Document:

Exhibit 10.3

AMENDMENT NUMBER TWO TO FINANCING AGREEMENT

This AMENDMENT NUMBER TWO TO
FINANCING AGREEMENT (this “Amendment”), dated as of December
31, 2004, is entered into by and among MATTRESS
FIRM, INC., a Delaware corporation (“MFI”), GEORGIA MATTRESS CORP., a Georgia
corporation (“GMC”), and ELITE
MANAGEMENT TEAM, INC., a Georgia corporation (“EMT”; and
together with MFI and GMC, each a “Borrower” and collectively and
jointly and severally, the “Borrowers”), MATTRESS HOLDING CORP., a Delaware corporation (“Parent”),
each Subsidiary of the Parent listed as a “Guarantor” on the signature
pages hereto (together with the Parent, each a “Guarantor” and
collectively, jointly and severally, the “Guarantors”), the lenders from
time to time party hereto (each a “Lender” and collectively, the “Lenders”),
ABLECO FINANCE LLC, a Delaware
limited liability company (“Ableco”), as collateral agent for the
Lenders (in such capacity, together with any successor collateral agent, the “Collateral
Agent”), and Ableco as administrative agent for the Lenders (in such
capacity, together with any successor administrative agent, the “Administrative
Agent” and together with the Collateral Agent, each an “Agent” and
collectively, the “Agents”).

W I T N E S S E T H

WHEREAS, MFI, Parent, Guarantors, Administrative Agent, Collateral
Agent, and the Lenders are parties to that certain Financing Agreement, dated
as of March 31, 2004 (as amended, restated, supplemented or otherwise modified
from time to time, the “Financing Agreement”);

WHEREAS, MFI has requested that GMC and EMT be joined as additional
Borrowers under the Financing Agreement and has requested that the Agents and
the Lenders agree to certain other amendments to the Financing Agreement as set
forth herein; and

WHEREAS, subject to the satisfaction of the conditions set forth
herein, the Agents and the Lenders are willing to so amend the Financing
Agreement pursuant to the terms set forth herein.

NOW, THEREFORE, for good ;and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             DEFINITIONS.

Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the
Financing Agreement, as amended hereby.

2.             AMENDMENTS
TO FINANCING AGREEMENT.

(a)           The first paragraph of the “Recitals”
to Financing Agreement hereby is amended and restated in its entirety to read
as follows:

“The
Borrower has asked the Lenders to extend credit to the Borrower consisting of
(a) a term loan designated as “Term Loan A” in the

 

aggregate
principal amount of $5,958,333.32, (b) a term loan designated as “Term Loan B”
in the aggregate principal amount of $6,019,576.30, consisting of $4,000,000
disbursed on the First Amendment Effective Date, $2,000,000 disbursed on the
Second Amendment Effective Date and certain Term Loan B PIK Amounts (as
hereinafter defined) that accrued between the First Amendment Effective Date
and December 1, 2004 and (c) a revolving credit facility in an aggregate amount
not to exceed $6,000,000 at any time outstanding.  The proceeds of the term loans and the loans
made under the revolving credit facility shall be used to repay existing
indebtedness of the Borrower, for general working capital purposes of the
Borrower and the Guarantors, and to pay fees and expenses related to this
Agreement.  The Lenders are severally,
and not jointly, willing to extend such credit to the Borrower subject to the
terms and conditions hereinafter set forth.”

(b)           Section 1.01 of the Financing
Agreement hereby is amended by adding the following defined terms in proper
alphabetical order or amending and restating the following definitions in their
entirety, as the case may be:

“Change
of Control” means each occurrence of any of the following:

(a)           the Permitted Holders shall cease to
have beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), in
the aggregate, of at least 100% of the aggregate outstanding voting power of
the Capital Stock of Parent or at least 51% of the outstanding non-voting power
of the Capital Stock of Parent,

(b)           Parent ceases to own and control
directly 100% of the Capital Stock of the Borrower; provided that the
indirect ownership by Parent of the Capital Stock of Elite until the
consummation of the Elite-GMC Merger shall not constitute a Change of Control,

(c)           the Borrower cease to own, directly
or indirectly, and control 100% of the Capital Stock of any Guarantor (other
than Parent) or any of the Borrower’s Subsidiaries, unless otherwise permitted
hereunder,

(d)           (i) Parent consolidates with or
merges into another entity or conveys, transfers or leases all or substantially
all of its property and assets to any Person, or (ii) any entity consolidates
with or merges into Parent, which in either event (i) or (ii) is pursuant to a
transaction in which the outstanding voting Capital Stock of Parent is
reclassified or changed into or exchanged for cash, securities or other
property, other than any such transaction in which the Permitted Holder have a
beneficial ownership in the aggregate of at least 100% of the aggregate
outstanding voting power of the Capital Stock of the resulting, surviving or
transferee entity or at least 51% of the outstanding non-voting power of the
Capital Stock of the resulting, surviving or transferee entity.

 

 

2

“Elite”
means Elite Management Team, Inc., a Georgia corporation.

“Elite
Acquisition” means the acquisition by GMC of all of the issued and
outstanding Capital Stock of Elite, in accordance with the Elite Acquisition
Agreement.

“Elite
Acquisition Agreement” means that certain Acquisition Agreement and Plan of
Reorganization, dated as of December 31, 2004, among Parent, GMC and each of
the stockholders of Elite.

“Elite-GMC
Merger” means the merger of Elite with and into GMC with GMC being the
surviving corporation, in accordance with the Elite-GMC Merger Agreement.

“Elite-GMC
Meter Agreement” means that certain Plan of Merger between Elite and GMC.

“Elite
Shareholder Demand Notes” means those certain demand promissory notes,
dated as of December 30, 2004, in the aggregate principal amount of $1,500,000,
payable by Elite to the former shareholders of Elite, which are being paid in
full concurrently with the consummation of the Elite Acquisition.

“Elite
Shareholder Notes” means those certain subordinated promissory notes, dated
as of December 31, 2004, in the aggregate principal amount of $1,500,000,
payable by Elite to the former shareholders of Elite, in form and substance
satisfactory to Collateral Agent.

“GMC”
means Georgia Mattress Corp., a Georgia corporation and wholly-owned Subsidiary
of Parent.

“Second
Amendment” means that certain Amendment Number Two to Financing Agreement,
dated as of December 31, 2004, among Borrower, Parent, Guarantors, Administrative
Agent, Collateral Agent and Lenders.

“Second
Amendment Effective Date” means the date that all of the conditions set
forth in Section 5 of the Second Amendment shall be satisfied (or waived
by the Collateral Agent in its sole discretion).

“Subordinated
Note” means that certain Second Amended and Restated Secured Senior
Subordinated Promissory Note dated as of March 31, 2004 in the principal amount
of $17,000,000.00 by Borrower in favor of Subco, as amended by Amendment Number
One to Second Amended and Restated Secured Senior Subordinated Promissory Note
dated as of June 1, 2004, Amendment Number Two to Second Amended and Restated
Secured Senior Subordinated Promissory Note dated as of October 18, 2004, and
Amendment Number Three to Second Amended and Restated 

 

3

Secured
Senior Subordinated Promissory Note dated as of December 31, 2004.

“Term
Loan B” means, collectively, the loans made by the Term Loan B Lenders to
the Borrower on the First Amendment Effective Date and the Second Amendment
Effective Date pursuant to Section 2.01(a)(iii) and the Term Loan B PIK
Amount.

“Total
Term Loan B Commitment” means $6,019,576.30, which amount is the sum of the
amounts of the Lenders’ Term Loan B Commitments.

(c)           Section 2.01(a)(iii) of the
Financing Agreement hereby is amended and restated in its entirety as follows:

“(iii)        each Term Loan B Lender severally agrees
to make its portion of the Term Loan B to the Borrower on the First Amendment
Effective Date and the Second Amendment Effective Date, as applicable, in an
aggregate principal amount equal to the amount of such Lender’s Term Loan B
Commitment.”

(d)           Section 2.01(b)(ii) of the
Financing Agreement hereby is amended and restated in its entirety as follows:

“(ii)         The aggregate principal amount of the
Term Loan A made on the Effective Date shall not exceed the Total Term Loan A
Commitment.  The aggregate principal
amount of the Term Loan B made on the First Amendment Effective Date and the
Second Amendment Effective Date shall not exceed the Total Term Loan B
Commitment.  Any principal amount of the
Term Loans that is repaid or prepaid may not be reborrowed.”

(e)           The second sentence of Section
2.02(a) of the Financing Agreement hereby is amended by deleting the words
“with respect to the Term Loans, on the Effective Date” and replacing them with
the words “with respect to the Term Loan A, on the Effective Date, and with
respect to the Term Loan B, on the First Amendment Effective Date and the
Second Amendment Effective Date, as applicable.”

(f)            Section 6.01(t) of the
Financing Agreement hereby is amended and restated in its entirety as follows:

“(t)
Use of Proceeds.  The proceeds of
the Loans shall be used (a) in the case of the Term Loan A and the initial
Revolving Loans, to refinance the Existing Debt, (b) in the case of the portion
of the Term Loan B funded on the Second Amendment Effective Date, to fund the
repayment of the Elite Shareholder Demand Notes, (c) to pay fees and expenses
in connection with the transactions contemplated hereby, and (d) to fund
working capital of the Borrower and the Guarantors, including the making of
scheduled payments on the Elite Shareholder Notes so long as, with respect to
each 

 

4

such
scheduled payment (a) no Event of Default exists immediately before or
immediately after giving effect to such payment and (b) there is Availability
of at least $3,000,000 at all times within 30 days prior to the date of such
payment and immediately after giving effect to such payment.”

(g)           Section 7.02(c) of the
Financing Agreement hereby is amended and restated in its entirety as follows:

“(c)
Fundamental Changes; Dispositions. 
Wind-up, liquidate or dissolve, or merge, consolidate or amalgamate with
any Person, or convey, sell, lease or sublease, transfer or otherwise dispose
of, whether in one transaction or a series of related transactions, all or any
part of its business, property or assets (including, without limitation
granting a new franchise, approving the opening of a new store by a franchisee
of a Loan Party, selling, closing or otherwise disposing of one or more store
locations), whether now owned or hereafter acquired (or agree to do any of the
foregoing), or purchase or otherwise acquire, whether in one transaction or a
series of related transactions, all or substantially all of the assets of any
Person (or any division thereof) (or agree to do any of the foregoing), or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
that

(i)  any Guarantor (other than
Parent) may be (x) merged with and into any other Guarantor (other than Parent)
or with and into the Borrower, or (y) liquidated or dissolved, in each case, so
long as (A) no other provision of this Agreement would be violated thereby, (B)
such Loan Party gives the Agents at least 30 days prior written notice of such
merger, liquidation or dissolution, (C) no Default or Event of Default shall
have occurred and be continuing either before or after giving effect to such
transaction, (D) the Lenders’ rights in any Collateral, including, without
limitation, the existence, perfection and priority of any Lien thereon, are not
adversely affected by such merger, liquidation, or dissolution, and (E) the
surviving Person in any merger or consolidation with the Borrower shall be the
Borrower and (F) the surviving Person in any merger or consolidation is joined
as a Loan Party hereunder and is a party to a Security Agreement and the
Capital Stock of such Person is the subject of a Pledge Agreement, in each
case, which is in full force and effect on the date of and immediately after
giving effect to such merger or consolidation;

(ii)  any Loan Party and its
Subsidiaries may make Permitted Dispositions; and

(iii)  the Elite-GMC Merger may
be consummated so long as it is completed within 20 Business Days after the
consummation of the Elite Acquisition.”

 

5

(h)           Section 7.02(e) of the
Financing Agreement hereby is amended and restated in its entirety as follows:

“(e)
Loans, Advances, Investments, Etc. 
Make or commit or agree to make any loan, advance guarantee of
obligations, other extension of credit or capital contributions to, or hold or
invest in or commit or agree to hold or invest in, or purchase or otherwise
acquire or commit or agree to purchase or otherwise acquire any shares of the
Capital Stock, bonds, notes, debentures or other securities of, or make or
commit or agree to make any other investment in, any other Person, or purchase
or own any futures contract or otherwise become liable for the purchase or sale
of currency or other commodities at a future date in the nature of a futures
contract, or permit any of its Subsidiaries to do any of the foregoing, except
for:  (i) investments existing on the
date hereof, as set forth on Schedule 7.02(e) hereto, but not any
increase in the amount thereof as set forth in such Schedule or any other
modification of the terms thereof, (ii) temporary loans and advances in cash
among the Loan Parties made in the ordinary course of business, (iii)
agreements with franchisees entered into in the ordinary course of business
permitting such franchisees to pay any applicable Up Front Franchise Fee to the
applicable Loan Party over time in a manner that is consistent with historical
practices, (iv) Permitted Investments, and (v) the Elite Acquisition, so long
as the Elite-GMC Merger is consummated within 20 Business Days after the Elite
Acquisition is consummated.

(i)            Schedules C-1, 6.01(e) and
6.01(ff) of the Financing Agreement hereby are replaced in their entirety
with Schedule C-1, Schedule 6.01(e) and Schedule 6.01(ff),
respectively, attached hereto and incorporated herein by this reference.

3.             JOINDER
TO FINANCING AGREEMENT AND OTHER LOAN DOCUMENTS. GMC and Elite hereby join in and agree to be bound by each and all of
the provisions of the Financing Agreement and the other Loan Documents to which
the Borrower is a party, and, in so doing, each of such Persons hereby becomes
a Borrower.  Without limiting the
generality of the foregoing, each of GMC and Elite, as a Borrower, hereby (a)
agrees to be bound by each provision in the Loan Agreement and each other Loan
Document to which the Borrower is a party as a party thereto, mutatis mutandis and (b) acknowledges that
the Collateral Agent may file an all assets UCC-1 financing statement on it in
the state in which it is organized.  From
and after the Second Amendment Effective Date, each reference in the Financing
Agreement or any other Loan Document to the Borrower shall be deemed to include
GMC and Elite.  Each of the Borrowers,
including GMC and Elite, agrees that it is jointly and severally obligated for
the payment and performance of the Obligations.

4.             REPRESENTATIONS
AND WARRANTIES.  Each Loan Party hereby represents and warrants to each Agent and each
Lender as follows:

(a)           It has the requisite power and
authority to execute and deliver this Amendment and to perform its obligations
hereunder and under the Loan Documents to which it is a party.

 

6

The
execution, delivery, and performance by it of this Amendment and the
performance by it of each Loan Document to which it is a party (i) have been
duly approved by all necessary action and no other proceedings are necessary to
consummate such transactions; and (ii) are not in contravention of (A) any law,
rule, or regulation, or any order, judgment, decree, writ, injunction, or award
of any arbitrator, court or governmental authority binding on it, (B) the terms
of its organizational documents, or (C) any provision of any contract or
undertaking to which it is a party or by which any of its properties may be
bound or affected;

(b)           This Amendment has been duly executed
and delivered by each Loan Party.  This
Amendment and each Loan Document is the legal, valid and binding obligation of
each Loan Party, enforceable against such Loan Party in accordance with its
terms, and is in full force and effect except as such validity and
enforceability is limited by the laws of insolvency and bankruptcy, laws
affecting creditors’ rights and principles of equity applicable hereto;

(c)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein has been issued and
remains in force by any Governmental Authority against any Loan Party, either
Agent or any Lender;

(d)           Except for Events of Default under Section
7.03 of the Financing Agreement as previously disclosed to Administrative
Agent, no Default or Event of Default has occurred and is continuing on the
date hereof or as of the date of the effectiveness of this Amendment (it being
understood that the foregoing acknowledgement of the existence of certain
Events of Default shall not be construed to be a waiver of such Events of
Default); and

(e)           After giving effect to this Amendment
and except, with respect to Section 6.01(kk) of the Financing Agreement,
for the existence of Events of Default under Section 7.03 of the
Financing Agreement as previously disclosed to the Administrative Agent, the
representations and warranties in the Financing Agreement and the other Loan
Documents are true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) on and as of the date hereof, as though made on such date (except to
the extent that such representations and warranties relate solely to an earlier
date) (it being understood that the foregoing acknowledgement of the existence
of certain Events of Default shall not be construed to be a waiver of such
Events of Default).

5.             CONDITIONS
PRECEDENT TO AMENDMENT.

The
satisfaction of each of the following shall constitute conditions precedent to
the effectiveness of this Amendment and each and every provision hereof:

(a)           Collateral Agent
shall have received this Amendment, duly executed and delivered by the parties
hereto, and the same shall be in full force and effect.

(b)           Collateral Agent shall have received
a Security Agreement, duly executed and delivered by GMC and Elite, and the
same shall be in full force and effect.

 

7

(c)           Collateral Agent shall have received
an Addendum to the Pledge Agreement, duly executed and delivered by all the
Loan Parties, and the same shall be in full force and effect, together with the
original certificates representing all of the Capital Stock of GMC accompanied
by undated stock powers executed in blank.

(d)           Collateral Agent shall have received
certified copies of UCC searches, listing all effective financing statements
which name GMC and Elite as debtors, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by Collateral
Agent, shall cover any of the Collateral.

(e)           Collateral Agent shall have received
that certain Amendment Number Two to Financing Agreement, dated of even date
herewith, duly executed and delivered by Subco, the lenders from time to time
party thereto, and Ableco, as collateral and administrative agent thereunder,
and the same shall be in full force and effect.

(f)            Collateral Agent shall have received
Amendment Number Three to the Subordinated Note, in form and substance
satisfactory to Agents, duly executed and delivered by the Borrower and Subco,
and the same shall be in full force and effect.

(g)           Collateral Agent shall have received
that certain amended and restated participation agreement dated as of January
3, 2004, duly executed and delivered by Ableco and SCSF Mattress Firm II, LLC,
a Delaware limited liability company, and the same shall be in full force and
effect.

(h)           Administrative Agent shall have
received, in accordance with that certain Flow of Funds Agreement dated as of
December 31, 2004 by and among the Borrowers, the Agent and the Lender, a
non-refundable amendment fee in the amount of $20,000, solely for
Administrative Agent’s own account and not for the account of any Lender.

(i)            Collateral Agent shall have received
a copy of the unanimous written consent of the board of directors or board of
managers (as applicable) of each Loan Party, including GMC and Elite, certified
as of the Second Amendment Effective Date by an Authorized Officer thereof, (A)
authorizing the borrowings hereunder and the transactions contemplated by this
Amendment and (B) authorizing the execution, delivery and performance by such
Loan Party of this Amendment and the execution and delivery of the other
documents to be delivered by such Loan Party in connection herewith.

(j)            Collateral Agent shall have received
the articles of incorporation and bylaws of GMC and Elite, together will all
amendments thereto, certified as of the Second Amendment Effective Date by an
Authorized Officer of GMC or Elite, as applicable.

(k)           Collateral Agent shall have received
a certificate of good standing with respect to GMC issued by the Georgia
Secretary of State and certificates of good standing with respect to Elite
issued by the North Carolina Secretary of State and the Georgia Secretary of
State.

(l)            Collateral Agent shall have received
fully executed copies of the Elite Shareholder Notes, and the Elite Acquisition
Agreement and all documents and agreements ancillary thereto, including the
Earnout Agreement (as defined in the Elite Acquisition

 

8

Agreement),
all of the foregoing being satisfactory to Collateral Agent (including the
subordination provisions contained in such promissory notes) and certified by
an Authorized Officer of GMC.

(m)          Collateral Agent shall have received
satisfactory evidence that the Elite Acquisition has closed (or will close
concurrently with the funding of that portion of Term Loan B which is to be
funded on the Second Amendment Effective Date) in accordance with the terms of
the Elite Acquisition Agreement.

(n)           Collateral Agent shall have received
payment from the Borrower of all unreimbursed costs and expenses that are
payable under Section 12.04 of the Financing Agreement, including
without limitation the outstanding fees and expenses of Paul, Hastings,
Janofsky & Walker LLP incurred through the Second Amendment Effective Date.

(o)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been issued and
remain in force by any Governmental Authority against any Loan Party, either
Agent, or any Lender.

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

7.             ENTIRE
AMENDMENT; EFFECT OF AMENDMENT.  This Amendment, and the terms and provisions hereof, constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes any and all prior or contemporaneous amendments relating to the
subject matter hereof.  Except for the
amendments to the Financing Agreement expressly set forth in Section 2
hereof, the Financing Agreement and other Loan Documents shall remain unchanged
and in full force and effect.  To the
extent any terms or provisions of this Amendment conflict with those of the
Financing Agreement or other Loan Documents, the terms and provisions of this
Amendment shall control.  This Amendment
is a Loan Document.  The amendments set
forth herein are limited to the specifics hereof, shall not apply with respect
to any facts or occurrences other than those on which the same are based, shall
not excuse future non-compliance with the Financing Agreement or the other Loan
Documents, and shall not operate as a consent to or waiver of any further or
other matter, under the Loan Documents.

8.             COUNTERPARTS;
TELECOPY EXECUTION.  This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of
the parties hereto may execute this Amendment by signing any such
counterpart.  Delivery of an executed
counterpart of this Amendment by telecopy shall be equally as effective as
delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by telecopy also shall deliver an original executed
counterpart of this Amendment, but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.

 

9

9.             MISCELLANEOUS.

(a)           Upon the effectiveness of this
Amendment, each reference in the Financing Agreement to “this Agreement”,
“hereunder”, “herein”, “hereof” or words of like import referring to the
Financing Agreement shall mean and refer to the Financing Agreement as amended
by this Amendment.

(b)           Upon the effectiveness of this
Amendment, each reference in the Loan Documents to the “Financing Agreement”,
“thereunder”, “therein”, “thereof” or words of like import referring to the
Financing Agreement shall mean and refer to the Financing Agreement as amended
by this Amendment.

(c)           Notwithstanding anything to the
contrary contained in Article V of the Financing Agreement, the Term Loan B
Lenders agree to fund $2,000,000 of Term Loan B on or after the Second
Amendment Effective Date in accordance with this Amendment and the Financing
Agreement, notwithstanding the existence of the Events of Default that have
occurred due to violations of Section 7.03 of the Financing Agreement
that have been disclosed to the Administrative Agent, and the Agents and the Lenders
consent to the foregoing (it being understood that the foregoing
acknowledgement of the occurrence of certain Events of Default shall not be
construed to be a waiver of such Events of Default).

(d)           Notwithstanding anything to the
contrary contained in the Financing Agreement or any other Loan Document, the
Agents and the Lenders agree that the Borrowers shall not be required to be in
compliance with Section 8.01 of the Financing Agreement as to the
operations and cash management of Elite until 30 days after the Second
Amendment Effective Date, and the failure by the Borrowers to so comply with Section
8.01 during such 30 day period shall not constitute a Default or an Event
of Default under any of the Loan Documents.

(e)           The Agents and the Lenders acknowledge
and agree that the Elite Shareholder Notes constitute Subordinated Debt, as
defined in the Financing Agreement, but shall not be subject to the mandatory
prepayment requirements set forth in Section 2.05(c)(v) of the Financing
Agreement.

(f)            The Borrowers agree to deliver to
the Agents revised financial projections, in form and substance satisfactory to
the Agents and otherwise in accordance with Section 7.01(a)(vi) of the
Financing Agreement, no later than January 31, 2005.  The Borrowers and the Agents and the Lenders
agree to negotiate in good faith to re-set the financial covenants set forth in
Section 7.03 of the Financing Agreement, based on the revised
projections delivered pursuant to the preceding sentence and at levels that are
consistent with the methodology previously used in setting such covenants under
the Financing Agreement, no later than February 10, 2005.

(g)           Except as expressly provided herein,
(i) the Agents and the Lenders hereby reserve all remedies, powers, rights, and
privileges that the Agents and the Lenders may have under the Financing
Agreement or the other Loan Documents, at law (including under the Code), in
equity, or otherwise; (ii) all terms, conditions, and provisions of the
Financing Agreement and the other Loan Documents are and shall remain in full
force and effect; and (iii) nothing herein shall operate as a consent to or a
waiver, amendment, or forbearance in respect of any matter

 

10

(including
any Event of Default whether presently existing or subsequently occurring) or
any other right, power, or remedy of the Agents or the Lenders under the
Financing Agreement and the other Loan Documents.  No delay on the part of the Agents and the
Lenders in the exercise of any remedy, power, right or privilege shall impair
such remedy, power, right, or privilege or be construed to be a waiver of any
default, nor shall any partial exercise of any such remedy, power, right or
privilege preclude further exercise thereof or of any other remedy, power,
right or privilege.

 

11

 

 

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

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS
  FIRM, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  GEORGIA
  MATTRESS CORP.,

  
	
   

  	
  a Georgia corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  ELITE
  MANAGEMENT TEAM, INC.,

  
	
   

  	
  a Georgia corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Secretary

  

 

 

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO FINANCING AGREEMENT]

 

 

S-1

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  MATTRESS
  HOLDING CORP.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS
  FIRM INVESTMENT MANAGEMENT, INC.,

  
	
   

  	
  an Arizona corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc Leder

  
	
   

  	
   

  	
  Name: Marc Leder

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  	
   

  
	
   

  	
  FESTRO,
  INC.,

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  TEAMEXCEL
  MANAGEMENT COMPANY,

  
	
   

  	
  a Texas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  

 

 

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO FINANCING AGREEMENT]

 

S-2

 

 

	
   

  	
  MATTRESS
  FIRM OPERATING, LTD.,

  
	
   

  	
  a Texas limited
  partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro, Inc., its general
  partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MATTRESS
  VENTURE INVESTMENT MANAGEMENT, LLC,

  
	
   

  	
  an Arizona limited
  liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc Leder

  
	
   

  	
   

  	
  Name: Marc Leder

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  FESTRO
  II, LLC,

  
	
   

  	
  a Texas limited liability
  company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  THE
  MATTRESS VENTURE, L.P.,

  
	
   

  	
  a Texas limited
  partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Festro II, LLC, its
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
   

  	
  Title: Treasurer &
  Secretary

  

 

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO FINANCING AGREEMENT]

 

S-3

 

	
   

  	
  COLLATERAL
  AGENT AND ADMINISTRATIVE AGENT:

  
	
   

  	
   

  
	
   

  	
  ABLECO
  FINANCE LLC,

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alexander J. Ornstein

  
	
   

  	
   

  	
  Name: Alexander J.
  Ornstein

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  ABLECO
  FINANCE LLC,

  
	
   

  	
  a Delaware limited
  liability company,

  
	
   

  	
  on behalf of itself and
  its affiliate assigns

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alexander J. Ornstein

  
	
   

  	
   

  	
  Name: Alexander J.
  Ornstein

  
	
   

  	
   

  	
  Title: Vice President

  

 

[SIGNATURE PAGE TO AMENDMENT NUMBER TWO TO FINANCING AGREEMENT]

 

S-4

 

SCHEDULE
C-1

Lenders and Lenders’ Commitments

 

	
  LENDER

  	
   

  	
  REVOLVING

  CREDIT

  COMMITMENT

  	
   

  	
  TERM LOAN A

  COMMITMENT

  	
   

  	
  TERM LOAN B

  COMMITMENT

  	
   

  	
  TOTAL

  COMMITMENT

  	
   

  
	
  Ableco Finance LLC and its
  affiliate assigns

  	
   

  	
  $

  	
  6,000,000

  	
   

  	
  $

  	
  5,958,333.32

  	
   

  	
  $

  	
  6,019,576.30

  	
   

  	
  $

  	
  17,977,909.62

  	
   

  
	
  All Lenders

  	
   

  	
  $

  	
  6,000,000

  	
   

  	
  $

  	
  5,958,333.32

  	
   

  	
  $

  	
  6,019,576.30

  	
   

  	
  $

  	
  17,977,909.62

  	
   

  
																	

 

 

 

 

 

SCHEDULE
6.01(e)

Subsidiaries

 

	
  Name of Entity*

  	
   

  	
  Type

  	
   

  	
  Jurisdiction

  	
   

  	
  Ownership

  	
   

  	
  Liens**

  	
   

  
	
  Mattress Firm, Inc.
  (“MFI”)

  	
   

  	
  corp.

  	
   

  	
  Delaware

  	
   

  	
  100% of common stock
  (1,010.7135 shares) owned by Parent

  	
   

  	
  None.

  	
   

  
	
  Mattress Firm Investment
  Management, Inc.

  	
   

  	
  corp.

  	
   

  	
  Arizona

  	
   

  	
  100% of common stock
  (1,000 shares) owned by MFI

  	
   

  	
  None.

  	
   

  
	
  Festro, Inc.

  	
   

  	
  corp.

  	
   

  	
  Texas

  	
   

  	
  100% of common stock
  (3,000 shares) owned by MFI

  	
   

  	
  None.

  	
   

  
	
  TeamExcel Management
  Company

  	
   

  	
  corp.

  	
   

  	
  Texas

  	
   

  	
  100% of common stock (806
  shares) owned by MFI

  	
   

  	
  None.

  	
   

  
	
  Mattress Firm Operating, Ltd.

  	
   

  	
  LP

  	
   

  	
  Texas

  	
   

  	
  GP interest (1%):

  owned by Festro, Inc.

  LP interest (99%):

  owned by Mattress Firm

  Investment Management,

  Inc.

  	
   

  	
  None.

  	
   

  
	
  Mattress Venture
  Investment Management, LLC

  	
   

  	
  LLC

  	
   

  	
  Arizona

  	
   

  	
  100% membership interest,
  owned by Mattress Firm Operating, Ltd.

  	
   

  	
  None.

  	
   

  
	
  Festro II, LLC

  	
   

  	
  LLC

  	
   

  	
  Texas

  	
   

  	
  100% membership interest,
  owned by Mattress Firm Operating, Ltd.

  	
   

  	
  None.

  	
   

  
	
  The Mattress Venture, L.P.

  	
   

  	
  LP

  	
   

  	
  Texas

  	
   

  	
  GP interest (1%):

  owned by Festro II, Inc.

  LP interest (99%):

  owned by Mattress Venture

  Investment Management,

  LLC

  	
   

  	
  None.

  	
   

  
	
  Georgia Mattress Corp.
  (“GMC”)

  	
   

  	
  corp.

  	
   

  	
  Georgia

  	
   

  	
  100% of common stock (100
  shares) owned by Parent

  	
   

  	
  None.

  	
   

  
	
  Elite Management Team,
  Inc.

  	
   

  	
  corp.

  	
   

  	
  Georgia

  	
   

  	
  100% of common stock
  (640,145.84 shares) owned by GMC

  	
   

  	
  None.

  	
   

  

 

*                                         Excludes MFA,
as this entity is not a “Subsidiary” (as defined) on the Second Amendment
Effective Date.

 

**           Except
for Liens securing the Obligations, and other Permitted Liens.

 

 

 

SCHEDULE
6.01(ff)

Collateral Locations

Tangible Collateral (except for Inventory in
transit) is located at the following locations:

1.                                      Locations set forth on
Schedule 6.01(o).

2.                                      Damaged/returned Inventory
from time to time temporarily in possession of supplier or service provider for
repair/replacement.

3.                                      Vehicles and Equipment:  At the Houston corporate office and various
warehouse locations set forth on Schedule 6.01(o) and identified below by
location number:

Loc No. 116, 220, 400, 500, 606, 900, 1401,
1501, 1608, 2000, 2105, 2204, 2500, 2706, 3701, 3900, 4100 and 4201

4.                                      The following locations:

North Point Market, Alpharetta, GA

Perimeter Pointe, Atlanta,
GA

Lawrenceville, GA

Buckhead, Atlanta, GA

Barrett, Kennesaw, GA

Southlake, Morrow, GA

Cobb Parkway, Marietta, GA

Austell, GA

Norcross Supercenter,
Norcross, GA

Douglasville, GA

Pleasant Hill — West,
Duluth, GA

Mall of Georgia, Buford, GA

Cumming, GA,

Midtown, Atlanta, GA

Conyers, GA

Pleasant Hill, Duluth, GA

Snellville Pavillion,
Snellville, GA

East Cobb, Marietta, GA

John’s Creek, Suwannee, GA

Hiram, GA

Forum, Norcross, GA

Stonecrest, Lithonia, GA

Barron’s Tower Place,
Snellville, GA

North DeKalb, Decatur, GA

Stone Mountain, GA

Roswell Whse 799, Roswell,
GA

Roswell Whse 799A, Roswell,
GA

New Hope, Durham, NC

Glenwood, Raleigh, NC

 

 

 

Garner, Raleigh, NC

North Capital, Raleigh, NC

Cary, NC

North Durham, Durham, NC

Alexander Place, Raleigh, NC

Beaver Creek Commons, Apex,
NC

Mebane Warehouse, Mebane, NC

High Point, Greensboro, NC

Winston-Salem, NC

East Chester, Highpoint, NC

Lawndale, Greensboro, NC

Oak Summit, Winston Salem,
NC

Wendover Village,
Greensboro, NC

Stratford Commons, Winston
Salem, NC

Independence, Charlotte, NC

Pineville, NC

University, Charlotte, NC

Lake Norman, Huntersville,
NC

Sycamore Commons, Matthews,
NC

Southpark, Charlotte, NC

Gastonia Clearance,
Gastonia, NC

Charlotte Warehouse,
Charlotte, NC

Haywood, Greenville, SC

Asheville, NC

Woodruff, Greenville, SC

Cherrydale Point,
Greenville, SC

Golden Oaks Warehouse,
Greenville, SC

North Rivers, Charleston, SC

Mount Pleasant, SC

West Ashley, Charleston, SC

Charleston Whs, North
Charleston, SC

Charleston Warehouse, North
Charleston, SC

 

 

2Exhibit 10.8

 

AMENDMENT NUMBER THREE TO FINANCING AGREEMENT

 

This AMENDMENT NUMBER THREE TO FINANCING AGREEMENT
(this “Amendment”), dated as of March    , 2005, is
entered into by and among MATTRESS FIRM, INC.,
a Delaware corporation (“MFI”), and MATTRESS
FIRM-GEORGIA, INC. (formerly known as Georgia Mattress Corp.), a
Georgia corporation (“MFGI”; and together with MFI, each a “Borrower”
and collectively and jointly and severally, the “Borrowers”), MATTRESS HOLDING CORP., a Delaware
corporation (“Parent”), each Subsidiary of the Parent listed as a “Guarantor”
on the signature pages hereto (together with the Parent, each a “Guarantor”
and collectively, jointly and severally, the “Guarantors”), the lenders
from time to time party hereto (each a “Lender” and collectively, the “Lenders”),
ABLECO FINANCE LLC, a Delaware
limited liability company (“Ableco”), as collateral agent for the
Lenders (in such capacity, together with any successor collateral agent, the “Collateral
Agent”), and Ableco as administrative agent for the Lenders (in such
capacity, together with any successor administrative agent, the “Administrative
Agent” and together with the Collateral Agent, each an “Agent” and
collectively, the “Agents”).

 

W I T N E S S E T H

 

WHEREAS, the
Borrowers, the Guarantors, Administrative Agent, Collateral Agent, and the
Lenders are parties to that certain Financing Agreement, dated as of March 31,
2004 (as amended, restated, supplemented or otherwise modified from time to
time, the “Financing Agreement”);

 

WHEREAS, the
Borrowers have requested that the Agents and the Lenders agree to amend the
financial covenants set forth in the Financing Agreement and waive certain
Events of Default that have occurred; and

 

WHEREAS,
subject to the satisfaction of the conditions set forth herein, the Agents and
the Lenders are willing to so amend the Financing Agreement and grant the
requested waivers pursuant to the terms set forth herein.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

 

1.                                      DEFINITIONS

 

Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Financing Agreement.

 

2.                                      AMENDMENTS
TO FINANCING AGREEMENT

 

(a)                                  Section 1.01
of the Financing Agreement hereby is amended by amending and restating the
defined term “Subsidiary” in its entirety as follows:

 

“Subsidiary”
means, with respect to any Person at any date, any corporation, limited or
general partnership, limited liability company, trust, estate,

 

 

association,
joint venture or other business entity (i) the accounts of which would be
consolidated with those of such Person in such Person’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP
or (ii) of which more than 50% of (A) the outstanding Capital Stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such Person, (B) in
the case of a partnership or limited liability company, the interest in the
capital or profits of such partnership or limited liability company or (C) in
the case of a trust, estate, association, joint venture or other entity, the
beneficial interest in such trust, estate, association or other entity business
is, at the time of determination, owned or controlled directly or indirectly
through one or more intermediaries, by such Person; provided that prior
to the occurrence of a MFA Triggering Event, MFA shall be deemed to be a
Subsidiary of a Loan Party solely for the purpose of measuring financial
results used to calculate the financial covenants set forth in Section 7.03,
and after the occurrence of a MFA Triggering Event, MFA shall be deemed to be a
Subsidiary for all purposes.

 

(b)                                 Section 7.03
of the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

Section 7.03                                Financial
Covenants.  So long as any principal
of or interest on any Loan or any other Obligation (whether or not due) shall
remain unpaid or any Lender shall have any Commitment hereunder, each Loan
Party shall not:

 

(a)                                  Leverage
Ratio.  Permit the ratio (the “Leverage
Ratio”) of Consolidated Funded Indebtedness as of the last day of each
Fiscal Month set forth below to TTM EBITDA of the Borrower and its Subsidiaries
as of the last day of such Fiscal Month to be greater than the applicable ratio
set forth opposite such date;

 

	
  Fiscal Month End

  	
   

  	
  Leverage Ratio

  
	
   

  	
   

  	
   

  
	
  March 1,
  2005

  	
   

  	
  3.29:1.00

  
	
   

  	
   

  	
   

  
	
  April 5,
  2005

  	
   

  	
  3.31:1.00

  
	
   

  	
   

  	
   

  
	
  May 3,
  2005

  	
   

  	
  3.28:1.00

  
	
   

  	
   

  	
   

  
	
  May 31,2005

  	
   

  	
  3.02:1.00

  
	
   

  	
   

  	
   

  
	
  July 5,
  2005

  	
   

  	
  2.81:1,00

  
	
   

  	
   

  	
   

  
	
  August 2,
  2005

  	
   

  	
  2.80:1.00

  
	
   

  	
   

  	
   

  
	
  August 30,
  2005

  	
   

  	
  2.70:1.00

  
	
   

  	
   

  	
   

  
	
  October 4,
  2005

  	
   

  	
  2.25:1.00

  

 

2

 

	
  November 1,
  2005

  	
   

  	
  2.17:1.00

  
	
   

  	
   

  	
   

  
	
  November 29,
  2005

  	
   

  	
  1.96:1.00

  
	
   

  	
   

  	
   

  
	
  January 3,
  2006

  	
   

  	
  1.95:1.00

  
	
   

  	
   

  	
   

  
	
  January 31,
  2006 and the last day of each Fiscal Month thereafter

  	
   

  	
  2.04:1.00

  

 

(b)                                 Fixed
Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio of the
Borrower and its Subsidiaries as of the last day of each Fiscal Month set forth
below to be less than the applicable ratio set forth opposite such date:

 

	
  Fiscal Month End

  	
   

  	
  Fixed Charge Coverage Ratio

  
	
   

  	
   

  	
   

  
	
  March 1,
  2005

  	
   

  	
  0.75:1.00

  
	
   

  	
   

  	
   

  
	
  April 5,
  2005

  	
   

  	
  0.72:1.00

  
	
   

  	
   

  	
   

  
	
  May 3,
  2005

  	
   

  	
  0.76:1,00

  
	
   

  	
   

  	
   

  
	
  May 31,
  2005

  	
   

  	
  0.84:1.00

  
	
   

  	
   

  	
   

  
	
  July 5,
  2005

  	
   

  	
  0.82:1.00

  
	
   

  	
   

  	
   

  
	
  August 2,
  2005

  	
   

  	
  0.82:1.00

  
	
   

  	
   

  	
   

  
	
  August 30,
  2005

  	
   

  	
  0.90:1.00

  
	
   

  	
   

  	
   

  
	
  October 4,
  2005

  	
   

  	
  1.08:1.00

  
	
   

  	
   

  	
   

  
	
  November 1,
  2005

  	
   

  	
  1.10:1.00

  
	
   

  	
   

  	
   

  
	
  November 29,
  2005

  	
   

  	
  1.10:1.00

  
	
   

  	
   

  	
   

  
	
  January 3,
  2006

  	
   

  	
  1.10:1.00

  
	
   

  	
   

  	
   

  
	
  January 31,
  2006 and the last day of each Fiscal Month thereafter

  	
   

  	
  1.10:1.00

  

 

3

 

(c)                                  TTM
EBITDA.  Permit the TTM EBITDA of the
Borrower and its Subsidiaries at the end of each Fiscal Month set forth below
to be less than the applicable amount set forth opposite such date:

 

	
  Fiscal Month End

  	
   

  	
  TTM EBITDA

  
	
   

  	
   

  	
   

  
	
  March 1,
  2005

  	
   

  	
  $

  	
  9,978,000

  
	
   

  	
   

  	
   

  
	
  April 5,
  2005

  	
   

  	
  $

  	
  9,919,000

  
	
   

  	
   

  	
   

  
	
  May 3,
  2005

  	
   

  	
  $

  	
  9,929,000

  
	
   

  	
   

  	
   

  
	
  May 31,
  2005

  	
   

  	
  $

  	
  10,695,000

  
	
   

  	
   

  	
   

  
	
  July 5,
  2005

  	
   

  	
  $

  	
  11,362,000

  
	
   

  	
   

  	
   

  
	
  August 2,
  2005

  	
   

  	
  $

  	
  11,844,000

  
	
   

  	
   

  	
   

  
	
  August 30,
  2005

  	
   

  	
  $

  	
  12,208,000

  
	
   

  	
   

  	
   

  
	
  October 4,
  2005

  	
   

  	
  $

  	
  13,927,000

  
	
   

  	
   

  	
   

  
	
  November 1,
  2005

  	
   

  	
  $

  	
  14,355,000

  
	
   

  	
   

  	
   

  
	
  November 29,
  2005

  	
   

  	
  $

  	
  15,799,000

  
	
   

  	
   

  	
   

  
	
  January 3,
  2006

  	
   

  	
  $

  	
  15,605,000

  
	
   

  	
   

  	
   

  
	
  January 31,
  2006 and the last day of each Fiscal Month thereafter

  	
   

  	
  $

  	
  14,850,000

  

 

(c)                                  The
first page of Schedule 7.02(b) of the Financing Agreement
hereby is replaced with the first page of Schedule 7.02(b) attached
hereto and incorporated herein by this reference.

 

3.                                      WAIVER.  The Agents and the Lenders hereby waive the
Events of Default (a) that have occurred under Section 9.01(c) of
the Financing Agreement as a result of the failure by the Borrowers to satisfy
the financial covenants under Section 7.03 of the Financing Agreement with
respect to all measurement periods up to and including the Fiscal Month that
ended on February 1, 2005 and (b) that have occurred under Section 9.01(d) of
the Financing Agreement as a result of the failure by the Borrowers to satisfy Section 9(d) of
the Second Amendment (such waiver to be effective through the date of this
Amendment only) and Section 9(f) of the Second Amendment.  The parties acknowledge that the Borrowers’
obligations under Section 9(d) of the Second Amendment are being
extended pursuant to Section 9(c) of this Amendment.

 

4.                                      REPRESENTATIONS
AND WARRANTIES.  Each Loan Party
hereby represents and warrants to each Agent and each Lender as follows:

 

4

 

(a)                                  It
has the requisite power and authority to execute and deliver this Amendment and
to perform its obligations hereunder and under the Loan Documents to which it
is a party.  The execution, delivery, and
performance by it of this Amendment and the performance by it of each Loan
Document to which it is a party (i) have been duly approved by all
necessary action and no other proceedings are necessary to consummate such
transactions; and (ii) are not in contravention of (A) any law, rule,
or regulation, or any order, judgment, decree, writ, injunction, or award of
any arbitrator, court or governmental authority binding on it, (B) the
terms of its organizational documents, or (C) any provision of any
contract or undertaking to which it is a party or by which any of its
properties may be bound or affected;

 

(b)                                 This
Amendment has been duly executed and delivered by each Loan Party.  This Amendment and each Loan Document is the
legal, valid and binding obligation of each Loan Party, enforceable against
such Loan Party in accordance with its terms, and is in full force and effect
except as such validity and enforceability is limited by the laws of insolvency
and bankruptcy, laws affecting creditors rights and principles of equity
applicable hereto;

 

(c)                                  No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated
herein has been issued and remains in force by any Governmental Authority
against any Loan Party, either Agent or any Lender;

 

(d)                                 No
Default or Event of Default has occurred and is continuing on the date hereof
or as of the date of the effectiveness of this Amendment; and

 

(e)                                  The
representations and warranties in the Financing Agreement and the other Loan
Documents are true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) on and as of the date hereof, as though made on such date (except to
the extent that such representations and warranties relate solely to an earlier
date).

 

5.                                      CONDITIONS
PRECEDENT TO AMENDMENT

 

The
satisfaction of each of the following shall constitute conditions precedent to
the effectiveness of this Amendment and each and every provision hereof:

 

(a)                                  Collateral
Agent shall have received this Amendment, duly executed and delivered by the
parties hereto, and the same shall be in full force and effect.

 

(b)                                 No
Default or Event of Default shall have occurred and be continuing on the date
hereof, nor shall result from the consummation of the transactions contemplated
herein.

 

(c)                                  No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated
herein shall have been issued and remain in force by any Governmental Authority
against any Loan Party, either Agent, or any Lender.

 

5

 

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

 

7.                                      ENTIRE
AMENDMENT; EFFECT OF AMENDMENT. 
This Amendment, and the terms and provisions hereof, constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes any and all prior or contemporaneous amendments relating to the
subject matter hereof.  Except for the
amendments to the Financing Agreement expressly set forth in Section 2
hereof, the Financing Agreement and other Loan Documents shall remain unchanged
and in full force and effect.  To the
extent any terms or provisions of this Amendment conflict with those of the
Financing Agreement or other Loan Documents, the terms and provisions of this
Amendment shall control.  This Amendment
is a Loan Document.  The amendments set
forth herein are limited to the specifics hereof, shall not apply with respect
to any facts or occurrences other than those on which the same are based, shall
not excuse future non-compliance with the Financing Agreement or the other Loan
Documents, and shall not operate as a consent to or waiver of any further or
other matter, under the Loan Documents.

 

8.                                      COUNTERPARTS;
TELECOPY EXECUTION.  This
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Amendment by signing any such counterpart.  Delivery of an executed counterpart of this
Amendment by telecopy shall be equally as effective as delivery of an original
executed counterpart of this Amendment. 
Any party delivering an executed counterpart of this Amendment by
telecopy also shall deliver an original executed counterpart of this Amendment,
but the failure to deliver an original executed counterpart shall not affect
the validity, enforceability, and binding effect of this Amendment.

 

9.                                      MISCELLANEOUS.

 

(a)                                  Upon
the effectiveness of this Amendment, each reference in the Financing Agreement
to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like import
referring to the Financing Agreement shall mean and refer to the Financing
Agreement as amended by this Amendment.

 

(b)                                 Upon
the effectiveness of this Amendment, each reference in the Loan Documents to
the “Financing Agreement”, “thereunder”, “therein”, “thereof” or words of like
import referring to the Financing Agreement shall mean and refer to the
Financing Agreement as amended by this Amendment.

 

(c)                                  Notwithstanding
anything to the contrary contained in the Financing Agreement or any other Loan
Document, the Agents and the Lenders agree that the Borrowers shall not be
required to be in compliance with Section 8.01 of the Financing
Agreement as to the operations and cash management of the Borrowers until April 15,
2005, and the failure by the Borrowers to so comply with Section 8.01
during such period shall not constitute a Default or an Event of Default under
any of the Loan Documents.

 

6

 

(d)                                 (i) The
Agents and the Lenders hereby reserve all remedies, powers, rights, and
privileges that the Agents and the Lenders may have under the Financing
Agreement or the other Loan Documents, at law (including under the Code), in
equity, or otherwise; (ii) all terms, conditions, and provisions of the
Financing Agreement and the other Loan Documents are and shall remain in full
force and effect; and (iii) except as expressly provided herein, nothing
herein shall operate as a consent to or a waiver, amendment, or forbearance in
respect of any matter (including any Event of Default whether presently
existing or subsequently occurring) or any other right, power, or remedy of the
Agents or the Lenders under the Financing Agreement and the other Loan
Documents.  No delay on the part of the
Agents and the Lenders in the exercise of any remedy, power, right or privilege
shall impair such remedy, power, right, or privilege or be construed to be a
waiver of any default, nor shall any partial exercise of any such remedy, power,
right or privilege preclude further exercise thereof or of any other remedy,
power, right or privilege.

 

(e)                                  The
parties hereto acknowledge that, concurrently herewith, (i) Subco, MFGI
and the other Loan Parties are entering into a Joinder Agreement (pursuant to
which MFGI has agreed to be joined as a party to the Amended and Restated
Guaranty, the Amended and Restated General Security Agreement and the Amended
and Restated Pledge Agreement relative to the Sealy Subordinated Debt) and (ii) Subco
is causing to be filed an all assets UCC-1 financing statement with the Georgia
Secretary of State with MFGI as debtor and Subco as secured party in connection
with the execution and delivery of the Joinder Agreement referenced above.

 

7

 

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

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM, INC.,

  
	
   

  	
  a Delaware
  corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   CFO

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM-GEORGIA, INC.,

  
	
   

  	
  a Georgia
  corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   Secretary

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER THREE TO FINANCING AGREEMENT]

 

S-1

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  MATTRESS HOLDING CORP.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM INVESTMENT

  
	
   

  	
  MANAGEMENT, INC.,

  
	
   

  	
  an Arizona
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael J. McConvery

  	
   

  
	
   

  	
   

  	
  Name: Michael J. McConvery

  
	
   

  	
   

  	
  Title:   Vice President

  
	
   

  	
   

  
	
   

  	
  FESTRO, INC.,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  TEAMEXCEL MANAGEMENT COMPANY,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   Treasurer &
  Secretary

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER THREE TO FINANCING AGREEMENT]

 

S-2

 

	
   

  	
  MATTRESS FIRM OPERATING, LTD.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
   

  	
  By: Festro, Inc.,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Jim R.
  Black

  
	
   

  	
   

  	
   

  	
  Title:   Treasurer & Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS VENTURE INVESTMENT

  
	
   

  	
  MANAGEMENT, LLC,

  
	
   

  	
  an Arizona
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael J. McConvery

  	
   

  
	
   

  	
   

  	
  Name: Michael J. McConvery

  
	
   

  	
   

  	
  Title:   Vice President

  
	
   

  	
   

  
	
   

  	
  FESTRO II, LLC,

  
	
   

  	
  a Texas
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  	
   

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title:   Treasurer &
  Secretary

  
	
   

  	
   

  
	
   

  	
  THE MATTRESS VENTURE, L.P.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By: Festro
  II, LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/
  Jim R. Black

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Jim R.
  Black

  
	
   

  	
   

  	
   

  	
  Title:   Treasurer & Secretary

  
						

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER THREE TO FINANCING AGREEMENT]

 

S-3

 

	
   

  	
  COLLATERAL AGENT AND

  
	
   

  	
  ADMINISTRATIVE AGENT:

  
	
   

  	
   

  
	
   

  	
  ABLECO FINANCE LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Daniel Wolf

  	
   

  
	
   

  	
   

  	
  Name: Daniel Wolf

  
	
   

  	
   

  	
  Title:   SVP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  ABLECO FINANCE LLC,

  
	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
  on behalf of
  itself and its affiliate assigns

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Daniel Wolf

  	
   

  
	
   

  	
   

  	
  Name: Daniel Wolf

  
	
   

  	
   

  	
  Title:   SVP

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER THREE TO FINANCING AGREEMENT]

 

S-4

 

SCHEDULE 7.02(B)
[FIRST PAGE ONLY]

 

EXISTING INDEBTEDNESS

 

	
   

  	
   

  	
   

  	
   

  	
  Term

  	
   

  	
  Outstanding Principal at 2/3/04

  	
   

  
	
  Lender

  	
   

  	
  Description

  	
   

  	
  Initial

  	
   

  	
  Maturity

  	
   

  	
  Total

  	
   

  	
  Current

  	
   

  	
  Long-Term

  	
   

  
	
  SNL Finance LLC(a)

  	
   

  	
  Junior subordinated note payable

  	
   

  	
  10/18/02

  	
   

  	
  6/28/09

  	
   

  	
  $

  	
  17,500,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  17,500,000

  	
   

  
	
  Phillip Busker (b)

  	
   

  	
  Seller note – Aug 1999 Centex acq

  	
   

  	
  8/5/99

  	
   

  	
  8/5/04

  	
   

  	
  266,164

  	
   

  	
  266,164

  	
   

  	
  —

  	
   

  
	
  Mitch Addison (b)

  	
   

  	
  Seller note – Aug 1999 Centex acq

  	
   

  	
  8/5/99

  	
   

  	
  8/5/04

  	
   

  	
  266,164

  	
   

  	
  266,164

  	
   

  	
  —

  	
   

  
	
  Afco (c)

  	
   

  	
  Premium finance – Property and umbrella

  	
   

  	
  10/31/03

  	
   

  	
  7/31/04

  	
   

  	
  142,082

  	
   

  	
  142,082

  	
   

  	
  —

  	
   

  
	
  Afco (c)

  	
   

  	
  Premium finance – Gen’l liab, workers comp

  	
   

  	
  12/15/03

  	
   

  	
  7/31/04

  	
   

  	
  367,367

  	
   

  	
  367,367

  	
   

  	
  —

  	
   

  
	
  TOTAL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  18,541,777

  	
   

  	
  $

  	
  1,041,777

  	
   

  	
  $

  	
  17,500,000

  	
   

  

 

(a)                                  Secured
by all assets of Mattress Firm, Inc. and its subsidiaries (excluding
assets of Mattress Firm–Arizona, LLC) and all the assets of Mattress
Firm-Georgia, Inc.  Secured by
common stock of Mattress Firm, Inc. and the equity interests of its
subsidiaries (excluding the membership interest in Mattress Firm–Arizona, LLC)
and all of the common stock of Mattress Firm–Georgia, Inc.  The note payable was amended and restated as
of the Effective Date and the outstanding principal was restated as $17,000,000
in connection therewith.

 

(b)                                 Unsecured.

 

(c)                                  Secured
by unearned premiums of related insurance policies.

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