruments or documents as the Lender may reasonably request (including,
without limitation, UCC financing statements). 
Each delivery of Pledged Securities shall be accompanied by a schedule
describing the securities theretofore and then being pledged hereunder, which
schedule shall be attached hereto as Schedule A and made a part
hereof.  Each schedule so delivered,
after approval by the Lender, shall supersede any prior schedules so
delivered.  In addition, all such Pledged
Stock shall be accompanied by irrevocable written proxies satisfactory under
applicable corporate law of the jurisdiction of incorporation of the Issuer of
such Pledged Stock.  The Pledgor agrees
promptly to deliver or cause to be delivered to the Lender any and all Pledged Securities,
and any and all certificates or other instruments or documents representing the
Collateral, including without limitation all such items (whether now owned or
hereafter acquired) which are required to be pledged to the Lender at any time
hereafter pursuant to the Note.  Except
as expressly set forth in this Agreement or any other Loan Document, no Pledgor
has any authority, express or implied, to dispose of any item or portion of the
Pledged Collateral.

 

(a)                                  If,
at any time and from time to time, any Collateral (including any certificate or
instrument representing or evidencing any Pledged Securities) is in the
possession of a Person other than Lender or the applicable Pledgor (a “Holder”),
then the applicable Pledgor shall promptly, at Lender’s option, either cause
such Collateral to be delivered into Lender’s possession, or execute and
deliver to such Holder a written notification/instruction, and take all other
steps necessary to perfect the security interest of Lender in such Collateral,
including obtaining from such Holder a written acknowledgment that such Holder
holds such Collateral for Lender, all pursuant to the UCC or other applicable
law governing the perfection of Lender’s security interest in the Collateral in
the possession of such Holder.  Each such
notification/instruction and acknowledgment shall be in form and substance
satisfactory to Lender.

 

(b)                                 If
at any time and from time to time any Collateral consists of an uncertificated
security or a security in book entry form, then the applicable Pledgor shall
promptly cause such Collateral to be registered or entered, as the case may be,
in the name of Lender or otherwise cause the security interest held by Lender
to be perfected in accordance with applicable law.

 

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3.                                      REPRESENTATIONS,
WARRANTIES AND COVENANTS.

 

Each Pledgor hereby represents, warrants and
covenants to and with the Lender that:

 

(a)                                  Such
Pledgor has taken all steps it deems necessary or appropriate to be informed on
a continuing basis of changes or potential changes affecting the Collateral
(including rights of conversion and exchange, rights to subscribe, payment of
dividends, reorganizations or recapitalization, tender offers and voting
rights), and such Pledgor agrees that no Lender shall have any responsibility
or liability for informing such Pledgor of any such changes or potential
changes or for taking any action or omitting to take any action with respect
thereto;

 

(b)                                 All
of the information herein or hereafter supplied to Lender by or on behalf of
any Pledgor in writing with respect to the Collateral is, or in the case of
information hereafter supplied will be, accurate and complete in all material
respects

 

(c)                                  Such
Pledgor has acquired the Pledged Stock pledged by it hereunder for value and
without notice of any adverse claim to the Pledged Stock; the Pledged Stock
includes all the outstanding capital stock of the Issuer which is the issuer of
such Pledged Stock; and all the shares of the Pledged Stock have been duly
authorized and validly issued and are fully paid and nonassessable.

 

(d)                                 Except
for the security interest granted hereunder, such Pledgor (i) is and will at
all times continue to be the direct owner, beneficially and of record, of the
Pledged Securities pledged by it hereunder, (ii) holds and will so hold the
same free and clear of all Liens and of all other rights or options in favor
of, or claims of, any other person other than Liens granted in connection with
the Notes or the Senior Indebtedness, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create any security interest in, the
Collateral, (iv) will cause all securities included within the Collateral to be
certificated securities, and (v) will cause any and all certificates, instruments
or other documents representing or evidencing Collateral to be forthwith
deposited with the Lender and pledged or assigned hereunder.

 

(e)                                  By
virtue of the execution and delivery by such Pledgor of this Agreement and the
delivery to Lender of the Pledged Stock to the extent evidenced by a
certificate (or the delivery to all Holders of the Pledged Stock of the
notification/instruction referred to in Section 2 hereof), the Lender will
obtain a valid, legal and perfected lien upon and security interest in such
Pledged Stock as security for the repayment of the Secured Obligations, free
and clear of all Liens or other adverse claims (other than the Security
Interests and the Liens granted in connection with the Note or the Senior
Indebtedness.

 

(f)                                    Schedule
A to this Agreement (as amended in accordance with the terms hereof) is
true and correct and complete in all material respects; without limiting the
generality of the foregoing:  (i) all the
Pledged Stock (to the extent designated as such on Schedule A) are in
certificated form, and, except to the extent registered in the name of Lender
or its nominee pursuant to the provisions of this Agreement, are registered in
the name of the applicable Pledgor; and (ii) the Pledged Stock as to each of
the Issuers constitute at least the percentage of

 

6

 

all the fully diluted issued
and outstanding Equity Interests of such Issuer as set forth in Schedule A
to this Agreement;

 

(g)                                 The
pledge and security interest effected hereby is effective to vest in the Lender
the rights in the Collateral contemplated herein.

 

(h)                                 Such
Pledgor will cause each Issuer not to issue any stock or other equity
securities unless such securities are issued in accordance with the terms of the
Loan Documents and are concurrently pledged to the Lender hereunder.

 

(i)                                     This
Agreement is the legal, valid and binding obligation of such Pledgor and is
enforceable against such Pledgor in accordance with its terms.

 

(j)                                     If
such Pledgor shall become entitled to receive or shall receive any stock
certificate (including without limitation any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of any capital or any certificate issued in connection with any
reorganization), option or rights in respect of capital stock of any Issuer,
whether in addition to, in substitution of, as a conversion of, or in exchange
for, any shares of the Pledged Stock, or otherwise in respect thereof, such Pledgor
shall accept the same as the agent of the Lender, hold the same in trust for
the Lender and deliver the same forthwith to the Lender in the exact form
received, duly indorsed by such Pledgor to the Lender and accompanied by such
stock powers and proxies as provided in Section 2 above, to be held by the
Lender, subject to the terms hereof, as additional Collateral for the Secured
Obligations.  Any sums paid upon or in
respect of the Pledged Securities upon the liquidation or dissolution of any
Issuer shall be paid over to the Lender to be held by it hereunder as
additional collateral security for the Secured Obligations, and in case any
distribution of capital shall be made on or in respect of the Pledged
Securities or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to the recapitalization or reclassification of the
capital of any Issuer or pursuant to the reorganization thereof, the property
so distributed shall, unless otherwise subject to a perfected security interest
in favor of the Lender, be delivered to the Lender to be held by it hereunder
as additional collateral security for the Secured Obligations.  If any sums of money or property so paid or
distributed in respect of the Pledged Securities shall be received by such
Pledgor, such Pledgor shall, until such money or property is paid or delivered
to the Lender, hold such money or property in trust for the Lender, segregated
from other funds of such Pledgor, as additional collateral security for the
Secured Obligations.

 

(k)                                  Such
Pledgor will not (1) sell, assign, transfer, exchange, or otherwise dispose of,
or grant any option with respect to, the Pledged Securities or proceeds thereof
(except pursuant to a transaction, if any, expressly permitted by the Note),
(ii) create, incur or permit to exist any Lien or option in favor of, or any
claim of any person with respect to, any of the Pledged Securities or proceeds
thereof, or any interest therein, except for the security interests created by
this Agreement or those created in connection with the Senior Indebtedness or
(iii) enter into any agreement or undertaking restricting the right of such
Pledgor or the Lender to sell, assign or transfer any of the Pledged Securities
or proceeds thereof.

 

(l)                                     In
the case of any Pledgor which is also an Issuer, such Issuer agrees that (i) it
will be bound by the terms of this Agreement relating to the Pledged Securities
issued by it and

 

7

 

will comply with such terms
insofar as such terms are applicable to it, (ii) it will notify the Lender
promptly in writing of the occurrence of any of the events described in Section
3(j) above with respect to the Pledged Securities issued by it, and (iii) the
terms of Section 5 hereof shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it
pursuant to Section 5 with respect to the Pledged Securities issued by it.

 

(m)                               The
Pledged Stock that are interests in general partnerships, limited partnerships
or limited liability companies (i) are not dealt in or traded on securities
exchanges or in securities markets, (ii) do not have terms expressly providing
that they are securities governed by Article 8 of the UCC, and (iii) are not
investment company securities, and are not, therefore, “securities” governed by
Article 8 of the UCC.

 

(n)                                 Neither
the pledge of the Collateral pursuant to this Agreement nor the extensions of
credit represented by the Secured Obligations violate Regulation T, U or X of
the Board of Governors of the Federal Reserve System.

 

(o)                                 Each
direct Subsidiary of each Pledgor is an Issuer of Pledged Stock that has been
pledged hereunder.

 

(p)                                 Each
Pledgor shall perform each and every covenant in any of the Loan Documents
applicable to such Pledgor;

 

(q)                                 Each
Pledgor shall, at all times, keep at least one complete set of its records
concerning substantially all of the Collateral pledged by Pledgor hereunder at
each Pledgor’s respective chief executive office as set forth in Schedule B
hereto, and not change the location of such chief executive office or of such
records without giving Lender at least thirty (30) days prior written notice
thereof;

 

(r)                                    Each
Pledgor shall not permit any of the Issuers to: 
(i) authorize the amendment of or amend the governing documents of such
Issuer that is a general partnership, limited partnership or limited liability
company to provide that the capital stock of such Issuer is governed by Article
8 of the UCC, or (ii) authorize the issuance of or issue certificates evidencing
the capital stock of such Issuer that is a general partnership, limited
partnership or limited liability company;

 

(s)                                  Upon
receipt by such Pledgor of any material notice, report, or other communication
from any of the Issuers or any Holder relating to all or any part of the
Collateral, deliver a copy of such notice, report or other communication to
Lender as soon as possible, but in no event later than five (5) days following
the receipt thereof by such Pledgor.

 

4.                                      REGISTRATION
IN NOMINEE NAME; DENOMINATIONS.

 

Upon either (a) the occurrence and during the
continuance of an Event of Default or (b) the reasonable good faith judgment of
the Lender that the registration of the Pledged Securities is necessary or
desirable to maintain or perfect the security interests created by this
Agreement in the Pledged Securities or to protect or exercise the rights or
remedies of the Lender hereunder, the Lender shall have the right (in its sole
and absolute discretion) to register the Pledged Securities in its own name or
the name of its nominee.  Such Pledgor
will promptly give

 

8

 

to the Lender copies of any
notices or other communications received by it with respect to Pledged
Securities registered in the name of such Pledgor.  The Lender shall at all times have the right
to exchange the certificates representing Pledged Securities for certificates
of smaller or larger denominations for any purposes consistent with this Agreement.

 

5.                                      IRREVOCABLE
PROXY; VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC.

 

(a)                                  For
so long as this Agreement and the pledge and security interest created hereby
remain in effect, and whether or not the Collateral or any of the Pledged
Securities has been transferred into the name of the Lender or its nominee,
each Pledgor hereby grants to the Lender a present, irrevocable proxy, coupled
with an interest, and hereby constitutes and appoints the Lender as such
Pledgor’s proxy with full power, in the same manner, to the same extent and
with the same effect as if such Pledgor were to do the same, to exercise all
voting, consenting, corporate and other rights accruing to such Pledgor as
owner of the Collateral or any part thereof, or arising out of or otherwise
pertaining to the Collateral, and whether at any meeting of shareholders of any
Issuer or in the absence of any such meeting or otherwise, and any and all
rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Pledged Securities upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by such Pledgor or
the Lender of any right, privilege or option pertaining to such Pledged
Securities, and in connection therewith, the right to deposit and deliver any
and all of the Pledged Securities with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Lender may determine), all without liability except to account for property
actually received by it, but the Lender shall have no duty to Pledgor to exercise
any such right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing. 
As further assurance of the proxy granted hereby, each Pledgor shall
from time to time execute and deliver to the Lender, all such additional
written proxies, powers of attorney, and other instruments as the Lender shall
request for the purpose of enabling the Lender to exercise the voting and other
rights which it is entitled to exercise hereunder at any time.  Each Pledgor hereby revokes any proxy or
proxies heretofore given by such Pledgor to any person or persons whatsoever
and agrees not to give any other proxies in derogation hereof until this
Agreement is no longer in full force and effect as hereinafter provided.  NOTWITHSTANDING THE PRECEDING PRESENT GRANT
OF AN IRREVOCABLE PROXY, THE LENDER AGREES NOT TO EXERCISE SUCH PROXY (AND TO
PERMIT EACH PLEDGOR TO CONTINUE TO EXERCISE VOTING AND OTHER RIGHTS COVERED BY
SUCH PROXY AND PERTAINING TO THE PLEDGED SECURITIES PLEDGED BY PLEDGOR ON UNTIL
THE OCCURRENCE AND CONTINUANCE OF AN EVENT OF DEFAULT.  Except as provided in subparagraphs (b) and
(c) of this Section 5:

 

(i)                                     So
long as (i) no Event of Default shall have occurred and be continuing, or (ii)
if an Event of Default has occurred and is continuing, no Pledgor shall have
received the written notice from Lender described below in Section 5(c), each
Pledgor shall be entitled to exercise any and all voting, management and other
consensual rights pertaining to the Collateral applicable to it or any part
thereof for any purpose not inconsistent with the terms of the Loan

 

9

 

Documents and shall be entitled
to receive and retain any cash dividends or distributions paid in respect of
the Collateral if and to the extent they are not prohibited by the Note.

 

(ii)                                  The
Lender shall execute and deliver to Pledgor, or cause to be executed and
delivered to each Pledgor, all such proxies, powers of attorney, and other
instruments as such Pledgor may reasonably request for the purpose of enabling
such Pledgor to exercise the voting rights which it is entitled to exercise
pursuant to subparagraph (i) above.

 

(iii)                               Each
Pledgor shall be entitled to receive and retain any and all cash dividends paid
on the Pledged Securities to the extent and only to the extent that such cash
dividends are permitted by, and otherwise paid in accordance with, the terms
and conditions of this Agreement, the Loan Documents and applicable laws.  All other payments, dividends and distributions
made on or in respect of Pledged Securities, whether paid or payable in cash,
securities or other property, and whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of the Issuer
of any Pledged Securities or received in exchange for or in redemption of
Pledged Securities or any part thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which such Issuer may
be a party or otherwise, shall be and become part of the Collateral and, if
received by any Pledgor, shall not be commingled by such Pledgor with any of
their other funds or property but shall be held separate and apart therefrom in
trust for the benefit of the Lender and shall be delivered to the Lender in the
same form as so received (with any necessary endorsement).

 

(b)                                 Upon
the occurrence and during the continuance of an Event of Default, all rights of
any Pledgor to dividends which such Pledgor is authorized to receive pursuant
to paragraph (a)(iii) of this Section 5 shall cease, and all such rights shall
thereupon become vested in the Lender, who shall have the sole and exclusive
right and authority to receive and retain such dividend payments.  All dividends which are received by any
Pledgor contrary to the provisions of this Section 5(b) shall be received in
trust for the benefit of the Lender, shall be segregated from other property or
funds of such Pledgor and shall be immediately delivered to the Lender in the
same form as so received (with any necessary endorsement).  Any and all money and other property paid
over to or received by the Lender pursuant to the provisions of this paragraph
(b) shall be deposited by the Lender in an account to be established by the
Lender upon receipt of such money or other property and such money or other
property and interest thereon shall be applied in accordance with the
provisions of Section 7 hereof.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default, at the
election of Lender in its sole and absolute discretion, upon the receipt by a
Pledgor of written notice of such election by Lender, and whether or not the
Collateral shall have been registered in the name of Lender or a nominee or
shall remain registered in the name of any Pledgor, all rights of such Pledgor
to exercise the voting rights which it is entitled to exercise pursuant to
paragraph (a)(i) of this Section 5 shall cease, and the Lender may thereupon
fully exercise, to the exclusion of such Pledgor, the proxy granted to it in Section
5(a).

 

(d)                                 Each
Pledgor hereby authorizes and instructs each Issuer of any Pledged Securities
pledged by such Pledgor hereunder to (i) comply with any instruction received
by it from the Lender in writing that (x) states that an Event of Default has
occurred and is continuing and (y) is otherwise in accordance with the terms of
this Agreement, without any other or further

 

10

 

instructions from such Pledgor,
and such Pledgor agrees that each Issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any
dividends or other payments with respect to the Pledged Securities directly to
the Lender.

 

6.                                      REMEDIES
UPON DEFAULT.

 

After the occurrence and during the continuance
of an Event of Default, whether or not all of the Secured Obligations shall
have become due and payable, in addition to its rights under the Loan
Documents:

 

(a)                                  The
Lender shall have all of the rights and remedies with respect to the Collateral
of a secured party under the UCC and such additional rights and remedies to
which a secured party is entitled under the laws in effect in any jurisdiction
where any rights and remedies hereunder may be asserted, including without
limitation the right, to the maximum extent permitted by law, to exercise all
voting, consensual and other powers of ownership pertaining to the Collateral
as if the Lender were the sole and absolute owner thereof (and each Pledgor
agrees to take all such action as may be appropriate to give effect to such
right).

 

(b)                                 The
Lender in its discretion may, in its name or in the name of any Pledgor or
otherwise, demand, sue for, collect or receive any money or property at any
time payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so.

 

(c)                                  The
Lender may sell, lease, assign, grant options with respect to or otherwise
dispose of all or part of the Collateral, at such place or places as the Lender
deems best, and for cash or for credit or for future delivery (without thereby
assuming any credit risk), at public or private sale, without demand of
performance or notice of intention to effect any such disposition or of the
time or place thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise) of any Pledgor, any such demand, notice and right or
equity being hereby expressly waived and released.  Each Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten days’ notice to such
Pledgor of the time and place of any public sale or the time after which such
private sale is to be made shall constitute reasonable notification; however
the Lender shall not be obligated to make a sale of the Collateral regardless
of notice of sale having been given.  The
Lender may, without notice or publication, adjourn any public or private sale
or cause the same to be adjourned from time to time by announcement at the time
and place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned.

 

(d)                                 Each
Pledgor recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended from time to time (the “Securities Act”),
and applicable state securities laws, the Lender may be compelled, with respect
to any sale of all or any part of the Collateral, to limit purchasers to those
who will agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale

 

11

 

thereof.  Each Pledgor acknowledges that any such
private sales may be at prices and on terms less favorable to the Lender than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Lender shall have no obligation to engage in public sales and no obligation to
delay the sale of any Collateral for the period of time necessary to permit
registration of such Collateral for public sale.  Each Pledgor will bear all costs and expenses
of carrying out their obligations hereunder with respect to the foregoing.  Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the foregoing
provisions and that such failure would not be adequately compensable in
damages, and therefore agree that their agreements with respect to the
foregoing may be specifically enforced.

 

(e)                                  If
Lender shall determine to exercise its right to sell all or any portion of the
Collateral pursuant to this Section, each Pledgor agrees that, upon request of
Lender, such Pledgor will, at its own expense:

 

(i)                                     use
its best efforts to execute and deliver, and cause the Issuers and the
directors and officers thereof to execute and deliver, all such instruments and
documents, and to do or cause to be done all such other acts and things, as may
be necessary, or in the opinion of Lender, advisable to register such
Collateral under the provisions of the Securities Act, and to cause the
registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be furnished,
and to make all amendments and supplements thereto and to the related
prospectuses which, in the opinion of Lender, are necessary or advisable, all
in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;

 

(ii)                                  use
its best efforts to qualify the Collateral under the state securities laws or
“Blue Sky” laws and to obtain all necessary governmental approvals for the sale
of the Collateral, as requested by Lender;

 

(iii)                               cause
the Issuers to make available to their respective security holders, as soon as
practicable, an earnings statement which will satisfy the provisions of Section
11(a) of the Securities Act;

 

(iv)                              execute
and deliver, or cause the officers and directors of the Issuers to execute and
deliver, to any person, entity or governmental authority as Lender may deem
necessary or appropriate, any and all documents and writings which, in Lender’s
reasonable judgment, may be necessary for approval, or be required by, any
regulatory authority located in any city, county, state or country where such
Pledgor or the Issuers engage in business, in order to transfer or to more
effectively transfer the Pledged Stock or otherwise enforce Lender’s rights
hereunder; and

 

(v)                                 do
or cause to be done all such other acts and things as may be necessary to make
such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law.

 

12

 

Each Pledgor acknowledges that there is no
adequate remedy at law for failure by it to comply with the provisions of this
Section and that such failure would not be adequately compensable in damages,
and therefore agrees that its agreements contained in this Section may be
specifically enforced.

 

EACH PLEDGOR
EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW: (i) ANY CONSTITUTIONAL
OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME SECURED PARTY DISPOSES
OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS SECTION; (ii) ALL
RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR MAY AT ANY TIME IN
THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING OR HEREAFTER
ENACTED; AND (iii) ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR
SALE.

 

7.                                      APPLICATION
OF PROCEEDS OF SALE.

 

The proceeds of any sale of Collateral
pursuant to Section 7 hereof, as well as any Collateral consisting of cash,
shall be applied by the Lender first to the payment of the costs and expenses
of any such sale, including reasonable fees and disbursements of the Lender’s
agent and counsel, and of any judicial proceeding wherein the same may be made,
and of all expenses, liabilities and advances (to the extent such advances are
reasonably made for the protection of the Collateral or the enforcement of the
Lender’s security interest in the Collateral) made or incurred by the Lender,
second, to meet amounts due and payable under the Loan Documents as and when
the same become payable, in each case, together with interest thereon (as well
after as before judgment and payable on demand) at the rate determined in
accordance with the Note from the date the same become due and payable until
the date the same are unconditionally and irrevocably paid and discharged in
full (provided that like interest payable under any of the Loan Documents
should not be double counted) and third, to whomsoever may be lawfully entitled
to receive any surplus.  Each Pledgor
shall remain liable for any deficiency if the proceeds of sale or other
disposition of the Collateral are insufficient to pay its Secured Obligations
and the fees and disbursements of any attorneys employed by the Lender to collect
such deficiency.

 

8.                                      LENDER
APPOINTED ATTORNEY-IN-FACT; CERTAIN OTHER PROVISIONS REGARDING LENDER.

 

(a)                                  Lender
shall be appointed as Collateral Lender, and shall have the powers and rights
with respect to the Collateral, pursuant to the provisions of Section 8 of the
Security Agreement.

 

(b)                                 Except
as otherwise provided herein, each Pledgor hereby appoints the Lender the
attorney-in-fact of such Pledgor for the purposes of carrying out the
provisions of this Agreement or taking any action or executing any instrument
which the Lender may reasonably deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an
interest.  The Lender shall have the
right to, or upon the request of the Lender shall, after the occurrence and
during the continuance of an Event of Default, with full power of substitution
either in the Lender’s name or in the name of the applicable Pledgor, (i) ask
for, demand, sue for, collect, receive and give acquittance for any and all monies
due or to become

 

13

 

due under or by virtue of any
Collateral, (ii) endorse checks, drafts, orders and other instruments for the
payment of money payable to such Pledgor constituting Collateral or any part
thereof or on account thereof and to give full discharge for the same, (iii)
settle, compromise, prosecute or defend any action, claim or proceeding with
respect thereto, and (iv) sell, assign, endorse, pledge, transfer and make any
agreement respecting, or otherwise deal with, the same; provided, however, that
nothing herein contained shall be construed as requiring or obligating the
Lender to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Lender, or to present or file any
claim or notice, or to take any action with respect to the Collateral or any
part thereof or the monies due or to become due in respect thereof or any
property covered thereby, and no action taken by the Lender or omitted to be
taken with respect to the Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of such Pledgor or to any claim or
action against the Lender.

 

(c)                                  If
any Pledgor fails to perform any agreement contained herein, the Lender may
(but shall not be required to) itself perform, or cause performance of, such
agreement and the expenses of the Lender incurred in connection therewith shall
be payable by such Pledgor under Section 12.

 

(d)                                 Each
Pledgor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof.  All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.

 

(e)                                  The
Lender’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
UCC or otherwise, shall be to deal with it in the same manner as the Lender
deals with similar property for its own account.  Neither the Lender nor any of its respective
officers, directors, employees or agent shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Pledgor or any other person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Lender hereunder
are solely to protect the Lender’s interests in the Collateral and shall not
impose any duty upon the Lender to exercise any such powers.  The Lender shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents
shall be responsible to any Pledgor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct.

 

(f)                                    Pursuant
to the UCC and any other applicable law, each Pledgor authorizes the Lender to
file or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such
Pledgor in such form and in such offices as the Lender reasonably determines
appropriate to perfect the security interests granted hereunder.  A photographic or other reproduction of this
Agreement shall be sufficient as a financing statement or other filing or
recording document or instrument for filing or recording in any jurisdiction.

 

14

 

9.                                      NO
WAIVER.

 

No remedy under this Agreement, under the
Note, or any other Loan Document is intended to be exclusive of any other
remedy, but each and every remedy shall be cumulative and in addition to any
and every other remedy given under this Agreement, under the Note, or any other
Loan Document, and those provided by law. 
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy by the Lender preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. 
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.  The Lender
shall not be deemed to have waived any rights hereunder or under any other
agreement or instrument unless such waiver shall be in writing and signed by
such parties.

 

10.                               SECURITY
INTEREST ABSOLUTE.

 

The obligations of each Pledgor under this
Pledge Agreement are independent of the obligations under any of the other Loan
Documents, and a separate action or actions may be brought and prosecuted against
each Pledgor to enforce this Agreement. 
All rights of the Lender hereunder, the grant of a security interest in
the Collateral and all obligations of each Pledgor hereunder shall be absolute
and unconditional irrespective of (a) any lack of validity or enforceability of
any Loan Document, any agreement with respect to any of the Secured Obligations
or any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Secured Obligations, or any other amendment or waiver of or any
consent to any departure from any Loan Document or any other agreement or
instrument, (c) any exchange, release, amendment or waiver of, or consent to or
departure from, any guaranty for all or any of the Secured Obligations, (d) any
change, restructuring or termination of the corporate structure or existence of
each Pledgor or Issuer or (e) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, each Pledgor in respect
of the Secured Obligations or in respect of this Agreement.

 

11.                               FURTHER
ASSURANCES.

 

(a)                                  Each
Pledgor agrees that from time to time, at its expense, to do such further acts
and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Lender may at any time
reasonably request in connection with the administration and enforcement of
this Agreement, with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Lender its rights and remedies hereunder.

 

(b)                                 Each
Pledgor will furnish to Lender, upon the request of Lender, (i) a certificate
executed by an authorized officer of such Pledgor, and dated as of the date of
delivery to Lender, itemizing in such detail as Lender may request, the
Collateral which, as of the date of such certificate, has been delivered to
Lender by such Pledgor pursuant to the provisions of this Agreement; and (ii)
such statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as Lender may request.

 

15

 

12.                               LENDER’S
FEES AND EXPENSES; INDEMNIFICATION.

 

(a)                                  Each
Pledgor agrees to pay upon demand to the Lender the amount of any and all
out-of-pocket expenses, including the reasonable fees and expenses of its
counsel (including without limitation the allocated fees and expenses of
in-house counsel) and of any experts or agents, which the Lender may reasonably
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Lender hereunder, or (iv) the failure by such Pledgor
to perform or observe any of the provisions hereof.

 

(b)                                 Without
limiting the foregoing, such Pledgor agrees to pay, and to hold the Lender
harmless from, and to indemnify them against, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions contemplated
by this Agreement.  Any such amounts
payable as provided hereunder shall be additional Secured Obligations secured
by this Agreement and the other Loan Documents to which such Pledgor is party.  Each Pledgor further agrees to pay, and to
hold the Lender harmless from, and to indemnify them against, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of this Agreement, or arising out of or relating to the Lender’s relationship
with such Pledgor hereunder or under any other Loan Document.

 

(c)                                  The
agreements in this Section 12 shall survive repayment of the Secured
Obligations and all other amounts payable under the Note and the other Loan
Documents.

 

13.                               BINDING
AGREEMENT; ASSIGNMENTS.

 

This Agreement, and the terms, covenants and
conditions hereof, shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, except that no
Pledgor shall be permitted to assign this Agreement or any interest herein.

 

14.                               GOVERNING
LAW.

 

This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.

 

15.                               SEVERABILITY.

 

In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, no party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable and the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.  The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal and unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.

 

16

 

16.                               SECTION
HEADINGS; INTERPRETATION.

 

Section headings used herein are for
convenience only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement. 
The use of the word “including” or any variation or derivative thereof
in this Agreement is by way of example rather than by limitation.  The language used in this Agreement will be
deemed to be the language chosen by the Lender and each Pledgor to express
their mutual intent.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement will
be construed as if drafted jointly by each Pledgor and the Lender, and no
presumption or burden of proof will arise favoring or disfavoring any Person by
virtue of the authorship of any of the provisions of this Agreement.

 

17.                               COUNTERPARTS.

 

This Agreement may be authenticated in two or
more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and any of the
parties hereto may authenticate this Agreement by signing any such
counterpart.  This Agreement may be
authenticated by manual signature, facsimile or, if approved in writing by the
Lender and each Pledgor, electronic means, all of which shall be equally valid.

 

18.                               TERMINATION.

 

(a)                                  At
such time as all of the Secured Obligations (other than any indemnity and
similar obligations which expressly survive termination of this Agreement and
are not then due and payable) have been paid irrevocably and in full, this
Agreement and all obligations (other than those expressly stated to survive
such termination) of the Lender and each Pledgor shall terminate, and the
Collateral shall be released from the Security Interests created hereby, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to applicable Pledgor.  At the request and sole expense of any
Pledgor following any such termination, the Lender shall deliver to such Pledgor
any Collateral of such Pledgor then held by the Lender hereunder and shall
execute and deliver to such Pledgor or authorize the filing of, but without
recourse to or warranty by the Lender, such UCC termination statements and
similar documents prepared by such Pledgor which such Pledgor shall reasonably
request to evidence the release of the Collateral from the security constituted
hereby.

 

(b)                                 Notwithstanding
anything to the contrary contained in this Agreement, this Agreement shall
remain in full force and effect and continue to be effective should any
petition be filed by or against any Pledgor for liquidation or reorganization,
should any Pledgor become insolvent or make an assignment for any benefit of
creditors or should a receiver or trustee be appointed for all or any
significant part of any Pledgor’s assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of
the Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance” or otherwise, all as though such payment, or any part
thereof, had not been made.

 

17

 

19.                               REVIVAL.

 

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

 

20.                               CONSENT
TO JURISDICTION AND SERVICE OF PROCESS.

 

ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN NEW YORK
CITY, NEW YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT.  EACH PLEDGOR ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.  NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE LENDER TO BRING PROCEEDINGS AGAINST ANY PLEDGOR IN THE COURTS OF ANY OTHER
JURISDICTION.

 

21.                               WAIVER
OF JURY TRIAL.

 

(i) EACH PLEDGOR AND THE LENDER EACH HEREBY IRREVOCABLY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS AGREEMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT HEREOF.  NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY ANY
PLEDGOR AGAINST THE LENDER FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN
WILLFUL MISCONDUCT OR ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT OF OR IN
ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH; AND EACH PLEDGOR HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES.  EACH PLEDGOR AGREES THAT THIS
SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES
THAT THE LENDER WOULD NOT EXTEND TO BORROWER

 

18

 

THE
LOANS UNDER THE NOTE IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.

 

22.                               NOTICES.

 

All notices and other communications provided
for hereunder shall be in writing (including telegraphic or telecopier
communication) and mailed, telecopied or delivered to:

 

If to a Pledgor:

 

c/o Mattress
Holding Corp.

5815 Gulf
Freeway

Houston, Texas
77023

Attention:                      Jim
R. Black, Chief Financial Officer

Telecopy:                        (713)
921-4053

 

With a copy
to:

 

Jenkens &
Gilchrist Parker Chapin LLP

The Chrysler
Building

405 Lexington
Avenue

New York, NY
10174

Attention:  Mitchell P. Portnoy, Esq.

Telecopier:  (212) 704-6288

 

If to the
Lender:

 

SLN Finance,
LLC

1105 North
Market Street

Suite 1300

P.O. Box 8985

Wilmington, DE
19899

Attention:                      Kevin
Calhoun and C. Deryl Couch, Esq.

Telecopy:                        (302)
651-8425

 

With a copy
to:

 

Jenkens &
Gilchrist Parker Chapin LLP

The Chrysler
Building

405 Lexington
Avenue

New York, NY
10174

Attention:  Mitchell P. Portnoy, Esq.

Telecopier:  (212) 704-6288

 

or to such other address and/or with such
other copy or copies as the intended recipient may have specified by prior
notice to the notifying party.  All such
notices and other communications shall, when mailed or telecopied, be effective
when deposited in the mails or telecopied, respectively, addressed as
aforesaid; except that notices and other communications to the Lender shall not
be

 

19

 

effective until received by the Lender.  Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of any Loan Document
shall be effective as delivery of an original executed counterpart thereof.

 

23.                               CONTINUING
SECURITY INTEREST.

 

This Agreement shall create a continuing
security interest in the Collateral and shall: 
(i) subject to Section 18 and 19, remain in full force and effect until
the payment in full in cash of the Secured Obligations, and the irrevocable
termination of any commitment to extend any financial accommodations under the
Note; (ii) be binding upon each Pledgor and its successors and assigns; and
(iii) inure to the benefit of Lender and its successors, transferees, and
assigns.  Subject to Sections 18 and 19,
upon the full and final payment in cash of the Secured Obligations, and the
full and final termination of any commitment to extend any financial
accommodations under the Note, the security interests granted herein shall
automatically terminate and all rights to the Collateral shall revert to the
applicable Pledgor.  Upon any such
termination, Lender will, at Pledgors’ expense, execute and deliver to Pledgors
such documents as the Pledgors shall reasonably request to evidence such
termination.  Such documents shall be
prepared by the Pledgors and shall be in form and substance reasonably satisfactory
to Lender.  Upon such termination, Lender
will, at Pledgors’ expense, deliver to Pledgors the certificates evidencing
their Pledged Stock (and any other non-cash property received as a dividend or
distribution or otherwise in respect of such Pledged Stock), together with any
cash then constituting the Collateral not then sold or otherwise disposed of in
accordance with the provisions hereof.

 

24.                               WAIVER
OF MARSHALING.

 

Each of Pledgor and Lender acknowledges and
agrees that in exercising any rights under or with respect to the Collateral: (i)
Lender is under no obligation to marshal any Collateral; (ii) may, in its
absolute discretion, realize upon the Collateral in any order and in any manner
it so elects; and (iii) may, subject solely to Section 7 hereof, apply the
proceeds of any or all of the Collateral to the Secured Obligations in any
order and in any manner it so elects. 
Pledgor and Lender waive any right to require the marshaling of any of
the Collateral.

 

25.                               INTERPRETATION.

 

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

 

26.                               ACKNOWLEDGMENTS.

 

Each Pledgor acknowledges that: (a) it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents; (b) the Lender has no fiduciary
relationship with or duty to such Pledgor arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
such Pledgor, on the one hand, and the Lender, on the other hand, in connection
herewith or therewith

 

20

 

is solely that of debtor and
creditor; and (c) no joint venture is created hereby or by the Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby or among
such Pledgor and the Lender.

 

27.                               SUBORDINATION
AGREEMENT.

 

The terms and provisions of this Agreement
and all security interests granted in connection herewith are subject in all
respects, to the subordination provisions of the Note.

 

 

* * * *

 

21

 

IN
WITNESS WHEREOF, the parties hereto have executed this
General Security Agreement as of the date first above written.

 

	
   

  	
  PLEDGORS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS FIRM, INC.,

  	
   

  
	
   

  	
  a Delaware corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO, Secretary and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS HOLDING CORP.,

  	
   

  
	
   

  	
  a Delaware corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS FIRM INVESTMENT MANAGEMENT, INC.,

  	
   

  
	
   

  	
  an Arizona corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FESTRO, INC.,

  	
   

  
	
   

  	
  a Texas corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
  Name: Jim R.
  Black

  	
   

  
	
   

  	
  Title:
  Secretary and Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TEAMEXCEL MANAGEMENT COMPANY,

  	
   

  
	
   

  	
  a Texas corporation, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
								

 

[SIGNATURE PAGES TO AMENDED AND RESTATED PLEDGE AGREEMENT]

 

S-1

 

	
   

  	
  MATTRESS FIRM OPERATING, LTD.,

  	
   

  
	
   

  	
  a Texas limited partnership, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro, Inc., its general
  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary
  and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS VENTURE INVESTMENT MANAGEMENT,

  LLC, as a Pledgor

  	
   

  
	
   

  	
  an Arizona limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin
  S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FESTRO II, LLC,

  	
   

  
	
   

  	
  a Texas limited liability company, as a Pledgor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE MATTRESS VENTURE, L.P.,

  	
   

  
	
   

  	
  a Texas limited partnership

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro II, LLC, its general
  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary
  and Treasurer

  	
   

  	
   

  
													

 

S-2

 

	
   

  	
  LENDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SLN FINANCE, LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company,

  	
   

  
	
   

  	
  as Lender

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rodger R. Krouse

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Rodger R. Krouse

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

S-3Exhibit 10.6

 

AMENDED AND RESTATED GUARANTY

 

This AMENDED
AND RESTATED GUARANTY is entered into as of March 31, 2004 (this “Guaranty”),
by and among Mattress Holding Corp., a Delaware corporation (“MHC”), and
each of MHC’s undersigned Subsidiaries identified as Guarantors on the
signature pages hereof (such Subsidiaries, together with MHC, each a “Guarantor”
and collectively, jointly and severally, the “Guarantors”), in favor of
and for the benefit of SLN Finance, LLC, a Delaware limited liability company (“Lender”).  Capitalized terms used in this Guaranty but
not defined herein shall have the meanings given to such terms in the Second
Amended and Restated Secured Senior Subordinated Promissory Note, dated as of
the date hereof, made by Mattress Finn, Inc., a Delaware corporation (“Borrower”)
in favor of Lender (the “Note”).

 

RECITALS

 

A.                                   WHEREAS, the Note further amends and
restates that certain Amended and Restated Secured Senior Subordinated
Promissory Note, dated as of October 18, 2002 (the “Existing Promissory Note”),
made by Borrower in favor of Mattress Holdings International, LLC (“MHI”).

 

B.                                     WHEREAS, certain Guarantors and MHI entered
into that certain Guaranty, dated as of October 18, 2002 (the “Existing
Guaranty”).

 

C.                                     WHEREAS, contemporaneously herewith, Lender
acquired from MHI all of the indebtedness evidenced by the Existing Promissory
Note (the “Debt Acquisition”).

 

D.                                    WHEREAS, it is a condition to the
consummation of Debt Acquisition that Lender and Guarantors amend and restate
the Existing Guaranty in the manner set forth herein.

 

E.                                      WHEREAS, Lender is sometimes referred to
herein as a “Beneficiary.”

 

F.                                      WHEREAS, a portion of the proceeds of the
Note have been incurred for, and inure to the benefit of, Guarantors (which
benefits are hereby acknowledged).

 

G.                                     WHEREAS, it is a condition precedent to the
making of the Loan under the Note that Borrower’s obligations thereunder be
guarantied by Guarantors.

 

H.                                    WHEREAS, the terms and provisions of the
Note and all security interests granted in connection therewith are subject in
all respects, to the subordination provisions of the Note.

 

I.                                         WHEREAS, Guarantors are willing irrevocably
and unconditionally to guaranty such obligations of Borrower.

 

NOW,
THEREFORE, based upon the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to

 

 

induce Lender consummate the
Debt Acquisition and to accept the Note, Guarantors hereby agree as follows:

 

1.                                      Guaranty.

 

In order to induce Lender to consummate the
Debt Acquisition and to accept the Note, each Guarantor jointly and severally
irrevocably and unconditionally guarantees, as primary obligor and not merely
as surety, the due and punctual payment in full of all Guarantied Obligations (as
hereinafter defined) when the same shall become due, whether at stated
maturity, by acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. § 362(a)). 
The term “Guarantied Obligations” means the Obligations of
Borrower, including interest accruing at the then applicable rate provided in
the Note after the final repayment date referred to therein or any acceleration
thereof pursuant to the terms of the Note and including any portion of the
Obligations that accrues after the commencement of an Insolvency Proceeding,
whether or not allowed or allowable in whole or in part as a claim in any such
Insolvency Proceeding.

 

Each Guarantor acknowledges that a portion of
the loan previously made under the Note have been and may be advanced to it and
that the Guarantied Obligations are being incurred for and will inure to its
benefit.

 

Any interest on any portion of the Guarantied
Obligations that accrues after the commencement of any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of said proceeding, such interest as would have
accrued on such portion of the Guarantied Obligations if said proceeding had
not been commenced) shall be included in the Guarantied Obligations because it is
the intention of each Guarantor and Guarantied Party that the Guarantied
Obligations should be determined without regard to any rule of law or order
that may relieve Borrower of any portion of such Guarantied Obligations.

 

In the event that all or any portion of the
Guarantied Obligations is paid by Borrower, the obligations of each Guarantor
hereunder shall continue and remain in full force and effect or be reinstated,
as the case may be, in the event that all or any part of such payment(s) is
rescinded or recovered directly or indirectly from Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments that are so rescinded
or recovered shall constitute Guarantied Obligations.

 

Upon the occurrence and continuance of an
Event of Default, each Guarantor will, subject to the other provisions of
Section 1, upon demand pay, or cause to be paid, in cash, to Beneficiary, an
amount equal to the aggregate of the unpaid Guarantied Obligations.

 

2.                                      Guaranty Absolute; Continuing Guaranty.  The obligations of each Guarantor hereunder
are not merely the creation of a surety relationship and are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of such Guarantor
or surety other than payment in full of the

 

2

 

Guarantied Obligations.  In furtherance of the foregoing and without
limiting the generality thereof, each Guarantor agrees that:  (a) this Guaranty is a guaranty of payment
when due and not of collectibility; (b) Guarantied Party may enforce this
Guaranty upon the occurrence and during the continuance of an Event of Default,
notwithstanding the existence of any dispute between Borrower and Beneficiary
with respect to the existence of such event; (c) the obligations of such
Guarantor hereunder are independent of the obligations of Borrower under the
Loan Documents and a separate action or actions may be brought and prosecuted
against such Guarantor whether or not any action is brought against Borrower;
and whether or not Borrower is joined in any such action or actions; and (d) a
payment of a portion, but not all, of the Guarantied Obligations by such
Guarantor shall in no way limit, affect, modify or abridge the liability of
such Guarantor for any portion of the Guarantied Obligations that has not been
paid.  This Guaranty is a continuing
guaranty and shall be binding upon each Guarantor and its successors and
assigns, and each Guarantor irrevocably waives any right to revoke this
Guaranty as to future transactions giving rise to any Guarantied
Obligations.  If such a revocation is
effective notwithstanding the foregoing waiver, each Guarantor acknowledges and
agrees that (a) no such revocation shall be effective until written notice
thereof has been received by Lender, (b) no such revocation shall apply to
any Guarantied Obligations in existence on such date (including any subsequent
continuation, extension, or renewal thereof, or change in the interest rate,
payment terms, or other terms and conditions thereof), (c) no such revocation
shall apply to any Guarantied Obligations made or created after such date to
the extent made or created pursuant to a legally binding commitment of Lender
in existence on the date of such revocation, (d) no payment by any Guarantor,
or from any other source, prior to the date of such revocation shall reduce the
maximum obligation of such Guarantors hereunder, and (e) any payment by a
Guarantor or from any source other than a Guarantor, subsequent to the date of
such revocation shall first be applied to that portion of the Guarantied
Obligations as to which the revocation is effective and which are not,
therefore, guarantied hereunder, and to the extent so applied shall not reduce
the maximum obligation of any Guarantor hereunder.

 

3.                                      Actions
by Beneficiary.  Beneficiary may from
time to time, without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any limitation, impairment or
discharge of any Guarantor’s liability hereunder, in accordance with the terms
of the other Loan Documents, (a) renew, extend, accelerate or otherwise change
the time, place, manner or terms of payment of the Guarantied Obligations, (b)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Guarantied Obligations
or any agreement relating thereto and/or subordinate the payment of the same to
the payment of any other obligations, (c) request and accept other guaranties
of the Guarantied Obligations and take and hold security for the payment of
this Guaranty or the Guarantied Obligations, (d) release, exchange, compromise,
subordinate or modify, with or without consideration, any security for payment
of the Guarantied Obligations, any other guaranties of the Guarantied
Obligations, or any other obligation of any person with respect to the
Guarantied Obligations, (e) upon the occurrence and continuation of an Event of
Default, enforce and apply any security now or hereafter held by or for the
benefit of Beneficiary in respect of this Guaranty or the Guarantied
Obligations and direct the order or manner of sale thereof, or exercise any
other right or remedy that the Beneficiary may have against any such security,
as Beneficiary in its discretion may determine consistent with the Loan
Documents, including foreclosure on any such security pursuant to one or more
judicial or nonjudicial sales,

 

3

 

whether or not every aspect of
any such sale is commercially reasonable, and (f) exercise any other rights
available to the Beneficiary under the Loan Documents.

 

4.                                      No
Discharge.  This Guaranty and the
obligations of each Guarantor hereunder shall be valid and enforceable and
shall not be subject to any limitation, impairment or discharge for any reason
(other than payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not such
Guarantor shall have had notice or knowledge of any of them:  (a) any failure to assert or enforce or
agreement not to assert or enforce, or the stay or enjoining, by order of
court, by operation of law or otherwise, of the exercise or enforcement of, any
claim or demand or any right, power or remedy with respect to the Guarantied
Obligations or any agreement relating thereto, or with respect to any other
guaranty of or security for the payment of the Guarantied Obligations, (b) any
waiver or modification of, or any consent to departure from, any of the terms
or provisions of any Loan Document, or any agreement or instrument executed
pursuant thereto, (c) the Guarantied Obligations, or any agreement relating
thereto, at any time being found to be illegal, invalid or unenforceable in any
respect, (d) the application of payments received from any source to the
payment of indebtedness other than the Guarantied Obligations, even though
Beneficiary might have elected to apply such payment to any part or all of the
Guarantied Obligations, (e) any failure to perfect or continue perfection of a
security interest in any collateral which secures any of the Guarantied
Obligations, (f) any defenses, set-offs or counterclaims which Borrower may
assert against Beneficiary in respect of the Guarantied Obligations, including
but not limited to failure of consideration, breach of warranty, statute of
frauds, statute of limitations, accord and satisfaction and usury, and (g) any
other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of such Guarantor as
an obligor in respect of the Guarantied Obligations.

 

5.                                      Waivers.  Each Guarantor waives to the fullest extent
permitted by applicable law, for the benefit of Beneficiary:  (a) any right to require the Beneficiary, as
a condition of payment or performance by such Guarantor, to (i) proceed against
Borrower or any other person, (ii) proceed against or exhaust any security held
from Borrower or any other Person, (iii) proceed against or have resort to any
balance of any deposit account or credit on the books of Beneficiary in favor
of Borrower or any other person, or (iv) pursue any other remedy in the power
of Beneficiary; (b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Borrower including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Guarantied Obligations or any agreement or instrument
relating thereto or by reason of the cessation of the liability of Borrower
from any cause other than payment in full of the Guarantied Obligations (other
than contingent indemnification obligations); (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) any defense based upon Beneficiary’s errors or omissions in the
administration of the Guarantied Obligations, except behavior that amounts to
gross negligence, willful misconduct or bad faith; (e) (i) any principles or
provisions of law, statutory or otherwise, that are or might be in conflict
with the terms of this Guaranty and any legal or equitable discharge of such
Guarantor’s obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Guarantor’s liability hereunder or the enforcement
hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that Beneficiary protect, secure,
perfect or insure any lien or any property

 

4

 

subject thereto; (f) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, including acceptance of this Guaranty,
notices of default under the Note, or any agreement or instrument related
thereto, notices of any renewal, extension or modification of the Guarantied
Obligations or any agreement related thereto, and notices of any of the matters
referred to in Section 3 and 4 hereof and any right to consent to any thereof;
and (g) any defenses or benefits that may be derived from or afforded by law
which limit the liability of or exonerate guarantors or sureties, or which may
conflict with the terms of this Guaranty.

 

WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, EACH GUARANTOR HEREBY
WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL
BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE §§ 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822,
2838, 2839, 2845, 2847, 2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE
§§ 580a, 580b, 580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA
CIVIL CODE, ANY SIMILAR LAW OF NEW YORK OR ANY OTHER APPLICABLE JURISDICTION.

 

WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, EACH GUARANTOR WAIVES ALL
RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY THE LENDER, EVEN
THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH
RESPECT TO SECURITY FOR A GUARANTIED OBLIGATION, HAS DESTROYED SUCH GUARANTOR’S
RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST BORROWER BY THE OPERATION OF
SECTION 580d OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE.

 

6.                                      Guarantor’s
Rights of Subrogation, Etc.; Subordination of Other Obligations.  Until the Guarantied Obligations are
satisfied in full in cash, no Guarantor will exercise any claim, right or
remedy, direct or indirect, that such Guarantor now has or may hereafter have
against Borrower or any of its assets in connection with this Guaranty or the
performance by such Guarantor of its obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation (a) any
right of subrogation, reimbursement or indemnification that such Guarantor now
has or may hereafter have against any Borrower, (b) any right to enforce, or to
participate in, any claim, right or remedy that Beneficiary now has or may
hereafter have against Borrower, and (c) any benefit of, and any right to
participate in, any collateral or security now or hereafter held by
Beneficiary.  Each Guarantor further
agrees that, to the extent the agreement to withhold the exercise of its rights
of subrogation, reimbursement and indemnification as set forth herein is found
by a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Borrower or against any collateral or security shall be junior and
subordinate to any rights the Beneficiary may have against Borrower, to all
right, title and interest the Beneficiary may have in any such collateral or
security, and in all events shall be subject to the subordination provisions
set forth in the Note.

 

5

 

Any indebtedness of Borrower now or hereafter
held by either Guarantor is subordinated in right of payment to the Guarantied
Obligations (and in all events shall be subject to the subordination provisions
set forth in the Note), and any such indebtedness of Borrower to such Guarantor
collected or received by such Guarantor, and any amount paid to such Guarantor
on account of any subrogation, reimbursement, indemnification or contribution
rights referred to in the preceding paragraph when all Guarantied Obligations
(other than contingent indemnification obligations) have not been paid in full,
shall be held in trust for and on behalf of the Beneficiary and shall forthwith
be paid over to Beneficiary to be credited and applied against the Guarantied
Obligations.

 

7.                                      Expenses.  Each Guarantor agrees to pay, or cause to be
paid, and to save the Beneficiary harmless against liability for, (i) any and
all costs and expenses (including reasonable fees and disbursements of counsel)
incurred or expended by Beneficiary in connection with the enforcement of or
preservation of any rights under this Guaranty and (ii) any and all costs and
expenses (including those arising from rights of indemnification) required to
be paid by such Guarantor under the provisions of any other Loan Document;
provided that any costs and expenses described in clause (i) above shall be
payable upon demand.

 

8.                                      Financial
Condition of Borrowers.  Beneficiary
shall not have any obligation, and each Guarantor waives any duty on the part
of Beneficiary, to disclose or discuss with such Guarantor its assessment, or
such Guarantor’s assessment, of the financial condition of Borrower or any
matter or fact relating to the business, operations or condition of
Borrower.  Each Guarantor has adequate
means to obtain information from Borrower on a continuing basis concerning the
financial condition of Borrower and its ability to perform its obligations
under the Loan Documents, and each Guarantor assumes the responsibility for
being and keeping informed of the financial condition of Borrower and of all
circumstances bearing upon the risk of nonpayment of the Guarantied
Obligations.

 

9.                                      Representations
and Warranties.  Each Guarantor
makes, for the benefit of Beneficiary, each of the representations and
warranties made in the Note as to such Guarantor, such Guarantor’s assets,
financial condition, operations, organization, legal status, business and the
Loan Documents to which such Guarantor is a party.

 

10.                               Amendments
and Waivers.  No amendment,
modification, termination or waiver of any provision of this Guaranty, and no
consent to any departure by any Guarantor therefrom, shall in any event be
effective without the written concurrence of Lender and, in the case of any
such amendment or modification, each Guarantor. 
Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.

 

11.                               Miscellaneous.  It is not necessary for Beneficiary to
inquire into the capacity or powers of any Guarantor or Borrower or the
officers, directors or any agents acting or purporting to act on behalf of any
of them.

 

The rights, powers and remedies given to
Beneficiary by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiary by virtue
of any statute or rule of law or in any of the Loan Documents or any agreement
between any Guarantor and Beneficiary or between Borrower and Beneficiary.  Any

 

6

 

forbearance or failure to
exercise, and any delay by Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.

 

In case any provision in or obligation under
this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

THIS GUARANTY
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF
LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.

 

This Guaranty shall inure to the benefit of
Beneficiary and its respective successors and permitted assigns.

 

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS GUARANTY EACH GUARANTOR ACCEPTS FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY.  Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of Beneficiary
to bring proceedings against any Guarantor in the courts of any other
jurisdiction.

 

EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, LENDER EACH AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
GUARANTY.  The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims and all
other common law and statutory claims. 
Each Guarantor and, by its acceptance of the benefits hereof, Lender
each (i) acknowledges that this waiver is a material inducement for such
Guarantor and Beneficiary to enter into a business relationship, that such
Guarantor and Beneficiary have already relied on this waiver in entering into
this Guaranty or accepting the benefits thereof, as the case may be, and that
each will continue to rely on this waiver in their related future dealings, and
(ii) further warrants and represents that each has reviewed this waiver with
its legal counsel and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR

 

7

 

MODIFICATIONS OF THIS
GUARANTY.  In the event of litigation,
this Guaranty may be filed as a written consent to a trial by the court.

 

12.                               Counterparts;
Effectiveness.  This Guaranty may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original for all purposes; but all such counterparts together
shall constitute but one and the same instrument.  This Guaranty may be authenticated by manual
signature, facsimile or, if approved in writing by the Guarantor, electronic
means, all of which shall be equally valid.

 

13.                               Binding
Guaranty; Assignments.  This
Guaranty, and the terms, covenants and conditions hereof, shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, except that Guarantor shall not be permitted to assign
this Guaranty or any interest herein.

 

14.                               Section
Headings; Interpretation.  Section
headings used herein are for convenience only and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Guaranty.            The use of the word
“including” or any variation or derivative thereof in this Guaranty is by way
of example rather than by limitation. 
The language used in this Guaranty will be deemed to be the language
chosen by the Guarantor to express their mutual intent.  In the event an ambiguity or question of
intent or interpretation arises, no presumption or burden of proof will arise
favoring or disfavoring any Person by virtue of the authorship of any of the
provisions of this Guaranty.

 

15.                               Subordination
Agreement.  The terms and provisions
of this Guaranty are subject in all respects to the subordination provisions of
the Note.

 

16.                               Notices.  All notices and other communications provided
for hereunder shall be in writing (including telegraphic or telecopier
communication) and mailed, telecopied or delivered to:

 

If to Borrower
or any Guarantor:

 

c/o Mattress
Firm, Inc.

5815 Gulf
Freeway

Houston, TX
77023

Attention:  Jim R. Black, Chief Financial Officer

Telecopy:  (713) 921-4053

 

With a copy
to:

 

Jenkins &
Gilchrist Parker Chapin LLP

The Chrysler
Building

405 Lexington
Avenue

New York, NY
10174

Attention:  Mitchell P. Portnoy, Esq.

Telecopier:  (212) 704-6288

 

8

 

If to Lender:

 

SLN Finance,
LLC

1105 North
Market Street

Suite 1300

P.O. Box 8985

Wilmington, DE
19899

Attention:  Kevin Calhoun and C. Deryl Couch, Esq.

Telecopy:  (302) 651-8425

 

With a copy
to:

 

Jenkens &
Gilchrist Parker Chapin LLP

The Chrysler
Building

405 Lexington
Avenue

New York, NY
10174

Attention:  Mitchell P. Portnoy, Esq.

Telecopier:  (212) 704-6288

 

or to such other address and/or
with such other copy or copies as the intended recipient may have specified by
prior notice to the notifying party.  All
such notices and other communications shall, when mailed or telecopied, be
effective when deposited in the mails or telecopied, respectively, addressed as
aforesaid; except that notices and other communications to the Lender shall not
be effective until received by the Lender. 
Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of any Loan Document shall be effective as delivery of
an original executed counterpart thereof.

 

[Remainder of page intentionally left blank]

 

9

 

IN WITNESS
WHEREOF, Guarantors have caused this Guaranty to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

 

	
   

  	
  GUARANTORS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS HOLDING CORP.,

  	
   

  
	
   

  	
  a Delaware corporation, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS FIRM INVESTMENT

  MANAGEMENT, INC.,

  	
   

  
	
   

  	
  an Arizona corporation, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FESTRO, INC.,

  	
   

  
	
   

  	
  a Texas corporation, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
  Name: Jim R.
  Black

  	
   

  
	
   

  	
  Title: Secretary
  and Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TEAMEXCEL MANAGEMENT COMPANY,

  	
   

  
	
   

  	
  a Texas corporation, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
								

 

[SIGNATURE PAGES TO AMENDED AND RESTATED GUARANTY]

 

S-1

 

	
   

  	
  MATTRESS FIRM OPERATING, LTD.,

  	
   

  
	
   

  	
  a Texas limited partnership, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro, Inc., its general
  partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary
  and Treasurer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS VENTURE INVESTMENT

  MANAGEMENT, LLC,

  	
   

  
	
   

  	
  an Arizona limited liability company, as a

  Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Benjamin
  S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Benjamin S. Emmons

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FESTRO II, LLC,

  	
   

  
	
   

  	
  a Texas limited liability company, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Secretary and Treasurer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE MATTRESS VENTURE, L.P.,

  	
   

  
	
   

  	
  a Texas limited partnership, as a Guarantor

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro II,LLC,  its general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim R.
  Black

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Jim R. Black

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary
  and Treasurer

  	
   

  
											

 

S-2

 

Solely for the purpose of
consenting to the amendment and restatement of the Existing Guaranty as set
forth above:

 

	
   

  	
  LENDER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SLN FINANCE, LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company,

  	
   

  
	
   

  	
  as Lender

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rodger R. Krouse

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Rodger R. Krouse

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

S-3

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