Document:

Exhibit 10.15

 

Stock Option Plan of Mattress Holding Corp.

Grant Agreement

 

This
Grant Agreement, dated as of               
      , 2005 (the “Effective Date”), evidences
the grant of an option pursuant to the provisions of the Amended and Restated
2003 Stock Option Plan (the “Plan”) of Mattress Holding Corp. (the “Company”)
to the individual whose name appears below (the “Optionee”), covering the
specific number of shares of Non-Voting Common Stock (the “Shares”) set forth
below and on the following terms and conditions:

 

1.                                       Name of Optionee:

 

2.                                       Number of Shares subject to this option:

 

3.                                       Exercise price per Share subject to this
option:   $              

 

4.                                       Date of grant of this option:                
      , 2005

 

5.                                       Type of option: Nonqualified Option

 

6.                                       Vesting:

 

a.               Except as otherwise
expressly provided in Section 6 b. or Section 6 c. hereof, this
option shall vest and become exercisable as follows:

 

(i)                                     20% of the
total number of Shares subject to this option shall vest and become exercisable
as of January 31, 2006 (the “First Anniversary Date”) if (a) the
Optionee is an employee of the Company on the First Anniversary Date and (b) the
Company’s EBITDA (as hereinafter defined) for the fiscal year ending on January 31,
2006 (the “2005 Fiscal Year”) equals or exceeds 85% of the 2005 Target Amount
(as hereinafter defined).

 

(ii)                                  20% of the
total number of Shares subject to this option shall vest and become exercisable
as of January 31, 2007 (the “Second Anniversary Date”) if (a) the
Optionee is an employee of the Company on the Second Anniversary Date and (b) the
Company’s EBITDA for the fiscal year ending January 31, 2007 (the “2006
Fiscal Year”) equals or exceeds 85% of the 2006 Target Amount (as hereinafter
defined). An additional 20% of the total number of Shares subject to this
option shall vest and become exercisable as of the Second Anniversary Date if
(x) the Optionee is an employee of the Company on the Second Anniversary Date,
(y) the Company’s EBITDA for the 2005 Fiscal Year was less than 85% of the 2005
Target Amount and (z) the Company’s EBITDA for the 2006 Fiscal Year
equals or exceeds 100% of the 2006 Target Amount.

 

(iii)                               20% of the
total number of Shares subject to this option shall vest and become exercisable
as of January 31, 2008 (the “Third Anniversary Date”) if (a) the
Optionee is an employee of the Company on the Third Anniversary Date and (b) the
Company’s EBITDA for the fiscal year ending January 31, 2008 (the “2007
Fiscal Year”) equals or exceeds 85% of the 2007 Target Amount (as hereinafter
defined). An additional 20% of the total number of Shares subject to this
option shall vest and become 

 

 

exercisable on the Third
Anniversary Date if (x) the Optionee is an employee of the Company on the Third
Anniversary Date, (y) the Company’s EBITDA for the 2006 Fiscal Year was less
than 85% of the 2006 Target Amount and (z) the Company’s EBITDA for the
2007 Fiscal Year equals or exceeds 100% of the 2007 Target Amount.

 

(iv)                              20% of the
total number of Shares subject to this option shall vest and become exercisable
as of January 31, 2009 (the “Fourth Anniversary Date”) if (a) the
Optionee is an employee of the Company on the Fourth Anniversary Date and (b) the
Company’s EBITDA for the fiscal year ending January 31, 2009 (the “2008
Fiscal Year”) equals or exceeds 85% of the 2008 Target Amount (as hereinafter
defined). An additional 20% of the total number of Shares subject to this
option shall vest and become exercisable on the Fourth Anniversary Date if (x)
the Optionee is an employee of the Company on the Fourth Anniversary Date, (y)
the Company’s EBITDA for the 2007 Fiscal Year was less than 85% of the 2007
Target Amount and (z) the Company’s EBITDA for the 2008 Fiscal Year
equals or exceeds 100% of the 2008 Target Amount.

 

(v)                                 20% of the total
number of Shares subject to this option shall vest and become exercisable as of
January 31, 2010 (the “Fifth Anniversary Date”) if (a) the Optionee
is an employee of the Company on the Fifth Anniversary Date and (b) the
Company’s EBITDA for the fiscal year ending January 31, 2010 (the “2009
Fiscal Year”) equals or exceeds 85% of the 2009 Target Amount (as hereinafter
defined). An additional 20% of the total number of Shares subject to this
option shall vest and become exercisable on the Fifth Anniversary Date if (x)
the Optionee is an employee of the Company on the Fifth Anniversary Date, (y)
the Company’s EBITDA for the 2008 Fiscal Year was less than 85% of the 2008
Target Amount and (z) the Company’s EBITDA for the 2009 Fiscal Year
equals or exceeds 100% of the 2009 Target Amount.

 

b.              Upon the occurrence of a Change in Control
(as defined in Section 6 e. below) in connection with which the
consideration paid to the Company or to its stockholders, as the case may be,
consists primarily of cash (as determined by the Board of Directors in its sole
discretion):

 

(i)                                     in addition to the Performance Vested Portion
(as defined in Section 6 e. below), an additional amount equal to the
Performance Vested Portion (measured immediately prior to the occurrence of the
Change in Control) shall become fully vested and exercisable immediately prior
to such Change in Control; provided, however, in no event shall the total
number of Shares exercisable pursuant to Section 6 a. and this Section 6
b. exceed the total number of Shares provided for in Section 2 hereof;

 

(ii)                                  the Optionee shall have the right to exercise
the vested portion of this option immediately prior to the Change in Control;
and

 

(iii)                               upon the consummation of the Change in Control, this option shall
terminate and become null and void.

 

c.               Notwithstanding anything to the contrary
contained in Section 6 a., 100% of the total number of Shares subject to
this option shall vest and become exercisable on January 31, 2012.

 

 

d.              Notwithstanding anything to the contrary
contained herein, (i) this option shall not be exercisable, and shall be
void and of no further force and effect, after the expiration of the option
term, (ii) except as provided in Section 7 below, this option shall
be exercisable only if the Optionee is, at the time of exercise, an employee of
the Company, (iii) this option shall in no event be exercisable for more
than the total number of Shares provided for in Section 2 hereof and (iv) vesting
shall cease immediately upon termination of employment for any reason, and any
portion of this option that has not vested on or prior to the date of such
termination is forfeited on such date. 
Once vesting has occurred, the vested portion can be exercised at any
time, subject to Section 7 below.

 

e.               For purposes of this Section 6:

 

(i)                                     “2005 Target
Amount” shall mean $14,000,000.

 

(ii)                                  “2006 Target
Amount” shall mean $17,000,000.

 

(iii)                               “2007 Target
Amount” shall mean the target amount set by the Company’s Board of Directors in
conjunction with the approval of the Company’s operating budget for the 2006
Fiscal Year.

 

(iv)                              “2008 Target
Amount” shall mean the target amount set by the Company’s Board of Directors in
conjunction with the approval of the Company’s operating budget for the 2007
Fiscal Year.

 

(v)                                 “2009 Target
Amount” shall mean the target amount set by the Company’s Board of Directors in
conjunction with the approval of the Company’s operating budget for the 2008
Fiscal Year.

 

(vi)                              “Change in
Control” shall mean (a) any consolidation or merger in which the Company
is not the surviving entity or which results in the acquisition of
substantially all of the Company’s outstanding shares of Common Stock by a
single person or entity or by a group of persons or entities acting in concert
or (b) any sale or transfer of all or substantially all of the Company’s
assets; provided, however, that the term “Change in Control”
shall not include transactions either (x) with affiliates of the Company or Sun
Capital Partners, Inc. (“Sun”) (as determined by the Board of Directors in
its sole discretion) or (y) pursuant to which more than fifty percent (50%) of
the shares of voting stock of the surviving or acquiring entity is held,
directly or indirectly, by Sun or its affiliates; provided, further, that a transaction shall not
constitute a Change in Control unless the transaction also constitutes a change
in the ownership or effective control of the Company, or in the ownership of a
substantial portion of the Company’s assets, within the meaning of Section 409A(a)(2)(A)(v) of
the Code and the regulations or other published guidance (including Internal
Revenue Service Notice 2005-1) promulgated thereunder.

 

(vii)                           “EBITDA” shall
mean, for any period, the Company’s net income, plus (but only to the
extent deducted in determining the Company’s net income) each of (a) depreciation,
(b) amortization expense, (c) interest expense and (d) provision
for income taxes, as determined in accordance with generally accepted
accounting principles consistently applied and reflected in the Company’s
financial statements for the applicable fiscal year, which financial statements
shall have been audited by the 

 

 

Company’s
regular certified public accounting firm. In addition, in calculating EBITDA
for purposes of this Option, the amount determined pursuant to the immediately
preceding sentence shall be increased by the compensation-related expense
directly attributable to the exercise of this Option or any other options
granted by the Company pursuant to the terms of the Plan (but only to the extent
that such compensation-related expense was deducted in determining the Company’s
net income).

 

(viii)                        “Performance
Vested Portion” shall mean, as of any date, the total number of Shares that
have vested and become exercisable pursuant to Section 6 a. hereof as of
such date.

 

7.                                       The last day on which the vested portion of
this option can be exercised is the earliest of:

 

a.               January 31, 2015;

 

b.              the day immediately before the date on which
the Optionee’s employment terminates for Cause (as defined in the Plan);

 

c.               30 days following the date that the Optionee’s
employment terminates other than as specified in clauses b., d., e., or f. of
this Section 7; provided that if the Optionee’s employment terminates
after the end of the Company’s fiscal year but prior to the delivery of the
audited financial statements of the Company for such fiscal year, then such
exercise period shall be the greater of (i) 30 days following the date
that the Optionee’s employment so terminates or (ii) 7 days after the
Company delivers to the Optionee audited financial statements of the Company
for such fiscal year;

 

d.              30 days following the Optionee’s termination
of employment or services due to death or Disability (as defined in the Plan);

 

e.               the date on which the Optionee breaches or
violates any of the terms or provisions hereof, including without limitation
any provision of Annex A hereto; or

 

f.                 the consummation of a Change in Control.

 

8.                                       In the event that, after the issuance of this option, Section 409A
of the Code or the regulations thereunder are amended, or the Internal Revenue
Service or Treasury Department issues additional guidance interpreting Section 409A
of the Code, the Committee may modify the terms of this option to the extent
the Committee determines that such modification is necessary to comply with the
requirements of Section 409A of the Code.

 

9.                                       The Optionee agrees to abide by
the covenants and provisions set forth in Annex A hereto and incorporated by
reference herein, and acknowledges that the Option being granted herein
constitutes adequate and sufficient consideration in support of such covenants
and provisions.

 

10.                                 The Optionee hereby acknowledges,
understands, and agrees that by signing this Grant Agreement, the Optionee
voluntarily and irrevocably forfeits any and all rights, title, and interests
the Optionee has or may have had in, to and under (a) any option
agreement, 

 

 

option letter, or other similar document pursuant to which the Company
may have previously granted, or offered to grant, options in the Company to the
Optionee and (b) any oral or written commitment or promise regarding
options that the Company may have made to the Optionee.

 

 

The
Optionee hereby acknowledges receipt of a copy of the Plan as presently in
effect.  All of the terms and conditions
of the Plan are incorporated herein by reference and this option is subject to
such terms and conditions in all respects. 
Capitalized terms that are used but not otherwise defined herein shall
have the meanings given to such terms in the Plan.  This Grant Agreement and the Plan constitute
the entire agreement of the parties with respect to the subject matter hereof,
and supersede any prior written or oral agreements. If the Optionee is entitled
to exercise the vested portion of this option, and wishes to do so, in whole or
in part, the Optionee shall submit to the Company a notice of exercise, in the
form attached as Annex B hereto or such other form as may hereinafter be
designated by the Company (in its sole discretion), specifying the exercise
date and the number of Shares to be purchased pursuant to such exercise, and
shall remit to the Company in a form satisfactory to the Company (in its sole
discretion) the exercise price, plus an amount sufficient to satisfy any
withholding tax obligations of the Company that arise in connection with such
exercise (as determined by the Company).

 

Accepted
and Agreed:

 

	
   

  	
   

  	
  Mattress
  Holding Corp.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Signature of Optionee

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
  Attachments:

  	
  Annex
  A (Covenants and Agreements of Optionee)

  
	
   

  	
  Annex
  B (Form of Exercise Notice)

  
	
   

  	
  Annex
  C (The Plan)

  
						

 

 

ANNEX A

 

COVENANTS AND AGREEMENTS OF OPTIONEE

 

The Optionee acknowledges the time and
expense incurred by the Company in connection with developing proprietary and
confidential information in connection with the Company’s business and
operations.  The Optionee agrees that he
or she will not, whether during his or her service as an employee of the Company or its Subsidiaries or at any time
thereafter, divulge, communicate, or use to the detriment of Sun, the Company
or any of their respective Subsidiaries and affiliates (the “Group”) or any
other person, firm or entity, confidential information or trade secrets
relating to the Group, including, without limitation, business strategies,
operating plans, acquisition strategies (including the identities of (and any
other information concerning) possible acquisition candidates), financial
information, market analysis, acquisition terms and conditions, personnel
information, know-how, customer lists and relationships, supplier lists and
relationships, or other non-public proprietary and confidential information
relating to the Group. The foregoing confidentiality agreement shall not apply
if the communication (i) is required in the course of performing his or
her duties as an employee of the Company or its Subsidiaries, (ii) is made
with the Board of Directors’ written consent, (iii) relates to information
that is or becomes generally known by the public other than as a result of a
breach hereof, or (iv) is required to be disclosed by law or judicial or
administrative process.

 

During
his or her service as an employee of the Company or its Subsidiaries and for
the one-year period thereafter, the Optionee shall not, to the detriment of the
Company or its Subsidiaries, directly or indirectly, for himself or on behalf
of any other person, firm or entity:  (i) solicit,
hire, employ, engage, retain or enter into a business affiliation with any person who at any time during the
preceding 12-month period was an employee of, the Company or any of its
Subsidiaries, or (ii) encourage, induce or attempt to encourage or induce
any person who at any time during the preceding 12-month period was a supplier
or customer of the Company or any of its Subsidiaries to cease doing business
with the Company or any of its Subsidiaries or to decrease the amount of
business such supplier or customer does with the Company or any of its
Subsidiaries.

 

During
his or her service as an employee of the Company or its Subsidiaries and for
the one-year period thereafter, the Optionee shall not, directly or indirectly,
engage in, or serve as a principal, partner, joint venturer, member, creditor,
manager, trustee, agent, stockholder, director, officer or employee of, or
advisor to, or in any other capacity, or in any manner, own, control, finance,
manage, operate, or otherwise participate, invest, or have any interest in, or
be connected with, any person, firm or entity which offers for sale, sells or
otherwise distributes, through catalogs or other direct marketing channels
(including, without limitation, the Internet), products substantially similar
to, or competitive with, those products offered for sale, sold or otherwise
distributed by the Company or its Subsidiaries (collectively, the “Company
Business”) anywhere in North America or any other country in which the Company
Business was conducted or related sales were effected during the preceding two
years.

 

Whether
during or after the term of his or her employment, the Optionee shall not
disparage, defame or discredit the Group or engage in any activity which would
have the effect of disparaging, defaming or discrediting the Group.

 

The
Optionee acknowledges that his or her service as an employee of the Company (or
its Subsidiaries), as the case may be, and the agreements herein are reasonable
and necessary for the protection of the Company and its Subsidiaries and
affiliates and are an essential inducement to the Company’s grant of the
Option.  Accordingly, the Optionee shall
be bound by the provisions hereof  to the
maximum extent permitted by law, it being the intent and spirit of the parties
that the foregoing shall be fully enforceable. 
However, the parties further agree that, if any of the provisions hereof
shall for any reason be held to be excessively broad as 

 

 

to
duration, geographical scope, property or subject matter, such provision shall
be construed by limiting and reducing it so as to be enforceable to the extent
compatible with the applicable law as it shall herein pertain.

 

The
Optionee acknowledges that the services to be rendered by him or her to the
Company or its Subsidiaries are of a unique nature and that it would be
difficult or impossible to replace such services and that by reason thereof the
Optionee agrees and consents that if he or she violates the provisions of this
Annex A, the Company or its Subsidiaries and affiliates, in addition to any
other rights and remedies available under this Grant Agreement or otherwise,
shall be entitled to an injunction to be issued or specific performance to be
required restricting the Optionee from committing or continuing any such
violation.

 

 

ANNEX B

 

Stock Option Plan of Mattress Holding Corp.

 

Notice of Exercise of Stock Option

 

1.                                       Exercise of Option. 
Pursuant to the Stock Option Plan of Mattress Holding Corp. (the “Plan”)
and my agreement with Mattress Holding Corp. (the “Company”) dated                           
(the “Grant Agreement”), I hereby elect to exercise my nonqualified stock
option (the “Option”) to the extent of                         
shares of Non-Voting Common Stock of the Company (the “Shares”).

 

2.                                       Delivery of Payment.  I
hereby deliver to the Company a cashier’s check in the amount of $                  
in full payment of the purchase price of the Shares [determined by multiplying (a) the
exercise price per Share as set forth in my Grant Agreement, by (b) the
number of Shares as to which I am exercising the Option] and in satisfaction of
my obligation to remit to the Company an amount sufficient to satisfy any
withholding tax obligations of the Company that arise in connection with this
exercise, or through such other payment method agreed to by the Company and
permitted under the terms of the Plan.

 

3.                                       Representations.  In
connection with my exercise of the Option, I hereby represent to the Company as
follows:

 

(a)                                  I am acquiring the Shares solely for
investment purposes, with no present intention of distributing or reselling any
of the Shares or any interest therein.  I
acknowledge that the Shares have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”).

 

(b)                                 I am aware of the Company’s business affairs
and financial condition and have acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Shares.

 

(c)                                  I understand that the Shares are “restricted
securities” under applicable U.S. federal and state securities laws and that,
pursuant to these laws, I must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or unless an exemption from such registration and qualification
requirements is available. I acknowledge that the Company has no obligation to
register or qualify the Shares for resale. 
I further acknowledge that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Shares, and requirements relating to the Company which are outside of
my control, and which the Company is under no obligation to and may not be able
to satisfy.

 

(d)                                 I understand that there is no public market
for the Shares, that no market may ever develop for them, and that the Shares
have not been approved or disapproved by the Securities and Exchange Commission
or any other federal, state or other governmental agency.

 

(e)                                  I understand that the Shares are subject to
certain restrictions on transfer set forth in the Plan.  Both the Plan and the Grant Agreement are
incorporated herein by reference.

 

(f)                                    I understand that any Shares purchased
hereunder shall be subject to the Stockholders’ Agreement of the Company dated
as of                         ,
as it may be amended from time to time (“Stockholders’ Agreement”), a copy of
which has been provided to me, and that it is a condition to the exercise of my
Option that I execute the attached signature page of the Stockholders’
Agreement,

 

 

agreeing
to be bound thereby.  I have had a full
and fair opportunity to review the Stockholders’ Agreement prior to exercising
the Option.

 

(g)                                 I understand that the certificate
representing the Shares will be imprinted with the following legends:

 

THE
SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL AND A REPURCHASE RIGHT IN FAVOR OF THE COMPANY OR ITS ASSIGNEE AS SET
FORTH IN THE COMPANY’S STOCK OPTION PLAN. 
SUCH RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHT ARE BINDING ON
TRANSFEREES OF THE SHARES REPRESENTED BY THIS CERTIFICATE.

 

THIS
CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE HELD SUBJECT TO THE
TERMS, COVENANTS AND CONDITIONS OF A STOCKHOLDERS’ AGREEMENT DATED AS OF                         ,
AS SUCH AGREEMENT MAY BE AMENDED, BY AND AMONG THE STOCKHOLDERS OF
MATTRESS HOLDING CORP., AND MAY NOT BE TRANSFERRED OR DISPOSED OF EXCEPT
IN ACCORDANCE WITH THE TERMS AND PROVISIONS THEREOF.  A COPY OF SAID AGREEMENT AND ALL AMENDMENTS
THERETO IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE COMPANY.

 

(h)                                 I have consulted my own tax advisors in
connection with my exercise of this Option and I am not relying upon the
Company for any tax advice.

 

(i)                                     I am presently an employee of the Company.

 

                      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

 

	
   

  	
  Submitted
  by the Optionholder:

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Social
  Security No.

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Received
  and Accepted by the Company:

  
	
   

  	
   

  
	
   

  	
  Mattress
  Holding Corp.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
											

 

Note:  If
options are being exercised on behalf of a deceased Plan participant, then this
Notice must be signed by such participant’s personal representative and must be
accompanied by a certificate issued by an appropriate authority evidencing that
the individual signing this Notice has been duly appointed and is currently
serving as the participant’s personal representative under applicable local law
governing decedents’ estates.Exhibit 10.20

 

Confidential information redacted
and filed separately with the Commission.

 

Omitted portions are indicated
by [*]

 

SIMMONS NEW DEALER INCENTIVE AGREEMENT

 

This Simmons
New Dealer Incentive Agreement (the “Agreement”) is made between Simmons
Bedding Company (“Simmons”) and Mattress Firm, Inc. and its Affiliates as
hereafter defined (“Dealer”) and is effective as of the        
day of June, 2005

(the “Effective Date”).

 

The Dealer
will also enter into an Authorized Dealer Agreement (the “Dealer Agreement”)
and the Co-Op Advertising Agreement (the “Co-Op Agreement”) with Simmons.  This Agreement sets forth separate terms and
conditions under which Simmons will advance incentive funds to Dealer, and
Dealer will also earn the right to receive certain other funds.

 

This Agreement
set forth understandings of the parties with respect to the mutual obligations
as to the matters described below.

 

1.                                       Definitions.

 

1.1                                 “Net
Purchases” means purchases by Dealer of Simmons’ products from Simmons, less
permitted returns and returns allowance.

 

1.2                                 “Eligible
Products” means all Beautyrest® and BackCare® lines purchased by Dealer from
Simmons and its affiliates, including purchases of floor samples for such lines
at the discounted gross cost to Dealer.

 

1.3                                 “Small
Stores” shall mean Stores containing less than [*] square feet of showroom space.

 

1.4                                 “Contract
Year” shall mean the 12 month period beginning on the Effective Date of this
Agreement or any anniversary thereof.

 

1.5                                 “Affiliates”
shall mean Mattress Firm – Arizona, LLC and Mattress Firm Operating, Ltd.

 

1.6                                 “Stores”
shall mean retail stores for the sale of mattresses currently owned and
operated by Mattress Firm, Inc. or its Affiliates or which are opened
during the Term, which shall never be less than [*] retail stores in any [*]
period.

 

2.                                       Term. 
This Agreement will take affect on the Effective Date, and will
terminate immediately upon the earlier of either:  (i) the termination of the dealer
relationship with Simmons; (ii) a breach of the Agreement as set forth in Section 16,
which is not cured as provided therein; or (iii) five (5) years from
the Effective Date (the “Term”). 
Notwithstanding anything else set forth herein, if Dealer and Simmons do
not enter into the Dealer Agreement and Co-Op Agreement within 10 days of the
Effective Date, then this Agreement shall be null and void in all respects
provided however that Dealer shall pay in full for any orders placed
hereunder.  Both parties agree to
negotiate such agreements in good faith.

 

3.                                       Promotions.  Dealer agrees to place on its Stores’ retail
floors a minimum of [*] Eligible
Products within [*] days of the
Effective Date (with the exception of Small Stores).

 

Confidential Information
Redacted

 

 

Dealer agrees
to promote Simmons bedding on a regular basis, and to maintain bedding
departments in good order consistent with the then current signed Dealer
Agreement.  Dealer further agrees not to
resell Simmons products to customers that Dealer knows or should have known
reside outside the United States.  Dealer
agrees to promote a reasonable and proportionate share of Simmons products in a
reasonable proportion of media that Dealer uses for its advertising to the
public consistent with the current signed Dealer Agreement.  For Small Stores, Dealer agrees that it will
place on its retail floors a minimum of [*]
Eligible Products within [*] days
of the Effective Date.

 

4.                                       Advance.  Simmons agrees to advance to Dealer the sum
of [*] (the “Incentive Fee”), in the form
of a check or wire transfer within thirty (30) days of the initial floor sample
shipment as an incentive to cause Dealer to put Simmons products in Dealer’s
Stores.

 

5.                                       Floor Samples.  Simmons will extend to Dealer, a [*] discount on floor samples on new line,
product introductions and initial floor samples purchased for new Stores.  Simmons agrees that it shall at least
annually allow Dealer to replace all floor samples in each of the Stores of
Dealer and its Affiliates, at Dealer’s option, and receive the [*] discount referred to herein on the
purchase of the replacement floor samples. 
Simmons will apply the discount on the face of the invoice submitted for
the purchase of floor samples or, in the event the discount is not provided on
the face of the invoice, Dealer will apply such discount in the payment of
invoices submitted for the purchase of floor samples.

 

6.                                       Co-Op Advertising Funds.  Simmons will accrue, on Dealer’s behalf, [*] on all Net Purchases of Eligible
Products as co-operative advertising funds into internally held accounts.  Simmons will provide Dealer with a monthly
statement of Net Purchases of Eligible Product and the related co-operative
advertising funds accrued on such purchases by the 15th day after
the end of each month.  Such statement
will be supplemented by an electronic listing in a format mutually acceptable
to Dealer and Simmons of the individual invoices comprising the monthly Net
Purchases of Eligible Product presented on such statement.  Furthermore, Simmons will submit a merchandise
credit memorandum along with the monthly statement for the total amount of
co-operative advertising funds accrued during the month.  On a monthly basis, Dealer may apply the
merchandise credit to reduce on a dollar-for-dollar basis the amounts owed on
invoices that are payable in the month following the month that such funds are
earned.  Dealer agrees, upon request, to
submit documentation to substantiate advertising spending funded with
co-operative advertising funds pursuant to the terms of the Co-Op Agreement.

 

7.                                       New Store Openings.  For each new Store opened by Dealer after the
Effective Date of this Agreement, Simmons will, within 10 days from the date of
the Store opening (a) pay Dealer [*]
in the form of a merchandise credit memorandum; (b) provide Dealer with
floor sample discounts as described in Paragraph 5 above; and (c) provide
Dealer with [*] for mutually
approved point of purchase materials, which may include Simmons’ neon signs,
pillow shams, and sign holders.

 

8.                                       Credit Terms.  Simmons will extend credit terms to Dealer of
[*] discount if paid in [*] days of the invoice date with the total
amount due in [*] days [*].

 

Confidential Information
Redacted

 

2

 

9.                                       Delivery.  Simmons will place Dealer and its Affiliates
on a priority delivery status with established order cutoff times by order day
for all locations as outlined on Exhibit A attached hereto.  Any new market of Dealer which shall come
under the terms of this Agreement shall be subject to a delivery status as
mutually agreed to by the parties depending on the location of the new market.

 

10.                                 Consumer Warranty Claims.  Simmons will accrue monthly, on Dealer’s
behalf, [*] of Eligible Product
purchases as a warranty return credit into internally held accounts.  Simmons will provide Dealer with a monthly
statement of Net Purchases of Eligible Product and the related warranty return
credit funds accrued on such purchases by the 15th day after the end
of each month.  Such statement will be
supplemented by an electronic listing in a format mutually acceptable to Dealer
and Simmons of the individual invoices comprising the monthly Net Purchases of
Eligible Product presented on such statement. 
Furthermore, Simmons will submit a merchandise credit memorandum along
with the monthly statement for the total amount of warranty return funds
accrued during the month.  On a monthly
basis, Dealer may apply the merchandise credit to reduce on a dollar-for-dollar
basis the amounts owed on invoices that are payable in the month following the
month that such funds are earned.  Dealer
agrees to handle at its sole cost and expense all consumer warranty claims,
including without limitation all calls from consumers, inspections,
replacements and correspondence; provided that all consumer warranty claims
will be handled by Dealer in compliance with the terms and conditions set forth
in Simmons’ warranty card provided with the product from time to time as well
as all applicable Federal and state laws and regulations.  Dealer will have the right to reject factory
defective products at the point of receipt (either direct off loading, from
drop trailers, or errors in manufacturing such as wrong label upon delivery,
improper manufacturer of floor samples) and factory recalls (e.g., odor, tick
yellowing) and such products shall be excluded from the consumer warranty
claims and accepted by Simmons for return. 
Dealer will also be solely responsible for the clearance of defective
merchandise and agrees to follow all applicable federal and state laws related to
the sale and/or disposal of the replaced products.  Any product recalls (as determined by Simmons
in its sole discretion) will be handled by Simmons; provided that Dealer will
provide all reasonable assistance requested. 
Dealer agrees to be responsible for, defend and hold Simmons and its
affiliates, officers, directors, shareholders, agents, and employees harmless
from and against any and all obligations, liabilities, losses, claims, demands,
suits, actions, causes of action, damages, awards, injuries, offsets, costs and
expenses (including, but not limited to, reasonable attorneys’ fees and costs)
paid or incurred by, or imposed on, such parties, whether based in warranty,
tort, contract or otherwise, directly or indirectly caused by or based upon
Dealer’s handling of warranty claims hereunder, any breach of this section by
Dealer or any violation of any Federal or state law or regulation.  Notwithstanding the foregoing, however, if in
any Contract Year during the Term Dealer’s warranty claims on Eligible Products
are more than [*] of Dealer’s gross sales of Eligible
Products, then, in that event, Dealer shall have the right to require Simmons
to take over the handling of all warranty situations and to credit Dealer for
Dealer’s wholesale cost of the defective product that was returned, and

 

Confidential Information
Redacted

 

3

 

Simmons shall
agree to hold Dealer and its Affiliates harmless from same, including costs,
damages, awards and attorneys’ fees, and Simmons will no longer be required to
accrue [*] as a warranty return
credit as set forth above.

 

11.                                 Refund.

 

a.                                       Within
First [*] Months.  In the event this Agreement is terminated (a) by
Simmons (i) under Sections 2(ii) and 16(a) of this Agreement; or
(ii) under Section 13.2 of the Dealer Agreement; or (b) by
Dealer for any reason within [*]
months of the Effective Date, Dealer agrees that it will return to Simmons the
Incentive Fee in full (i.e., [*]).  Dealer agrees to return the entire Incentive
Fee it owes Simmons within [*]
days of the termination of this Agreement.

 

b.                                      In
the Last [*] Months.  In the event this Agreement is terminated (a) by
Simmons (i) under Sections 2(ii) and 16(a) of this Agreement; or
(ii) under Section 13.2 of the Dealer Agreement; or (b) by
Dealer for any reason in the last [*] months
of Term, Dealer agrees that it will return to Simmons a portion of the [*] of the Incentive Fee prorated based on
the number of partial and full months remaining in the remaining [*] years of the Term.  By way of example, if the Agreement is
terminated in year 4, month 7 (i.e., the 55th month), Dealer will be
required to repay to Simmons a total of [*].  Dealer agrees to return the balance of the
Incentive Fee it owes Simmons, if any, within [*] days of the termination of this Agreement.

 

12.                                 Meetings.  Simmons acknowledges that Dealer strives to
maintain margins so as to permit productivity and profitability of its
operations.  Simmons further acknowledges
that Dealer evaluates the productivity and profitability of its stores by the
productivity of its SKU’s and/or the gross sales generated per square foot of
showroom space.  The parties agree to
have quarterly meetings in which the profitability and productivity of the
Eligible Products are discussed.  To the
extent that any of the Eligible Products are deemed unproductive or
unprofitable to Dealer, then Simmons agrees to use its best efforts to take
steps to assist in reestablishing the profitability and productivity of
Eligible Products, including the replacement thereof.

 

13.                                 Price Increases.  Simmons shall give Dealer at least 90 days
written notice of any price increase of any Eligible Product.  Any such price change shall not be effective,
however, until 90 days after written notice thereof and should Simmons fail to
give Dealer 90 days advance notice, then Dealer shall have the right to be
charged the prior price of any such Eligible Product until after 90 days
written notice thereof.

 

Confidential Information
Redacted

 

4

 

14.                                 POP Materials.  During the term of this Agreement, Simmons
shall pay Dealer [*] (the “Base
Amount”) per Contract Year within 90 days from the beginning of each Contract
Year for point of purchase materials. 
Beginning in the second Contract Year, the Base Amount shall be adjusted
annually to reflect any increase or decrease in the Consumer Price Index (for
All Urban Consumers for the Houston-Galveston-Brazoria, Texas Area Average for
All Items, 1982-84=100) from the previous year.

 

15.                                 Ticks. 
Simmons shall offer Dealer the opportunity to select exclusive ticks for
new products approximately thirty (30) days before any new product is
introduced.

 

16.                                 Default.

 

(a)                                  By
Dealer:  If Dealer defaults under
Sections 3, 6, 10, 18, 21, 26 or 27 of this Agreement, then Simmons shall send
Dealer a written notice outlining in detail the alleged default.  Dealer shall have a period of thirty (30)
days from the date of receipt of such notice to cure such default.  If Dealer fails to cure the breach within
such 30-day period, then, in that event, Simmons shall have the right to
terminate this Agreement immediately upon written notice to Dealer.

 

(b)                                 By
Simmons:  If Simmons defaults under
the terms of this Agreement, then Dealer shall send a written notice to Simmons
outlining in detail the alleged default. 
Simmons shall have a period of thirty (30) days from the date of receipt
of such notice to cure such default.  If
Simmons fails to cure the breach within such 30 day period, then, in that event,
Dealer shall have the right to terminate this Agreement immediately upon
written notice to Simmons.

 

17.                                 Relationship of the Parties.  Simmons and Dealer are and shall remain
independent contractors.  This Agreement
does not constitute a partnership or establish either party as the employee,
agent, franchisee or legal representative of the other for any purpose and
neither party has the authority to act for, bind or make commitments on behalf
of the other, and Dealer hereby releases any claims that Simmons has violated
any franchise disclosure or other franchisor obligation in connection with the
creation of this Agreement.  Dealer
agrees that nothing in this Agreement gives Simmons the right to establish the
prices at which Dealer advertises and/or sells Simmons’ products.

 

18.                                 Dealer’s Representations and Warranties.  Dealer represents and warrants to Simmons
that Dealer has had the opportunity to retain independent counsel regarding its
existing and prospective obligations and commitments to third parties, and
Dealer further represents and warrants that neither the execution of this
Agreement nor the performance of Dealer’s obligations under this Agreement will
conflict with or violate any contractual agreements with or commitments,
whether written or oral, to any third party.

 

19.                                 Entire Agreement and Amendment.  This Agreement constitutes the entire
agreement between the parties with respect to its subject matter and cancels
and supersedes all prior agreements, understandings and arrangements, whether written
or oral, between the Parties with respect to such subject matter, other than
the Dealer Agreement and Co-Op Agreement. 
To the extent of any conflicts between the terms of this Agreement and
the Dealer Agreement or Co-Op Agreement, this Agreement shall control.  No amendment, modification or waiver of the
terms of

 

Confidential Information
Redacted

 

5

 

this Agreement
will be binding on either party unless reduced to writing and signed by an
authorized representative of the party to be bound.

 

20.                                 Notices.  Any notice required or permitted under this
Agreement must be given in writing to the address provided for the party
receiving the notice.  Notices to Simmons
shall be made to:

 

	
   

  	
  Simmons
  Bedding Company

  
	
   

  	
  One
  Concourse Parkway

  
	
   

  	
  Atlanta,
  Georgia 30328 USA

  
	
   

  	
  Attention:
  Legal Department

  

 

Notices to
Dealer shall be made to:

 

	
   

  	
  Gary Fazio,
  President and CEO

  
	
   

  	
  Mattress
  Firm, Inc.

  
	
   

  	
  5815 Gulf
  Freeway

  
	
   

  	
  Houston,
  Texas 77023 USA

  

 

21.                                 Assignment.  Neither party may assign its rights or
delegate any of its rights or obligations under this Agreement without the
express prior written consent of the other party.  Notwithstanding the foregoing, however, in
the event that either party sells all or substantially all of their assets, or
sells all or substantially all of their shares either by acquisition, sale,
merger or in the event that either party puts their shares into a public
offering then, in that event, this Agreement may be a assigned to the successor
in interest without consent.

 

22.                                 Choice of Law.  This Agreement and all claims arising under
or in connection with it shall be governed by and construed in accordance with
the laws of the State of Texas, without regard to any conflicts or choice of
laws principles that would otherwise require the application of the laws of any
other jurisdiction.

 

23.                                 Arbitration.  Except for disputes regarding the non-payment
of money due to Simmons, all disputes relating to any provision of this
Agreement or relating to or arising out of the parties’ relationship or
creation or termination thereof (including, without limitation, any claim that
any provision of this Agreement or any other obligation of either of the
parties is illegal or otherwise unenforceable or voidable) shall be settled by
arbitration at the office of the American Arbitration Association in Houston,
Texas if brought by Simmons and in Atlanta, Georgia if brought by Dealer, in
accordance with the United States Arbitration Act (9 U.S.C. §1 et seq.)
and the Commercial Arbitration Rules of the American Arbitration
Association.  All awards of the
arbitration shall be binding and non-appealable except as otherwise provided in
the United States Arbitration Act.  Judgment
upon the award of the arbitrator may be entered in any court having
jurisdiction.  Nothing in this
arbitration clause shall prevent Simmons from seeking a pre-award attachment of
assets or preliminary relief to enforce intellectual property rights or
confidentiality obligations, in a court of competent jurisdiction prior to an
award on the merits by the arbitration panel.

 

24.                                 Labeling.  Commencing thirty (30) days from the date of
written request from Dealer, all products delivered by Simmons to Dealer shall
provide bar coded labeling in accordance with specifications mutually
acceptable to Dealer and Simmons.

 

Confidential Information
Redacted

 

6

 

25.                                 Performance Requirements.  Dealer shall have the right to terminate this
Agreement if, in any Contract Year, Dealer’s Simmons retail sales divided by
the total Simmons SKU’s does not equal that of another national brand
manufacturer (with an assortment of at least [*]
SKU’s and with substantially similar treatment on compensation, margin and
similar items).

 

26.                                 Confidentiality.  Each party to this Agreement acknowledges
that this Agreement and its terms are confidential information, which if
disclosed to third parties could cause harm to the parties.  Each party agrees to exercise reasonable
commercial efforts to maintain the confidentiality of the Agreement, the
program and terms under this Agreement, as well as the confidential
information, which such party receives or learns about the other parties hereto
as part of this transaction and the relationship established thereby.  This obligation of confidentiality shall
apply to each party as well as its employees, officers, directors, agents,
partners, and shareholders.  Each party
shall limit access to such confidential information to its employees, officers,
directors, agents, attorneys, accountants, financial advisors, partners and
shareholders with reasonable need to know such information, and each party
shall be responsible for any unauthorized use or disclosure of that information
by such individuals.  None of the parties
to this Agreement shall disclose this confidential information to any other
third party without the prior express written consent of the other parties
hereto or unless required to do so by law. 
Upon termination of this Agreement, for any reason, Dealer shall return
to Simmons all written documents and computer discs (magnetic or otherwise)
containing any confidential information, including, but not limited to, all
manuals, bulletins, memoranda, correspondence and computer data (whatever stored
on disc or otherwise).

 

27.                                 Trademarks.  Except as granted hereunder or under any
other agreement between the parties hereto, Dealer acknowledges and agrees that
Dealer has no right or interest in or to any trademarks or trade names owned or
used by Simmons (“Trademarks”) and, in connection with its sales of Simmons
products.  Dealer agrees that is shall
not at any time alter any Trademarks or use Trademarks in a form and manner not
approved by Simmons for any purpose, including the promotion, advertising and
sale of Simmons products to the public.

 

28.                                 Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under the applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.

 

29.                                 Waiver. 
No waiver of any term or condition of this Agreement shall be effective
or binding unless such waiver is in writing and is signed by the waiving party,
nor shall this Agreement be changed, modified, discharged or terminated other
than in accordance with its terms, in whole or in part, except by a writing
signed by both parties.  Waiver by any
party of any term, provision or condition of this Agreement shall not be
construed to be a waiver of any other term, provision or condition nor shall
such waiver be deemed a subsequent waiver of the same term, provision or
condition.

 

Confidential Information
Redacted

 

7

 

	
  MATTRESS FIRM, INC.

  	
  SIMMONS BEDDING COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gary Fazio

  	
   

  	
  By:

  	
  /s/ Kevin Damewood

  	
   

  
	
   

  	
  Gary Fazio

  President and CEO

  	
  Name:

  	
  Kevin Damewood

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  June 9, 2005

  	
   

  	
  Title:

  	
  Senior Vice President Sales

  	
   

  	 

	
   

  	
  Date:

  	
  June 10, 2005

  	
   

  
	
   

  	
   

  
	
  MATTRESS FIRM – ARIZONA, LLC

  	
  MATTRESS FIRM OPERATING, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gary Fazio

  	
   

  	
  By:

  	
  /s/ Gary Fazio

  	
   

  
	
   

  	
  (Authorized Signature)

  	
   

  	
  (Authorized Signature)

  
	
  Name:

  	
  Gary Fazio

  	
   

  	
  Name:

  	
  Gary Fazio

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  President

  	
   

  
	
  Date:

  	
  June 9, 2005

  	
   

  	
  Date:

  	
  June 9, 2005

  	
   

  
													

 

Confidential Information
Redacted

 

8

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