Document:

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                                                                    EXHIBIT 10.2

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                  COMMON STOCK REGISTRATION RIGHTS AGREEMENT

                          Dated as of August 6, 1999

                                     among

                   MATTRESS DISCOUNTERS HOLDING CORPORATION,
                      MATTRESS DISCOUNTERS HOLDING L.L.C.

                                      AND

                            CHASE SECURITIES INC.,
                         CIBC WORLD MARKETS CORP. AND
                      BANCBOSTON ROBERTSON STEPHENS INC.,
                             as Initial Purchasers

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<PAGE>

          THIS COMMON STOCK REGISTRATION RIGHTS AGREEMENT (the "Agreement") is
                                                                ---------
made and entered into as of August 6, 1999, among Mattress Discounters Holding
Corporation, a Virginia corporation ("Holdings"), Mattress Discounters Holding
                                      --------
L.L.C. (the "Investor"), and Chase Securities Inc. ("CSI"), CIBC World Markets
             --------                                ---
Corp., and BancBoston Robertson Stephens Inc. (together with CSI, the "Initial
                                                                       -------
Purchasers").
----------

          This Agreement is made pursuant to the Purchase Agreement, dated as of
August 3, 1999, among Holdings, the guarantors party thereto and the Initial
Purchasers (the "Purchase Agreement"), relating to the sale by Holdings to the
                 ------------------
Initial Purchasers of an aggregate of 140,000 Units, each Unit consisting of
$1,000 principal amount 12 5/8% Senior Notes due 2007 of Mattress Discounters
Corporation (the "Notes") and 1 Warrant (collectively, "Warrants") to purchase
                  -----                                 --------
initially 4.850 shares of Class A Common Stock of Holdings and 0.539 shares of
Class L Common Stock of Holdings.  In order to induce the Initial Purchasers to
enter into the Purchase Agreement, Holdings has agreed to provide to the Holders
(as defined herein) the registration rights for the Registrable Securities (as
defined herein) set forth in this Agreement and the Investor has agreed to
provide the Holders, among other things, the tag-along rights for the Warrants
and the Registrable Securities set forth herein.  The execution of this
Agreement is a condition to the obligations of the Initial Purchasers to
purchase the Units under the Purchase Agreement.

          In consideration of the foregoing, the parties hereto agree as
follows:

1.   Definitions.
     -----------

          As used in this Agreement, the following capitalized defined terms
shall have the following meanings:

          "Advice" shall have the meaning ascribed to that term in the last
           ------
paragraph of Section 4.

          "Affiliate" of any specified Person shall mean any other Person which,
           ---------
directly or indirectly, controls, is controlled by, or is under direct or
indirect common control with, such specified Person.  For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.

          "Agreement" shall have the meaning ascribed to that term in the
           ---------
preamble hereto.

          "Business Day" shall mean a day that is not a Legal Holiday.
           ------------

          "Capital Stock" shall mean, with respect to any Person, any and all
           -------------
shares, interests, participations, rights in or other equivalents (however
designated and whether voting and/or non-voting) of capital stock, partnership
interests or any other participation, right or other interest
<PAGE>

                                      -2-

in the nature of an equity interest in such Person or any option, warrant or
other security convertible into or exercisable or exchangeable for any of the
foregoing.

          "Class A Common Stock" shall mean the Class A Common Stock of
           --------------------
Holdings, par value $.01 per share.

          "Class L Common Stock" shall mean the Class L Common Stock of
           --------------------
Holdings, par value $.01 per share.

          "Common Stock" shall mean, together, the Class A Common Stock and the
           ------------
Class L Common Stock of Holdings and any options, warrants or security
convertible into or exercisable or exchangeable for such common stock.

          "CSI" shall have the meaning ascribed to that term in the preamble
           ---
hereto.

          "Effectiveness Period" shall mean the shorter of (a) 180 days or (b)
           --------------------
such period of time as all of the Subject Equity included in such Registration
Statement shall have been sold thereunder.

          "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           ------------
amended from time to time.

          "Fair Market Value" shall mean the value of any securities as
           -----------------
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by any
Holder of such security may represent a minority interest in a private company)
by a nationally or regionally recognized investment banking firm selected by
Holdings for the determination of such value.

          "Holder" shall mean the Initial Purchasers, for so long as each
           ------
Initial Purchaser owns any Warrants or Registrable Securities, and each of their
successors, assigns and direct and indirect transferees who become registered
owners of Warrants or Registrable Securities.

          "Holdings" shall have the meaning ascribed to that term in the
           --------
preamble hereto and shall also include Holdings' successors.

          "Initial Public Equity Offering" shall mean a primary public offering
           ------------------------------
(whether or not underwritten, but excluding any offering pursuant to Form S-8
under the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock of Holdings
pursuant to an effective registration statement under the Securities Act in
which Holdings receives aggregate gross proceeds of at least $30 million.

          "Initial Purchasers" shall have the meaning ascribed to that term in
           ------------------
the preamble hereto.
<PAGE>

                                      -3-

          "Legal Holiday" shall mean a Saturday, a Sunday or a day on which
           -------------
banking institutions in New York, New York are required by law, regulation or
executive order to remain closed.

          "Notes" shall have the meaning ascribed to that term in the preamble
           -----
hereto.

          "Participating Holder" shall have the meaning ascribed to that term in
           --------------------
Section 3.2(a).

          "Person" shall mean an individual, partnership, corporation, trust or
           ------
unincorporated organization, or a government or agency or political subdivision
thereof.

          "Piggy-Back Registration" shall have the meaning ascribed to that term
           -----------------------
in Section 2.1.

          "Proposed Purchaser" shall have the meaning ascribed to that term in
           ------------------
Section 3.2(a).

          "Prospectus" shall mean the prospectus included in any Registration
           ----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to any such prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.

          "Purchase Agreement" shall have the meaning ascribed to that term in
           ------------------
the preamble hereto.

          "Registrable Securities" shall mean any of (i) the Common Stock issued
           ----------------------
and issuable upon exercise of the Warrants and (ii) any other securities issued
or issuable with respect to the Warrants or Warrant Shares by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
As to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
offering of such securities by the holder thereof shall have been declared
effective under the Securities Act and such securities shall have been disposed
of by such holder pursuant to such registration statement, (b) such securities
have been sold to the public pursuant to, or are eligible for sale to the public
without volume or manner of sale restrictions under, Rule 144(k) (or any similar
provision then in force, but not Rule 144A) promulgated under the Securities
Act, (c) such securities shall have been otherwise transferred and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by Holdings or its transfer agent and
subsequent disposition of
<PAGE>

                                      -4-

such securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (d) such securities
shall have ceased to be outstanding.

          "Registration Expenses" shall mean all expenses incident to Holdings'
           ---------------------
performance of or compliance with this Agreement, including, without limitation,
all SEC and stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees and expenses, fees and expenses of compliance with
securities or blue sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), rating agency fees, printing expenses, messenger,
telephone and delivery expenses, fees and disbursements of counsel for Holdings
and all independent certified public accountants and any fees and disbursements
of underwriters customarily paid by issuers or sellers of securities (but not
including any underwriting discounts or commissions, fees of counsel to the
Holders or transfer taxes, if any, attributable to the sale of Subject Equity by
Holders of such Subject Equity).

          "Registration Statement" shall mean any registration statement of
           ----------------------
Holdings which covers any of the Subject Equity pursuant to the provisions of
this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.

          "Requisite Shares" shall mean a number of Warrants, Warrant Shares and
           ----------------
Registrable Securities equivalent to a majority of the Warrant Shares subject to
the originally issued Warrants.

          "Rule 144" shall mean Rule 144 under the Securities Act, as such Rule
           --------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.

          "Rule 144A" shall mean Rule 144A under the Securities Act, as such
           ---------
Rule may be amended from time to time.

          "SEC" shall mean the Securities and Exchange Commission.
           ---

          "Securities Act" shall mean the Securities Act of 1933, as amended
           --------------
from time to time.

          "Stockholder" shall mean, collectively, each Holder, the Investor and
           -----------
the Affiliates of the Investor owning Common Stock or other securities
convertible or exercisable or exchangeable into Common Stock.
<PAGE>

                                      -5-

          "Stockholders Agreement" shall mean that certain stockholders
           ----------------------
agreement dated August 6, 1999 by and among Holdings and certain of its
Stockholders.

          "Subject Equity" shall mean the Warrants, Warrant Shares and
           --------------
Registrable Securities.

          "Tag-Along Notice" shall have the meaning ascribed to that term in
           ----------------
Section 3.2(a).

          "Tag-Along Right" shall have the meaning ascribed to that term in
           ---------------
Section 3.2(a).

          "Transfer" shall have the meaning ascribed to that the term in Section
           --------
3.2(a).

          "Transfer Notice" shall have the meaning ascribed to that term in
           ---------------
Section 3.2(a).

          "Triggering Event" shall mean the date of the consummation of a bona
           ----------------
fide underwritten public offering of Common Stock as a result of which at least
20% of the outstanding shares of Common Stock are listed on a United States
national securities exchange or the Nasdaq National Market.

          "Warrants" shall have the meaning ascribed to that term in the
           --------
preamble hereto.

          "Warrant Shares" shall mean the shares of Common Stock issued and
           --------------
issuable upon exercise of the Warrants and any other securities issued or
issuable with respect to the Warrants by way of stock dividend, stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.

          "Withdrawal Election" shall have the meaning ascribed to that term in
           -------------------
Section 2.2(c).

2.   Registration Rights.
     -------------------

          2.1.  Piggy-Back Registration.  If at any time Holdings proposes to
                -----------------------
file a Registration Statement under the Securities Act with respect to an
offering by Holdings for its own account or for the account of any of its
respective securityholders covering the sale of Common Stock (other than (a) a
registration statement on Form S-4 or S-8 or any similar or successor form or in
connection with a registration the primary purpose of which is to register debt
securities (i.e., in connection with a so-called "equity kicker"), or (b) a
            ---
registration statement filed in connection with an offer of securities solely to
Holdings' existing securityholders) for sale on the same terms and conditions as
the securities of Holdings or any other selling securityholder included therein,
then Holdings shall give written notice of such proposed filing to the Holders
of Registrable Securities as soon as practicable (but in no event less than 10
Business Days before the anticipated filing date), and such notice shall offer
such Holders the opportunity to register such number of Registrable Securities
as each such Holder may request (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and the intended
<PAGE>

                                      -6-

method of distribution thereof) (a "Piggy-Back Registration"). Holdings shall
                                    -----------------------
use its commercially reasonable efforts to cause the managing underwriter or
underwriters of such proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of Holdings or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 2.2 by giving written notice to Holdings of
its request to withdraw. Holdings may withdraw a Piggy-Back Registration at any
time prior to the time it becomes effective; provided that Holdings shall give
                                             --------
prompt notice thereof to participating Holders.  Holdings will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.1, and each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
registration statement effected pursuant to this Section 2.1.

          No failure to effect a registration under this Section 2.1 and to
complete the sale of Registrable Securities in connection therewith shall
relieve Holdings of any other obligation under this Agreement.

          2.2.  Reduction of Piggy-Back Registration.  (a)  If the lead managing
                ------------------------------------
underwriter of any underwritten offering described in Section 2.1 has informed,
in writing, the Holders of the Registrable Securities requesting inclusion in
such offering that it is its view that the total number of securities which
Holdings, the Holders and any other Persons desiring to participate in such
registration intend to include in such offering exceeds the number which can be
sold in an orderly manner within a price range acceptable to Holdings and
without adversely affecting the marketability of the offering, then the
Securities Holdings proposes to sell shall first be included in such offering,
and then the number of Registrable Securities to be offered for the account of
such Holders and the number of such securities to be offered for the account of
all such other Persons (other than Holdings) participating in such registration
shall be reduced or limited pro rata in proportion to the respective number of
                            --- ----
securities requested to be registered to the extent necessary to reduce the
total number of securities requested to be included in such offering to the
number of securities, if any, recommended by such lead managing underwriter.

          (b)   If the lead managing underwriter of any underwritten offering
described in Section 2.1 notifies the Holders requesting inclusion of
Registrable Securities in such offering, that the kind of securities that such
Holders, Holdings and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, (x) the Registrable Securities to
be included in such offering shall be reduced as described in clause (a) above
or (y) if a reduction in the Registrable Securities pursuant to clause (a) above
would, in the judgment of the lead managing underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the Registrable
Securities
<PAGE>

                                      -7-

requested to be included would have on such offering, such Registrable
Securities will be excluded from such offering.

          (c)  If, as a result of the proration provisions of this Section 2.2,
any Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration (a "Withdrawal Election"); provided that a Withdrawal Election
                      -------------------    --------
shall be irrevocable and, after making a Withdrawal Election, a Holder shall no
longer have any right to include Registrable Securities in the registration as
to which such Withdrawal Election was made.

3.   Transfers.
     ---------

          3.1. Generally. All Subject Equity at any time and from time to time
               ---------
outstanding shall be held subject to the conditions and restrictions set forth
in this Section 3. All shares of Capital Stock now or hereafter held by the
Investor shall be held subject to the conditions and restrictions set forth in
this Section 3. Each Holder of Subject Equity and the Investor by executing this
Agreement or by accepting a certificate representing Capital Stock or other
indicia of ownership therefor from Holdings agree with Holdings and with each
other Stockholder to such conditions and restrictions.

          3.2. Tag-Along Rights. (a) Prior to a Triggering Event, each of the
               ----------------
Holders of Subject Equity shall have the right (the "Tag-Along Right") to
                                                     ---------------
require the Proposed Purchaser to purchase from each of them all (subject to (c)
below) Subject Equity owned by such Holder in the event of any proposed direct
or indirect sale or other disposition (collectively, a "Transfer") of
                                                        --------
Stockholder Shares (as defined in the Stockholders Agreement) (whether now or
hereafter issued) to any Person or Persons (such other Person or Persons being
hereinafter referred to as the "Proposed Purchaser") by the Investor or any of
                                ------------------
its Affiliates in any transaction or series of related transactions of Holdings'
Common Stock representing 25% or more of the aggregate number of shares of
common stock of Holdings owned by the Investor on the date hereof (other than
sales in a bona fide public offering pursuant to an effective registration
statement under the Securities Act, sales to the public pursuant to the
provisions of Rule 144 (or any similar rule or rules then in effect) under the
Securities Act, transfers to Holdings or one or more of its stockholders
pursuant to the right of first refusal contained in Section 4(c) of the
Stockholders Agreement and transfers to Affiliates and certain other transfers
permitted by Section 4(d) of the Stockholders Agreement).  Any Investor
proposing a transfer which triggers the rights under this Section 3.2(a) shall
notify, or cause to be notified, each Holder of Subject Equity in writing (a
"Transfer Notice") of each such proposed Transfer at least 10 Business Days
 ---------------
prior to the date thereof.  Such notice shall set forth:  (a) the name of the
Proposed Purchaser and the number of shares of Common Stock and other
securities, if any, proposed to be transferred, (b) the proposed amount of
consideration and terms and conditions of payment offered by such Proposed
Purchaser (if the proposed consideration is not cash, the Transfer Notice shall
describe the terms of the proposed consideration) and (c) that either the
Proposed Purchaser has been informed of the "Tag-Along Right" and has agreed to
purchase Subject Equity in accordance with the terms hereof or that the
<PAGE>

                                      -8-

Investor or any of its Affiliates will make such purchase. The Tag-Along Right
may be exercised by any Holder of Subject Equity by delivery of a written notice
to the Investor who delivered the Transfer Notice ("Tag-Along Notice"), within 5
                                                    ----------------
Business Days of receipt of the Transfer Notice, indicating its election to
exercise the Tag-Along Right (the "Participating Holders"). The Tag-Along
                                   ---------------------
Notice shall state the amounts of Subject Equity that such Holder proposes to
include in such Transfer to the Proposed Purchaser. Failure by any Holder to
provide a Tag-Along Notice within the 5 Business Day notice period shall be
deemed to constitute an election by such Holder not to exercise its Tag-Along
Right. The closing with respect to any sale to a Proposed Purchaser pursuant to
this Section shall be held at the time and place specified in the Transfer
Notice. Consummation of the sale of Common Stock by the Investor or any of its
Affiliates to a Proposed Purchaser shall be conditioned upon consummation of the
sale by each Participating Holder to such Proposed Purchaser (or the Investor)
of the Subject Equity entitled to be transferred as described in (c) below, if
any. Additionally:

          (b)  In the event that the Proposed Purchaser does not purchase
Subject Equity entitled to be transferred as described in (c) below, on the same
terms and conditions as purchased from the Investor or any of its Affiliates,
then the Investor or to its Affiliates shall purchase such Subject Equity if the
Transfer occurs.

          (c)  Each Holder shall have the right to require the Proposed
Purchaser to purchase from such Holder that percentage of the aggregate number
of shares of Common Stock desired to be transferred by such Holder equal to a
fraction, expressed as a percentage, the numerator of which is the total number
of shares of Common Stock held by such Holder and the denominator of which is
the total number of shares of Common Stock held by all Stockholders and all
other persons owning Common Stock or securities convertible or exchangeable into
Common Stock participating in such Transfer.

          (d)  Any Subject Equity purchased from the Participating Holders
pursuant to this Section 3.2 shall be paid for in the same type of consideration
and at the same price per share of Common Stock and upon the same terms and
conditions of such proposed Transfer of Common Stock by the Investor and/or any
of its Affiliates. The price per Warrant to be paid by the Proposed Purchaser
shall be less the exercise price of such Warrant per share. If the Subject
Equity to be purchased includes securities or property other than Common Stock,
the price to be paid for such securities or property shall be the same price per
share or other denomination paid by the Proposed Purchaser for like securities
purchased from the Investor or any of its Affiliates. The Investor shall arrange
for payment directly by the Proposed Purchaser to each Participating Holder,
upon delivery of the certificate or certificates representing the Warrants
and/or Registrable Securities duly endorsed for transfer, together with such
other documents as the Proposed Purchaser may reasonably request.

          (e)  If the sale of Common Stock by the Investor or its Affiliates and
the sale of the Subject Equity entitled to be transferred as provided above have
not been completed in accordance with the terms of the Proposed Purchaser's
offer, all certificates representing such Subject Equity shall be returned to
the Participating Holders, and all the restrictions on Transfer
<PAGE>

                                      -9-

contained in this Agreement with respect to Common Stock owned by the Investor
and its Affiliates shall remain in effect.

          (f)  If the Investor proposing the Transfer intends to Transfer a
strip of two or more classes of shares and any Participating Holder holds all
such classes, such Participating Holder may only participate in such Transfer if
such Participating Holder participates with respect to all such classes of
shares.

          (g)  Each Participating Holder shall be required to bear its pro rata
share (based upon the number of shares sold) of the expenses incurred by the
transferring stockholders in connection with such transaction to the extent such
costs are incurred for the benefit of all such stockholders and are not
otherwise paid by Holdings or the Proposed Purchaser.

          3.3. Drag-Along Rights. If at any time prior to an Initial Public
               -----------------
Equity Offering, the Investor and/or any of its Affiliates determines to sell
all or substantially all of the Capital Stock of Holdings owned by it to a
Person other than the Investor or an Affiliate of the Investor, the Investor
(whether directly or through an Affiliate) shall have the right to require the
Holders of Subject Equity to sell such Subject Equity to such transferee;
provided that the consideration to be received by the Holders of Subject Equity
--------
shall be the same type of consideration received by the Investor and its
Affiliates. Any Warrants and/or Registrable Securities purchased from the
Holders thereof pursuant to this Section 3.3 shall be paid for at the same price
per share of Common Stock and upon the same terms and conditions of such
proposed transfer of Common Stock by the Investor and its Affiliates. The price
per Warrant to be paid by the Proposed Purchaser shall be less the exercise
price of such Warrant per share. If the Subject Equity to be purchased includes
securities other than Common Stock, the price to be paid for such securities
shall be the same price per share or other denomination paid by the Proposed
Purchaser for like securities purchased from the Investor and its Affiliates or,
if like securities are not purchased from the Investor and its Affiliates, the
Fair Market Value of such securities.

4.   Registration Procedures.
     -----------------------

          In connection with the obligations of Holdings with respect to any
Registration Statement pursuant to Section 2.1 hereof, Holdings shall:

          (a)  A reasonable period of time prior to the initial filing of a
     Registration Statement or Prospectus and a reasonable period of time prior
     to the filing of any amendment or supplement thereto (including any
     document that would be incorporated or deemed to be incorporated therein by
     reference), furnish to the Initial Purchasers and the managing
     underwriters, if any, copies of all such documents proposed to be filed,
     which documents (other than those incorporated or deemed to be incorporated
     by reference) will be subject to the review of such Holders, and such
     underwriters, if any, and cause the officers and directors of Holdings,
     counsel to Holdings and independent certified public accountants to
     Holdings to respond to such reasonable inquiries as shall be necessary, in
     the opinion of counsel to such underwriters, to conduct a reasonable
     investigation within the meaning
<PAGE>

                                     -10-

     of the Securities Act; provided that the foregoing inspection and
                            --------
     information gathering shall be coordinated on behalf of the Initial
     Purchasers by CSI;

          (b)  Prepare and file with the SEC such amendments, including post-
     effective amendments, to each Registration Statement as may be necessary to
     keep such Registration Statement continuously effective for the applicable
     time period required hereunder; cause the related Prospectus to be
     supplemented by any required Prospectus supplement, and as so supplemented
     to be filed pursuant to Rule 424 under the Securities Act; and comply with
     the provisions of the Securities Act and the Exchange Act with respect to
     the disposition of all securities covered by such Registration Statement
     during such period in accordance with the intended methods of disposition
     by the sellers thereof set forth in such Registration Statement as so
     amended or in such Prospectus as so supplemented;

          (c)  Notify the holders of Registrable Securities to be sold and the
     managing underwriters, if any, promptly, and (if requested by any such
     person), confirm such notice in writing, (i)(A) when a Prospectus or any
     Prospectus supplement or post-effective amendment is proposed to be filed,
     and (B) with respect to a Registration Statement or any post-effective
     amendment, when the same has become effective, (ii) of any request by the
     SEC or any other Federal or state governmental authority for amendments or
     supplements to a Registration Statement or related Prospectus or for
     additional information, (iii) of the issuance by the SEC, any state
     securities commission, any other governmental agency or any court of any
     stop order, order or injunction suspending or enjoining the use of a
     Prospectus or the effectiveness of a Registration Statement or the
     initiation of any proceedings for that purpose, (iv) of the receipt by
     Holdings of any notification with respect to the suspension of the
     qualification or exemption from qualification of any of the Registrable
     Securities for sale in any jurisdiction, or the initiation or threatening
     of any proceeding for such purpose, and (v) of the happening of any event
     or information becoming known that makes any statement made in a
     Registration Statement or related Prospectus or any document incorporated
     or deemed to be incorporated therein by reference untrue in any material
     respect or that requires the making of any changes in such Registration
     Statement, Prospectus or documents so that it will not contain any untrue
     statement of a material fact or omit to state any material fact required to
     be stated therein or necessary to make the statements therein, not
     misleading, and that in the case of a Prospectus, it will not contain any
     untrue statement of a material fact or omit to state any material fact
     required to be stated therein or necessary to make the statements therein,
     in light of the circumstances under which they were made, not misleading;

          (d)  Use its best efforts to avoid the issuance of or, if issued,
     obtain the withdrawal of any order enjoining or suspending the use of a
     Prospectus or the effectiveness of a Registration Statement or the lifting
     of any suspension of the qualification (or exemption from qualification) of
     any of the Registrable Securities for sale in any jurisdiction, at the
     earliest practicable moment;
<PAGE>

                                     -11-

          (e)  If requested by the managing underwriters, if any, (i) promptly
     incorporate in a Prospectus supplement or post-effective amendment such
     information as the managing underwriters, if any reasonably believe should
     be included therein, and (ii) make all required filings of such Prospectus
     supplement or such post-effective amendment under the Securities Act as
     soon as practicable after Holdings has received notification of the matters
     to be incorporated in such Prospectus supplement or post-effective
     amendment; provided, however, that Holdings shall not be required to take
                --------  -------
     any action pursuant to this Section 4(e) that would, in the opinion of
     counsel for Holdings, violate applicable law;

          (f)  Upon written request to Holdings, furnish to each Holder of
     Registrable Securities to be sold pursuant to a Registration Statement and
     each managing underwriter, if any, without charge, at least one conformed
     copy of such Registration Statement and each amendment thereto, including
     financial statements and schedules, all documents incorporated or deemed to
     be incorporated therein by reference, and all exhibits to the extent
     requested (including those previously furnished or incorporated by
     reference) as soon as practicable after the filing of such documents with
     the SEC;

          (g)  Deliver to each Holder of Registrable Securities to be sold
     pursuant to a Registration Statement, and the underwriters, if any, without
     charge, as many copies of the Prospectus (including each form of
     prospectus) and each amendment or supplement thereto as such persons
     reasonably request; and Holdings hereby consents to the use of such
     Prospectus and each amendment or supplement thereto by each of the selling
     Holders of Registrable Securities and the underwriters, if any, in
     connection with the offering and sale of the Registrable Securities covered
     by such Prospectus and any amendment or supplement thereto;

          (h)  Prior to any public offering of Registrable Securities, use its
     best efforts to register or qualify or cooperate with the Holders of
     Registrable Securities to be sold, the underwriters, if any, and their
     respective counsel in connection with the registration or qualification (or
     exemption from such registration or qualification) of such Registrable
     Securities for offer and sale under the securities or Blue Sky laws of such
     jurisdictions as any such Holder or underwriter reasonably requests in
     writing; keep each such registration or qualification (or exemption
     therefrom) effective during the period such Registration Statement is
     required to be kept effective hereunder and do any and all other acts or
     things necessary or advisable to enable the disposition in such
     jurisdictions of the Registrable Securities covered by the applicable
     Registration Statement; provided, however, that Holdings shall not be
                             --------  -------
     required to (i) qualify generally to do business in any jurisdiction where
     it is not then so qualified or (ii) take any action which would subject it
     to general service of process or to taxation in any jurisdiction where they
     are not so subject;

          (i)  In connection with any sale or transfer of Registrable Securities
     that will result in such securities no longer being Registrable Securities,
     cooperate with the Holders thereof and the managing underwriters, if any,
     to facilitate the timely preparation and delivery of certificates
     representing Registrable Securities to be sold, which certificates
<PAGE>

                                     -12-

     shall not bear any restrictive legends and shall be in a form eligible for
     deposit with The Depository Trust Company and to enable such Registrable
     Securities to be in such denominations and registered in such names as the
     managing underwriters, if any, or such Holders may request at least two
     Business Days prior to any sale of Registrable Securities;

          (j)  Upon the occurrence of any event contemplated by Section 4(c)(v),
     as promptly as practicable, prepare a supplement or amendment, including,
     if appropriate, a post-effective amendment, to each Registration Statement
     or a supplement to the related Prospectus or any document incorporated or
     deemed to be incorporated therein by reference, and file any other required
     document so that, as thereafter delivered, such Prospectus will not contain
     an untrue statement of a material fact or omit to state a material fact
     required to be stated therein or necessary to make the statements therein,
     in light of the circumstances under which they were made, not misleading;

          (k)  Enter into such agreements (including an underwriting agreement
     in form, scope and substance as is customary in underwritten offerings) and
     take all such other reasonable actions in connection therewith (including
     those reasonably requested by the managing underwriters, if any, or the
     Holders of a majority of the Registrable Securities being sold) in order to
     expedite or facilitate the disposition of such Registrable Securities, and,
     whether or not an underwriting agreement is entered into and whether or not
     the registration is an underwritten registration, (i) make such
     representations and warranties to the Holders of such Registrable
     Securities and the underwriters, if any, with respect to the business of
     Holdings and its subsidiaries (including with respect to businesses or
     assets acquired or to be acquired by any of them), and the Registration
     Statement, Prospectus and documents, if any, incorporated or deemed to be
     incorporated by reference therein, in each case, in form, substance and
     scope as are customarily made by issuers to underwriters in underwritten
     offerings, and confirm the same if and when requested; (ii) obtain opinions
     of counsel to Holdings and updates thereof (which counsel and opinions (in
     form, scope and substance) shall be reasonably satisfactory to the managing
     underwriters, if any, addressed to each selling Holder of Registrable
     Securities and each of the underwriters, if any), covering the matters
     customarily covered in opinions requested in underwritten offerings and
     such other matters as may be reasonably requested by such underwriters;
     (iii) use their best efforts to obtain customary "cold comfort" letters and
     updates thereof from the independent certified public accountants of
     Holdings (and, if necessary, any other independent certified public
     accountants of any subsidiary of Holdings or of any business acquired by
     Holdings for which financial statements and financial data is, or is
     required to be, included in the Registration Statement), addressed (where
     reasonably possible) to each selling Holder of Registrable Securities and
     each of the underwriters, if any, such letters to be in customary form and
     covering matters of the type customarily covered in "cold comfort" letters
     in connection with underwritten offerings; (iv) if an underwriting
     agreement is entered into, the same shall contain indemnification
     provisions and procedures no less favorable to the selling Holders and the
     underwriters, if
<PAGE>

                                     -13-

     any, than those set forth in Section 5 hereof (or such other provisions and
     procedures acceptable to Holders of a majority of Registrable Securities
     covered by such Registration Statement and the managing underwriters, if
     any); and (v) deliver such documents and certificates as may be reasonably
     requested by the Holders of a majority of the Registrable Securities being
     sold and the managing underwriters, if any, to evidence the continued
     validity of the representations and warranties made pursuant to clause (i)
     above and to evidence compliance with any customary conditions contained in
     the underwriting agreement or other agreement entered into by Holdings;

          (l)  Make available for inspection by a representative of the Initial
     Purchasers selling Registrable Securities, any underwriter participating in
     any such disposition of Registrable Securities, and any attorney,
     consultant or accountant retained by such Initial Purchasers or
     underwriter, at the offices where normally kept, during reasonable business
     hours, all financial and other records, pertinent corporate documents and
     properties of Holdings and its subsidiaries (including with respect to
     businesses and assets acquired or to be acquired to the extent that such
     information is available to Holdings), and cause the officers, directors,
     agents and employees of Holdings and its subsidiaries (including with
     respect to businesses and assets acquired or to be acquired to the extent
     that such information is available to Holdings) to supply all information
     in each case reasonably requested by any such representative, underwriter,
     attorney, consultant or accountant in connection with such Registration
     Statement; provided, however, that such persons shall first agree in
                --------  -------
     writing with Holdings that any information that is reasonably and in good
     faith designated by Holdings in writing as confidential at the time of
     delivery of such information shall be kept confidential by such Persons,
     unless (i) disclosure of such information is required by court or
     administrative order or is necessary to respond to inquiries of regulatory
     authorities, (ii) disclosure of such information is required by law
     (including any disclosure requirements pursuant to Federal securities laws
     in connection with the filing of the Registration Statement or the use of
     any Prospectus), (iii) such information becomes generally available to the
     public other than as a result of a disclosure or failure to safeguard such
     information by such Person or (iv) such information becomes available to
     such Person from a source other than Holdings and its subsidiaries and such
     source is not bound by a confidentiality agreement; and provided, further,
                                                             --------  -------
     that the foregoing inspection and information gathering shall be
     coordinated on behalf of the Initial Purchasers by CSI;

          (m)  Comply with all applicable rules and regulations of the SEC and
     make generally available to their securityholders earning statements
     satisfying the provisions of Section 11(a) of the Securities Act and Rule
     158 under the Securities Act, no later than 60 days after the end of any
     12-month period (or 135 days after the end of any 12-month period if such
     period is a fiscal year) (i) commencing at the end of any fiscal quarter in
     which Registrable Securities are sold to underwriters in a firm commitment
     or reasonable efforts underwritten offering and (ii) if not sold to
     underwriters in such an offering, commencing on the first day of the first
     fiscal quarter after the effective date of a Registration
<PAGE>

                                     -14-

     Statement, which statement shall cover said period, consistent with the
     requirements of Rule 158 under the Securities Act; and

          (n)  Cooperate with each seller of Registrable Securities covered by
     any Registration Statement and each underwriter, if any, participating in
     the disposition of such Registrable Securities and their respective counsel
     in connection with any filings required to be made with the National
     Association of Securities Dealers, Inc.

          Holdings may require a Holder of Registrable Securities to be included
in a Registration Statement to furnish to Holdings such information regarding
(i) the intended method of distribution of such Registrable Securities, (ii)
such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registration Statement and Holdings may
exclude from such Registration Statement the Registrable Securities of any
Holder who unreasonably fails to furnish such information within a reasonable
time after receiving such request.

          If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of Holdings, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of Holdings' securities covered thereby
and that such holding does not imply that such Holder will assist in meeting any
future financial requirements of Holdings, or (ii) in the event that such
reference to such Holder by name or otherwise is not required by the Securities
Act, the deletion of the reference to such Holder in any amendment or supplement
to the Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.

          Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from Holdings of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii),
4(c)(iv) or 4(c)(v) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof, or until it is advised
in writing (the "Advice") by Holdings that the use of the applicable Prospectus
                 ------
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.  If Holdings shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each Holder of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 4(j) hereof or (y) the Advice, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus.
<PAGE>

                                     -15-

5.   Indemnification and Contribution.
     --------------------------------

          (a)  Holdings shall indemnify and hold harmless the Initial
Purchasers, each Holder, each underwriter who participates in an offering of
Registrable Securities, their respective Affiliates, each Person, if any, who
controls any of such parties within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act and each of their respective directors,
officers, employees and agents, as follows:

             (i)   against any and all loss, liability, claim, damage and
     expense whatsoever, joint or several, as incurred, arising out of any
     untrue statement or alleged untrue statement of a material fact contained
     in any Registration Statement (or any amendment thereto), covering
     Registrable Securities, including all documents incorporated therein by
     reference, or the omission or alleged omission therefrom of a material fact
     required to be stated therein or necessary to make the statements therein,
     in the light of the circumstances under which they were made, not
     misleading or arising out of any untrue statement or alleged untrue
     statement of a material fact contained in any Prospectus (or any amendment
     or supplement thereto) or the omission or alleged omission therefrom of a
     material fact necessary in order to make the statements therein, in the
     light of the circumstances under which they were made, not misleading;

             (ii)  against any and all loss, liability, claim, damage and
     expense whatsoever, joint or several, as incurred, to the extent of the
     aggregate amount paid in settlement of any litigation, or any investigation
     or proceeding by any court or governmental agency or body, commenced or
     threatened, or of any claim whatsoever based upon any such untrue statement
     or omission, or any such alleged untrue statement or omission, if such
     settlement is effected with the prior written consent of Holdings; and

             (iii) against any and all expenses whatsoever, as incurred
     (including reasonable fees and disbursements of counsel chosen by CSI),
     reasonably incurred in investigating, preparing or defending against any
     litigation, or any investigation or proceeding by any court or governmental
     agency or body, commenced or threatened, or any claim whatsoever based upon
     any such untrue statement or omission, or any such alleged untrue statement
     or omission, to the extent that any such expense is not paid under
     subparagraph (i) or (ii) of this Section 5(a);

provided that this indemnity does not apply to any loss, liability, claim,
--------
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to Holdings by such Holder or any
underwriter in writing expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) or
(ii) contained in any preliminary prospectus if such Holder or such underwriter
failed to send or deliver a copy of the Prospectus (in the form it was first
provided to such parties for confirmation of sales) to the Person asserting such
losses, claims, damages or liabilities on or prior to the delivery of written
confirmation of any sale of securities covered thereby to such Person in any
case
<PAGE>

                                     -16-

where such delivery is required by the Securities Act and such Prospectus would
have corrected such untrue statement or omission. Any amounts advanced by
Holdings to an indemnified party pursuant to this Section 5 as a result of such
losses shall be returned to Holdings if it shall be finally determined by such a
court in a judgment not subject to appeal or final review that such indemnified
party was not entitled to indemnification by Holdings.

          (b)  By accepting the benefits of this Agreement, each Holder agrees,
severally and not jointly, to indemnify and hold harmless Holdings, each Initial
Purchaser, each underwriter who participates in an offering of Registrable
Securities and the other selling Holders and each of their respective directors,
officers (including each officer of Holdings who signed the Registration
Statement), employees and agents and each Person, if any, who controls Holdings,
the Initial Purchasers, any underwriter or any other selling Holder within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all loss, liability, claim, damage and expense
whatsoever described in the indemnity contained in Section 5(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to Holdings
by such selling Holder expressly for use in the Registration Statement (or any
amendment thereto), or any such Prospectus (or any amendment or supplement
thereto).

          (c)  Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers properly
served on such indemnified party, but failure to so notify an indemnifying party
shall not relieve such indemnifying party from any liability hereunder to the
extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 5(a) above, counsel to the indemnified parties shall be selected by
CSI and, in the case of parties indemnified pursuant to Section 5(b) above,
counsel to the indemnified parties shall be selected by Holdings.
Notwithstanding the foregoing sentence, in case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent it may wish, jointly with any other indemnifying
party similarly notified, unless such indemnified party shall have one or more
legal defenses available to it which are not available to the indemnifying
party, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election as aforesaid to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party.
<PAGE>

                                     -17-

In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any Judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 5 (whether or
not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.

          (d)  If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.

          (e)  In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, Holdings and the Holders shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by Holdings, and
the Holders, as incurred; provided that no Person guilty of fraudulent
                          --------
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation.  As between Holdings and the Holders, such parties
shall contribute to such aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect the relative fault of Holdings, on
the one hand, and the Holders, on the other hand, with respect to the statements
or omissions which resulted in such loss, liability, claim, damage or expense,
or action in respect thereof, as well as any other relevant equitable
considerations.  The relative fault of Holdings, on the one hand, and of the
Holders, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Holdings, on the one hand, or by or on behalf of the Holders, on the
other, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.  Holdings and the
Holders of the Registrable Securities agree that it would not be just and
equitable if contribution pursuant to this Section 5 were to be determined
<PAGE>

                                     -18-

by pro rata allocation or by any other method of allocation that does not take
   --- ----
into account the relevant equitable considerations. For purposes of this Section
5, each Affiliate of a Holder, and each director, officer, employee, agent and
Person, if any, who controls a Holder or such Affiliate within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Holder, and each director of Holdings,
each officer of Holdings who signed the Registration Statement, and each Person,
if any, who controls Holdings within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as Holdings.

6.   Rules 144 and 144A.
     ------------------

          Holdings shall use its best efforts to file any reports required to be
filed by it under the Securities Act and the Exchange Act in a timely manner
and, if at any time it is not required to file such reports but in the past had
been required to or did file such reports, it will, upon the request of any
Holder of Warrants or Registrable Securities, make available other information
as required by, and so long as necessary to permit, sales of its Warrants and
Registrable Securities pursuant to Rule 144A. Notwithstanding the foregoing,
nothing in this Section 6 shall be deemed to require Holdings to register any of
its securities pursuant to the Exchange Act.

7.   Underwritten Registrations.
     --------------------------

          If any of the Registrable Securities covered by any Registration
Statement are to be sold in an underwritten public offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by Holdings.

          No Person may participate in any underwritten public offering
hereunder unless such person (i) agrees to sell such Registrable Securities on
the basis reasonably provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

          If Holdings has complied with all its obligations under this Agreement
with respect to a Piggy-Back Registration relating to an underwritten public
offering, all holders of Warrants and Registrable Securities, upon request of
the lead managing underwriter with respect to such underwritten public offering,
will be required to not sell or otherwise dispose of any Warrant or Registrable
Security owned by them for a period not to exceed 90 days from the consummation
of such underwritten public offering.

8.   Miscellaneous.
     -------------

          8.1.  Remedies.  In the event of a breach by Holdings, the Investor or
                --------
by a Holder of any of its obligations under this Agreement, each Holder, the
Investor and Holdings, in addi-
<PAGE>

                                     -19-

tion to being entitled to exercise all rights granted by law, including recovery
of damages, will be entitled to specific performance of its rights under this
Agreement. Holdings, the Investor and each Holder agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
of any of the provisions of this Agreement and each hereby further agrees that,
in the event of any action for specific performance in respect of such breach,
it shall waive the defense that a remedy at law would be adequate.

          8.2.  No Conflicting Agreements.  Holdings and the Investor will not
                -------------------------
enter into any agreement that conflicts with the rights granted to the Holders
and indemnified persons in this Agreement or otherwise conflicts with the
provisions hereof.  Without the written consent of the Holders of a majority of
the outstanding Warrants and each class and series of Registrable Securities,
Holdings and the Investor shall not grant to any Person any rights which
conflict with the provisions of this Agreement.

          8.3.  Amendments and Waivers.  The provisions of this Agreement,
                ----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Holders
of not less than the Requisite Shares; provided, however, that, for the purposes
                                       --------  -------
of this Agreement, Warrants, Warrant Shares and Registrable Securities that are
owned, directly or indirectly, by Holdings, the Investor or any of their
Affiliates are not deemed outstanding.  Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority of the
Registrable Securities being sold by such Holders pursuant to such Registration
Statement; provided, however, that the provisions of this sentence may not be
           --------  -------
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.  Notwithstanding the foregoing, no
amendment, modification, supplement, waiver or consent with respect to Section 5
shall be made or given otherwise than with the prior written consent of each
Person affected thereby.

          8.4.  Notices.  All notices and other communications provided for
                -------
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier to
Holdings, as provided in the Purchase Agreement,

          (a)  if to the Investor,

               Mattress Discounters Holding L.L.C.
               c/o Bain Capital, Inc.
               Two Copley Place
               Boston, MA 02116
               Attention: Michael Krupka
               Telecopy No.: (617) 572-3274

          With a copy, which shall not constitute notice, to:
<PAGE>

                                     -20-

               Kirkland & Ellis
               Citicorp Center
               153 East 53rd Street
               New York, New York 10022
               Attention: Lance C. Balk, Esq.
               Telecopy No.: (212) 446-4900

     or such other address or to the attention of such other person as the
     recipient party shall have specified by prior written notice to the sending
     party.

          (b)  if to the Initial Purchasers, as provided in the Purchase
     Agreement, or

          (c)  if to any other Person who is then the registered Holder of
     Warrants or Registrable Securities, to the address of such Holder as it
     appears in the register therefor of Holdings.

          Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given:  when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.

          8.5.  Successors and Assigns.  This Agreement shall inure to the
                ----------------------
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder.  Notwithstanding the
foregoing, no successor or assignee of Holdings shall have any of the rights
granted under this Agreement until such Person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's acceptance
of such rights and obligations.

          8.6.  Counterparts.  This Agreement may be executed in any number of
                ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.

          8.7.  Governing Law; Submission to Jurisdiction.  THIS AGREEMENT SHALL
                -----------------------------------------
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
HOLDINGS AND THE INVESTOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR IT-
<PAGE>

                                     -21-

SELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS.

          8.8.  Severability.  The remedies provided herein are cumulative and
                ------------
not exclusive of any remedies provided by law.  If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

          8.9.  Headings.  The headings in this Agreement are for convenience of
                --------
reference only and shall not limit or otherwise affect the meaning hereof.  All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
<PAGE>

          IN WITNESS WHEREOF, the parties have caused this Common Stock
Registration Rights Agreement to be duly executed as of the date first written
above.

                              MATTRESS DISCOUNTERS HOLDING
                              CORPORATION

                                    /s/ Michael Krupka
                              By: __________________________________
                                  Name: Michael Krupka
                                  Title:

                              MATTRESS DISCOUNTERS HOLDING L.L.C.

                                    /s/ Michael Krupka
                              By: __________________________________
                                  Name: Michael Krupka
                                  Title:

                              CHASE SECURITIES INC.

                                    /s/ Ira Ginsburg
                              By: __________________________________
                                  Name: Ira Ginsburg
                                  Title:

                              CIBC WORLD MARKETS CORP.

                                    /s/ Kevin Migiel
                              By: __________________________________
                                  Name: Kevin Migiel
                                  Title:

                              BANCBOSTON ROBERTSON STEPHENS INC.
<PAGE>

                                  /s/ Greg Foy
                              By: __________________________________
                                  Name: Greg Foy
                                  Title:<PAGE>

                                                                    EXHIBIT 10.3

                       MATTRESS DISCOUNTERS CORPORATION
                   MATTRESS DISCOUNTERS HOLDING CORPORATION

                          140,000 Units consisting of
                                 $140,000,000
       12 5/8% Senior Notes due 2007 of Mattress Discounters Corporation

                                      and

                140,000 Warrants to Purchase 679,000 Shares of
                   Class A Common Stock and 75,460 Shares of
       Class L Common Stock of Mattress Discounters Holding Corporation

                              PURCHASE AGREEMENT
                              ------------------

                                                                  August 3, 1999
CHASE SECURITIES INC.
CIBC WORLD MARKETS CORP.
BANCBOSTON ROBERTSON STEPHENS INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017

Ladies and Gentlemen:

          Mattress Discounters Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell $140,000,000 aggregate principal amount
 -------
of its 12 5/8% Senior Notes due 2007 (the "Notes").  The Notes will be issued
                                           -----
pursuant to an Indenture to be dated as of August 6, 1999 (the "Indenture")
                                                                ---------
between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee").  The Notes will be unconditionally guaranteed (the "Guarantees") by
 -------                                                        ----------
each of T.J.B., Inc., a Maryland corporation ("TJB"), and The Bedding Experts,
                                               ---
Inc., an Illinois corporation ("Bedding Experts" and, together with TJB, the
                                ---------------
"Guarantors" and, collectively with the Company, the "Notes Issuers"), pursuant
 ----------                                           -------------
to the terms of the Indenture (the "Guarantees").  Mattress Discounters Holding
                                    ----------
Corporation, a Virginia corporation ("Holdings"), proposes to issue and sell
                                      --------
140,000 Warrants (the "Warrants") to purchase 679,000 shares of Class A Common
                       --------
Stock, par value $.01 per share of Holdings and 75,460 shares of Class L Common
Stock, par value $.01 per share, of Holdings (the Class A Common Stock and the
Class L Common Stock, collectively, the "Warrant Shares").  The Notes and the
                                         --------------
Warrants are collectively referred to as the "Units."  The Notes Issuers and
                                              -----
Holdings are collectively referred to as the "Issuers."  Each Unit will consist
                                              -------
of $1,000 principal amount
<PAGE>

of Notes and one Warrant, to purchase 4.850 shares of Class A Common Stock and
0.539 shares of Class L Common Stock. The Warrants are to be issued under a
Warrant Agreement to be dated as of August 6, 1999 (the "Warrant Agreement")
                                                         -----------------
between Holdings and State Street Bank and Trust Company, as Warrant Agent (the
"Warrant Agent"). The Units will be issued under a Unit Certificate dated as of
 -------------
August 6, 1999 (the "Unit Certificate") among the Issuers, the Trustee, the
                     ----------------
Warrant Agent and State Street Bank and Trust Company, as Unit Agent (the "Unit
                                                                           ----
Agent"). The Notes, the Guarantees, the Units, the Warrants and the Warrant
-----
Shares are referred to collectively herein as the "Securities." The Issuers
                                                   ----------
hereby confirm their agreement with Chase Securities Inc. ("CSI"), CIBC World
                                                            ---
Markets Corp. and BancBoston Robertson Stephens Inc. (together with CSI, the
"Initial Purchasers") concerning the purchase of the Securities from the Company
 ------------------
by the several Initial Purchasers.

          The Units will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "Securities
                                                                    ----------
Act"), in reliance upon an exemption therefrom.  The Company has prepared a
---
preliminary offering memorandum dated July 13, 1999 (the "Preliminary Offering
                                                          --------------------
Memorandum") and will prepare an offering memorandum dated the date hereof (the
----------
"Offering Memorandum") setting forth information concerning the Issuers and the
 -------------------
Units.  Copies of the Preliminary Offering Memorandum have been, and copies of
the Offering Memorandum will be, delivered by the Company and Holdings to the
Initial Purchasers pursuant to the terms of this Agreement.  Any references
herein to the Preliminary Offering Memorandum and the Offering Memorandum shall
be deemed to include all amendments and supplements thereto, unless otherwise
noted.  The Company and Holdings hereby confirm that they have authorized the
use of the Preliminary Offering Memorandum and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial
Purchasers in accordance with Section 2.

          Holders of the Notes and the Guarantees (including the Initial
Purchasers and their direct and indirect transferees) will be entitled to the
benefits of an Exchange and Registration Rights Agreement, substantially in the
form attached hereto as Annex A-1 (the "Notes Registration Rights Agreement"),
                                        -----------------------------------
pursuant to which the Notes Issuers will agree to file with the Securities and
Exchange Commission (the "Commission") (i) a registration statement under the
                          ----------
Securities Act (the "Exchange Offer Registration Statement") registering an
                     -------------------------------------
issue of senior notes of the Company that are guaranteed by the Guarantors (the
"Exchange Securities") and that are identical in all material respects to the
 -------------------
Notes and the Guarantees (except that the Exchange Securities will not contain
terms with respect to transfer restrictions and liquidated damages) and (ii)
under certain circumstances, a shelf registration statement pursuant to Rule 415
under the Securities Act (the "Shelf Registration Statement").  Holders of the
                               ----------------------------
Warrants will be entitled to the benefits of a Common Stock Registration Rights
Agreement, substantially in the form attached hereto as Annex A-2 (the "Stock
                                                                        -----
Registration Rights Agreement" and together with the Notes Registration Rights
-----------------------------
Agreement, the "Registration
                ------------

                                      -2-
<PAGE>

Rights Agreements") among Holdings and the Equity Investors (as defined in the
Offering Memorandum) and the Initial Purchasers, pursuant to which Holdings will
agree to provide certain registration rights with respect to the Warrant Shares
and the Equity Investors will agree to provide certain tag-along and other
rights to holders of Warrants and Warrant Shares.

          The Units are being issued in connection with a recapitalization (the
"Recapitalization") in which (a) MD Acquisition Corporation, a Virginia
 ----------------
corporation ("MD Acquisition") has entered into a Transaction Agreement, dated
              --------------
as of May 28, 1999, as amended July 15, 1999 (the "Transaction Agreement"), by
                                                   ---------------------
and among MD Acquisition, Heilig-Meyers Company, a Virginia corporation
("Heilig-Meyers"), and Heilig-Meyers Associates, Inc., a Virginia corporation
 --------------
("HMA"), pursuant to which Heilig-Meyers will contribute the issued and
  ---
outstanding shares of the Company, TJB and Bedding Experts, to HMA and MD
Acquisition will then merge (the "Merger") with HMA with HMA being the surviving
                                  ------
corporation and changing its name to Mattress Discounters Holding Corporation,
at which time MDC will become a direct wholly owned subsidiary of Holdings and
TJB and Bedding Experts will become direct wholly owned subsidiaries of MDC, (b)
the Company will also enter into a new credit facility, which consists of a $20
million revolving credit facility with a six-year term (the "Credit Agreement"),
                                                             ----------------
and (c) certain Equity Investors including Bain Capital, Inc. and its affiliates
are making a $76.2 million equity investment (the "Equity Investment") in
                                                   -----------------
Mattress Discounters Holding, LLC, which will be contributed to MD Acquisition
to pay a portion of the cash consideration in the Recapitalization.

          Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.

          1.   Representations, Warranties and Agreements of the Issuers.
               ---------------------------------------------------------
Each of Issuers represents and warrants to, and agrees with, the several Initial
Purchasers on and as of the date hereof and, in all material respects, as of the
Closing Date, (as defined in Section 3) that, after giving effect to the
Recapitalization:

          (a)  Each of the Preliminary Offering Memorandum and the Offering
     Memorandum, as of its respective date, did not, and on the Closing Date the
     Offering Memorandum will not, contain any untrue statement of a material
     fact or omit to state a material fact required to be stated therein or
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading; provided that
                                                               --------
     each of the Issuers makes no representation or warranty as to information
     contained in or omitted from the Preliminary Offering Memorandum or the
     Offering Memorandum in reliance upon and in conformity with written
     information relating to the Initial Purchasers furnished to the Company by
     or on behalf of

                                      -3-
<PAGE>

     any Initial Purchaser specifically for use therein (the "Initial
                                                              -------
     Purchasers' Information").
     -----------------------

          (b)  Each of the Preliminary Offering Memorandum and the Offering
     Memorandum, as of its respective date, contains all of the information
     that, if requested by a prospective purchaser of the Units, would be
     required to be provided to such prospective purchaser pursuant to Rule
     144A(d)(4) under the Securities Act.

          (c)  Assuming the accuracy of the representations and warranties of
     the Initial Purchasers contained in Section 2 and their compliance with the
     agreements set forth therein, it is not necessary, in connection with the
     issuance and sale of the Units to the Initial Purchasers and the offer,
     resale and delivery of the Units by the Initial Purchasers in the manner
     contemplated by this Agreement and the Offering Memorandum, to register the
     Units under the Securities Act or to qualify the Indenture under the Trust
     Indenture Act of 1939, as amended (the "Trust Indenture Act").
                                             -------------------

          (d)  Each of the Issuers has been duly incorporated and is an existing
     corporation in good standing under the laws of its jurisdiction of
     incorporation, is duly qualified to do business and is in good standing as
     a foreign corporation in each jurisdiction in which its ownership or lease
     of property or the conduct of its businesses requires such qualification,
     and has all power and authority necessary to own or hold its properties and
     to conduct the businesses in which it is engaged, except where the failure
     to so qualify or have such power or authority would not reasonably be
     expected to, singularly or in the aggregate, have a material adverse effect
     on the condition (financial or otherwise), results of operations, business
     or prospects of the Company and its subsidiaries taken as a whole (a
     "Material Adverse Effect").
      -----------------------
          (e)  The Company has an authorized capitalization as set forth in the
     Offering Memorandum under the heading "Capitalization"; as of the Closing
     Date, all of the outstanding shares of capital stock of the Company will
     have been duly and validly authorized and issued and will be fully paid and
     non-assessable; all of the issued and outstanding shares of capital stock
     of the Company are owned by Holdings, free and clear of any lien, charge,
     security interest, encumbrance, restriction upon voting or transfer or any
     other claim of any third party; and the capital stock of the Company
     conforms in all material respects to the description thereof contained in
     the Offering Memorandum. TJB and Bedding Experts are the only subsidiaries,
     direct or indirect, of the Company (collectively, the "Subsidiaries"). All
                                                            ------------
     of the outstanding shares of capital stock of each Subsidiary of the
     Company have been duly and validly authorized and issued, are fully paid
     and non-assessable and are owned directly or indirectly by the Company,
     free and clear of any lien, charge, encumbrance, security interest,
     re-

                                      -4-
<PAGE>

     striction upon voting or transfer or any other claim of any third party,
     except for security interests securing the Credit Agreement.

          (f)  Each of the Issuers, as applicable, has full right, power and
     authority to execute and deliver, to the extent it is a party thereto, this
     Agreement, the Indenture, the Registration Rights Agreements, the Notes,
     the Guarantees, the Unit Certificate, the Warrant Agreement, the Warrant
     Certificate, the Credit Agreement and each other document to which any of
     the Issuers is a party entered into in connection with the Recapitalization
     by the Company (collectively, the "Transaction Documents") and to perform
                                        ---------------------
     its obligations hereunder and thereunder; and, as of the Closing Date, all
     corporate action required to be taken for the due and proper authorization,
     execution and delivery of each of the Transaction Documents and the
     consummation of the transactions contemplated thereby will have been duly
     and validly taken.

          (g)  This Agreement has been duly authorized, executed and delivered
     by of each of the Issuers and constitutes a valid and legally binding
     agreement of each of the Issuers.

          (h)  As of the Closing Date, the Registration Rights Agreements will
     have been duly authorized by each of the Issuers, to the extent it is a
     party thereto, and, when duly executed and delivered in accordance with its
     terms by each of the parties thereto, will constitute valid and legally
     binding agreements of such Issuer enforceable against such Issuer in
     accordance with their terms, except to the extent that such enforceability
     may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law).

          (i)  As of the Closing Date, the Indenture will been duly authorized
     by of each of the Notes Issuers and, when duly executed and delivered in
     accordance with its terms by each of the parties thereto, will constitute a
     valid and legally binding agreement of each of the Notes Issuers
     enforceable against of each of the Notes Issuers in accordance with its
     terms, except to the extent that such enforceability may be limited by
     applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws affecting creditors' rights generally and
     by general equitable principles (whether considered in a proceeding in
     equity or at law). On the Closing Date, the Indenture will conform in all
     material respects to the requirements of the Trust Indenture Act and the
     rules and regulations of the Commission applicable to an indenture which is
     qualified thereunder.

                                      -5-
<PAGE>

          (j)  As of the Closing Date, the Notes will have been duly authorized
     by the Company and, when duly executed, authenticated, issued and delivered
     as provided in the Indenture and paid for as provided herein, will be duly
     and validly issued and outstanding and will constitute valid and legally
     binding obligations of the Company entitled to the benefits of the
     Indenture and enforceable against the Company in accordance with their
     terms, except to the extent that such enforceability may be limited by
     applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws affecting creditors' rights generally and
     by general equitable principles (whether considered in a proceeding in
     equity or at law).

          (k)  As of the Closing Date, the Guarantees to be endorsed on the
     Notes will have been duly authorized by each of the Guarantors and, when
     duly executed by each of the Guarantors and when the Notes are duly
     executed, authenticated, issued and delivered as provided in the Indenture
     and paid for as provided herein, will constitute valid and legally binding
     obligations of each of the Guarantors entitled to the benefits of the
     Indenture, enforceable against each of the Guarantors in accordance with
     their terms, except to the extent that such enforceability may be limited
     by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law).

          (l)  As of the Closing Date, the Exchange Securities will have been
     duly authorized by the Company and, when executed, authenticated, issued
     and delivered as provided in the Indenture and the Registration Rights
     Agreement, will be duly and validly issued and outstanding and will
     constitute valid and legally binding obligations of the Company entitled to
     the benefits of the Indenture, enforceable against the Company in
     accordance with their terms, except to the extent that such enforceability
     may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law).

          (m)  As of the Closing Date, the Guarantees to be endorsed on the
     Exchange Securities will have been duly authorized by each of the
     Guarantors and, when duly executed by each of the Guarantors and when the
     Exchange Securities are duly executed, authenticated, issued and delivered
     as provided in the Indenture and the Registration Rights Agreement, will
     constitute valid and legally binding obligations of each of the Guarantors
     entitled to the benefits of the Indenture, enforceable against each of the
     Guarantors in accordance with their terms, except to the extent that such
     enforceability may be limited by applicable bankruptcy, insolvency,
     fraudulent conveyance, reorganization, moratorium and other similar laws
     affecting creditors' rights generally

                                      -6-
<PAGE>

     and by general equitable principles (whether considered in a proceeding in
     equity or at law).

          (n)  As of the Closing Date, the Units will have been duly authorized
     by the Issuers and, when duly executed, authenticated, issued and delivered
     as provided in the Unit Certificate and paid for as provided herein, will
     be duly and validly issued and outstanding and will constitute valid and
     legally binding obligations of the Issuers entitled to the benefits of the
     Unit Certificate and enforceable against the Issuers in accordance with
     their terms, except to the extent that such enforceability may be limited
     by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law).

          (o)  As of the Closing Date, the Warrants will have been duly
     authorized by Holdings and, when duly executed, authenticated, issued and
     delivered as provided in the Warrant Agreement and paid for as provided
     herein, will be duly and validly issued and outstanding and will constitute
     valid and legally binding obligations of Holdings entitled to the benefits
     of the Warrant Agreement and enforceable against Holdings in accordance
     with their terms, except to the extent that such enforceability may be
     limited by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws affecting creditors'
     rights generally and by general equitable principles (whether considered in
     a proceeding in equity or at law).

          (p)  When issued in accordance with the terms and conditions contained
     in the Warrant Agreement upon exercise of the Warrants, the Warrant Shares
     will be duly authorized, validly issued, fully paid and non-assessable and
     will not be subject to any preemptive or similar rights. As of the Closing
     Date, the Warrant Shares will have been duly reserved for issuance in
     accordance with the terms of the Warrants and the Warrant Agreement.

          (q)  As of the Closing Date, the Credit Agreement will have been duly
     authorized by the Company and each guarantor party thereto and, when duly
     executed and delivered by the Company and each guarantor party thereto,
     will constitute a valid and legally binding agreement of the Company and
     each guarantor party thereto enforceable against the Company and each
     guarantor party thereto in accordance with its terms, except to the extent
     that such enforceability may be limited by applicable bankruptcy,
     insolvency, fraudulent conveyance, reorganization, moratorium and other
     similar laws affecting creditors' rights generally and by general equitable
     principles (whether considered in a proceeding in equity or at law).

                                      -7-
<PAGE>

          (r)  As of the Closing Date, each Transaction Document will conform in
     all material respects to the description thereof contained in the Offering
     Memorandum.

          (s)  The execution, delivery and performance by each of the Issuers of
     each of the Transaction Documents to which it is a party, the issuance,
     authentication, sale and delivery of the Securities and compliance by each
     of the Issuers with the terms thereof and the consummation of the
     transactions contemplated by the Transaction Documents will not conflict
     with or result in a breach or violation of any of the terms or provisions
     of, or constitute a default under, or result in the creation or imposition
     of any lien, charge or encumbrance upon any property or assets of any
     Issuer or any of its subsidiaries pursuant to, any material indenture,
     mortgage, deed of trust, loan agreement or other material agreement or
     instrument to which any Issuer or any of its subsidiaries is a party or by
     which any Issuer or any of its subsidiaries is bound or to which any of the
     property or assets of any Issuer or any of its subsidiaries is subject, nor
     will such actions result in any violation of the provisions of the charter
     or by-laws of any Issuer or any of its subsidiaries or any statute or any
     judgment, order, decree, rule or regulation of any court or arbitrator or
     governmental agency or body having jurisdiction over any Issuer or any of
     its subsidiaries or any of their properties or assets; and no consent,
     approval, authorization or order of, or filing or registration with, any
     such court or arbitrator or governmental agency or body under any such
     statute, judgment, order, decree, rule or regulation is required for the
     execution, delivery and performance by any Issuer of each of the
     Transaction Documents, the issuance, authentication, sale and delivery of
     the Securities and compliance by any Issuer with the terms thereof and the
     consummation of the transactions contemplated by the Transaction Documents,
     except for such consents, approvals, authorizations, filings, registrations
     or qualifications (i) which shall have been obtained or made prior to the
     Closing Date and (ii) as may be required to be obtained or made under the
     Securities Act and applicable state securities laws as provided in the
     Registration Rights Agreement.

          (t)  Deloitte & Touche LLP and KPMG LLP are each independent certified
     public accountants with respect to the Company and its subsidiaries within
     the meaning of Rule 101 of the Code of Professional Conduct of the American
     Institute of Certified Public Accountants ("AICPA") and its interpretations
                                                 -----
     and rulings thereunder. The historical financial statements (including the
     related notes) contained in the Offering Memorandum have been prepared in
     accordance with generally accepted accounting principles consistently
     applied throughout the periods covered thereby and fairly present the
     financial position of the entities purported to be covered thereby at the
     respective dates indicated and the results of their operations and their
     cash flows for the respective periods indicated; and the financial
     information contained in the Offering Memorandum under the headings
     "Summary--Summary Unaudited Pro Forma

                                      -8-
<PAGE>

     Combined Financial Data", "Summary Historical Combined Financial Data",
     "Capitalization", "Unaudited Pro Forma Combined Financial Data", "Selected
     Historical Combined Financial Data", "Management's Discussion and Analysis
     of Financial Condition and Results of Operations" and "Management--
     Executive Compensation" are derived from the accounting records of the
     Company and its subsidiaries and fairly present the information purported
     to be shown thereby. The pro forma financial information contained in the
     Offering Memorandum has been prepared on a basis consistent with the
     historical financial statements contained in the Offering Memorandum
     (except for the pro forma and supplemental adjustments specified therein),
     includes all material adjustments to the historical financial information
     required by Rule 11-02 of Regulation S-X under the Securities Act and the
     Exchange Act to reflect the transactions described in the Offering
     Memorandum, gives effect to assumptions made on a reasonable basis and
     fairly presents the historical and proposed transactions contemplated by
     the Offering Memorandum and the Transaction Documents. The other historical
     financial and statistical information and data included in the Offering
     Memorandum are, in all material respects, fairly presented.

          (u)  Except as disclosed in the Offering Memorandum, there are no
     legal or governmental proceedings pending to which any Issuer is a party or
     of which any property or assets of any Issuer is the subject which,
     singularly or in the aggregate, if determined adversely to the Company or
     any of the Subsidiaries, could reasonably be expected to have a Material
     Adverse Effect; and to the best knowledge of each Issuer, no such
     proceedings are threatened or contemplated by governmental authorities or
     threatened by others.

          (v)  No action has been taken and no statute, rule, regulation or
     order has been enacted, adopted or issued by any governmental agency or
     body which prevents the issuance of the Securities or suspends the sale of
     the Securities in any jurisdiction; no injunction, restraining order or
     order of any nature by any federal or state court of competent jurisdiction
     has been issued with respect to the Company or any of its subsidiaries
     which would prevent or suspend the issuance or sale of the Securities or
     the use of the Preliminary Offering Memorandum or the Offering Memorandum
     in any jurisdiction; no action, suit or proceeding is pending against or,
     to the best knowledge of each Issuer, threatened against or affecting any
     Issuer or any of their subsidiaries before any court or arbitrator or any
     governmental agency, body or official, domestic or foreign, which could
     reasonably be expected to interfere with or adversely affect the issuance
     of the Securities or in any manner draw into question the validity or
     enforceability of any of the Transaction Documents or any action taken or
     to be taken pursuant thereto; and each Issuer has complied with any and all
     requests by any securities

                                      -9-
<PAGE>

     authority in any jurisdiction for additional information to be included in
     the Preliminary Offering Memorandum and the Offering Memorandum.

          (w)  No Issuer is (i) in violation of its charter or by-laws, (ii) in
     default in any material respect, and no event has occurred which, with
     notice or lapse of time or both, would constitute such a default, in the
     due performance or observance of any term, covenant or condition contained
     in any material indenture, mortgage, deed of trust, loan agreement or other
     material agreement or instrument to which it is a party or by which it is
     bound or to which any of its property or assets is subject or (iii) in
     violation in any material respect of any law, ordinance, governmental rule,
     regulation or court decree to which it or its property or assets may be
     subject.

          (x)  Each Issuer possesses all material licenses, certificates,
     authorizations and permits issued by, and has made all declarations and
     filings with, the appropriate federal, state or foreign regulatory agencies
     or bodies which are necessary for the ownership of its properties or the
     conduct of its businesses as described in the Offering Memorandum, except
     where the failure to possess or make the same would not, singularly or in
     the aggregate, have a Material Adverse Effect, and no Issuer has received
     notification of any revocation or modification of any such license,
     certificate, authorization or permit.

          (y)  Each Issuer has filed all federal, state, local and foreign
     income and franchise tax returns required to be filed through the date
     hereof and has paid all taxes due thereon, and no tax deficiency has been
     determined adversely to any Issuer which has had (nor does any Issuer have
     any knowledge of any tax deficiency which, if determined adversely to any
     Issuer, could reasonably be expected to have) a Material Adverse Effect.

          (z)  No Issuer is (i) an "investment company" or a company "controlled
     by" an investment company within the meaning of the Investment Company Act
     of 1940, as amended (the "Investment Company Act"), and the rules and
                               ----------------------
     regulations of the Commission thereunder or (ii) a "holding company" or a
     "subsidiary company" of a holding company or an "affiliate" thereof within
     the meaning of the Public Utility Holding Company Act of 1935, as amended.

          (aa) Each Issuer maintains a system of internal accounting controls
     sufficient to provide reasonable assurance that (i) transactions are
     executed in accordance with management's general or specific
     authorizations; (ii) transactions are recorded as necessary to permit
     preparation of financial statements in conformity with generally accepted
     accounting principles and to maintain asset accountability; (iii) access to
     as-

                                      -10-
<PAGE>

     sets is permitted only in accordance with management's general or specific
     authorization; and (iv) the recorded accountability for assets is compared
     with the existing assets at reasonable intervals and appropriate action is
     taken with respect to any differences.

          (bb) Each Issuer has insurance covering its properties, operations,
     personnel and businesses, which insurance is in amounts and insures against
     such losses and risks as are consistent with industry practice to protect
     each Issuer and its businesses. No Issuer has received notice from any
     insurer or agent of such insurer that capital improvements or other
     expenditures are required or necessary to be made in order to continue such
     insurance.

          (cc) Each Issuer owns or possesses the right to use all material
     patents, patent applications, trademarks, service marks, trade names,
     trademark registrations, service mark registrations, copyrights, licenses
     and know-how (including trade secrets and other unpatented and/or
     unpatentable proprietary or confidential information, systems or
     procedures) used in the conduct of its businesses currently operated or
     proposed to be operated by it; and no Issuer has received any notice of any
     claim of conflict in any material respect with any such rights of others.

          (dd) Except as disclosed in the Offering Memorandum, each Issuer has
     good and marketable title to, or has valid rights to lease or otherwise
     use, all items of real and personal property which are material to the
     business of the Issuers taken as a whole, in each case free of all liens,
     encumbrances and defects of title except such as (i) do not materially
     interfere with the use made and proposed to be made of such property by any
     Issuer or (ii) could not reasonably be expected to have a Material Adverse
     Effect.

          (ee) Except as disclosed in the Offering Memorandum, no labor
     disturbance by or dispute with the employees of any Issuer exists or, to
     the best knowledge of each Issuer, is imminent that would, either
     singularly or in the aggregate, have a Material Adverse Effect.

          (ff) No "prohibited transaction" (as defined in Section 406 of the
     Employee Retirement Income Security Act of 1974, as amended, including the
     regulations and published interpretations thereunder ("ERISA"), or Section
                                                            -----
     4975 of the Internal Revenue Code of 1986, as amended from time to time
     (the "Code")) or "accumulated funding deficiency" (as defined in Section
           ----
     302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
     (other than events with respect to which the 30-day notice requirement
     under Section 4043 of ERISA has been waived) has occurred with

                                      -11-
<PAGE>

     respect to any employee benefit plan of any Issuer which could reasonably
     be expected to have a Material Adverse Effect; each such employee benefit
     plan is in compliance in all material respects with applicable law,
     including ERISA and the Code; each Issuer has not incurred and does not
     expect to incur liability under Title IV of ERISA with respect to the
     termination of, or withdrawal from, any pension plan for which any Issuer
     would have any liability; and each such pension plan that is intended to be
     qualified under Section 401(a) of the Code is so qualified in all material
     respects and nothing has occurred, whether by action or by failure to act,
     which could reasonably be expected to cause the loss of such qualification.

          (gg) There has been no storage, generation, transportation, handling,
     treatment, disposal, discharge, emission or other release of any kind of
     toxic or other wastes or other hazardous substances by, due to or caused by
     any Issuer (or, to the best knowledge of each Issuer, any other entity
     (including any predecessor) for whose acts or omissions any Issuer is or
     could reasonably be expected to be liable) upon any of the property now or
     previously owned or leased by any Issuer, or upon any other property, in
     violation of any statute or any ordinance, rule, regulation, order,
     judgment, decree or permit or which would, under any statute or any
     ordinance, rule (including rule of common law), regulation, order,
     judgment, decree or permit, give rise to any liability, except for any
     violation or liability could not reasonably be expected to have, singularly
     or in the aggregate with all such violations and liabilities, a Material
     Adverse Effect; and there has been no disposal, discharge, emission or
     other release of any kind onto such property or into the environment
     surrounding such property of any toxic or other wastes or other hazardous
     substances with respect to which any Issuer has knowledge, except for any
     such disposal, discharge, emission or other release of any kind which could
     not reasonably be expected to have, singularly or in the aggregate with all
     such discharges and other releases, a Material Adverse Effect.

          (hh) No Issuer nor, to the best knowledge of any Issuer, any director,
     officer, agent, employee or other person associated with or acting on
     behalf of any Issuer has (i) used any corporate funds for any unlawful
     contribution, gift, entertainment or other unlawful expense relating to
     political activity; (ii) made any direct or indirect unlawful payment to
     any foreign or domestic government official or employee from corporate
     funds; (iii) violated or is in violation of any provision of the Foreign
     Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff,
     influence payment, kickback or other unlawful payment.

          (ii) Except as described in the Offering Memorandum, there are no
     outstanding subscriptions, rights, warrants, calls or options to acquire,
     or instruments convertible into or exchangeable for, or agreements or
     understandings with respect to

                                      -12-
<PAGE>

     the sale or issuance of, any shares of capital stock of or other equity or
     other ownership interest in any Issuer.

          (jj) No Issuer owns any "margin securities" as that term is defined in
     Regulation U of the Board of Governors of the Federal Reserve System (the
     "Federal Reserve Board"), and none of the proceeds of the sale of the
      ---------------------
     Securities will be used, directly or indirectly, for the purpose of
     purchasing or carrying any margin security, for the purpose of reducing or
     retiring any indebtedness which was originally incurred to purchase or
     carry any margin security or for any other purpose which might cause any of
     the Securities to be considered a "purpose credit" within the meanings of
     Regulation T, U or X of the Federal Reserve Board.

          (kk) Except as disclosed in the Offering Memorandum, none of the
     Issuers is a party to any contract, agreement or understanding with any
     person that would give rise to a valid claim against any Issuer or the
     Initial Purchasers for a brokerage commission, finder's fee or like payment
     in connection with the offering and sale of the Units.

          (ll) The Units satisfy the eligibility requirements for resales to
     "qualified institutional buyers" pursuant to Rule 144A(d)(3) under the
     Securities Act.

          (mm) None of the Issuers, any of their affiliates or any person acting
     on its or their behalf has engaged or will engage in any directed selling
     efforts (as such term is defined in Regulation S under the Securities Act
     ("Regulation S")), and all such persons have complied and will comply with
       ------------
     the offering-restrictions requirement of Regulation S to the extent
     applicable.

          (nn) None of the Issuers nor any of their affiliates has, directly or
     through any agent, sold, offered for sale, solicited offers to buy or
     otherwise negotiated in respect of, any security (as such term is defined
     in the Securities Act) which is or will be integrated with the sale of the
     Units in a manner that would require registration of any of the Securities
     under the Securities Act.

          (oo) None of the Issuers or any of their affiliates or any other
     person acting on its or their behalf has engaged, in connection with the
     offering of the Units, in any form of general solicitation or general
     advertising within the meaning of Rule 502(c) under the Securities Act.

                                      -13-
<PAGE>

          (pp) There are no securities of any Issuer registered under the
     Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed
                                                       ------------
     on a national securities exchange or quoted in a U.S. automated inter-
     dealer quotation system.

          (qq) The Issuers have not taken and will not take, directly or
     indirectly, any action prohibited by Regulation M under the Exchange Act in
     connection with the offering of the Securities.

          (rr) None of the Issuers nor any of their subsidiaries does business
     with the government of Cuba or with any person or affiliate located in Cuba
     within the meaning of Florida Statutes Section 517.075.

          (ss) Since the date as of which information is given in the Offering
     Memorandum, except as otherwise stated therein, (i) there has been no
     material adverse change or any development involving a prospective material
     adverse change in the condition, financial or otherwise, or in the
     earnings, business affairs, management or business prospects of the
     Issuers, taken as a whole, whether or not arising in the ordinary course of
     business, (ii) no Issuer has incurred any material liability or obligation,
     direct or contingent, other than in the ordinary course of business, (iii)
     no Issuer has entered into any material transaction other than in the
     ordinary course of business and (iv) there has not been any change in the
     capital stock or long-term debt of any Issuer, or any dividend or
     distribution of any kind declared, paid or made by any Issuer on any class
     of its capital stock.

          2.  Purchase and Resale of the Units. (a) On the basis of the
              --------------------------------
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Issuers agree to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuers, the number of Units set forth opposite the name of such Initial
Purchaser on Schedule I hereto at a purchase price of $933.77 per Unit. Each of
             ----------
the Guarantors will issue its Guarantee at the time of issuance and sale of the
Notes. The Issuers shall not be obligated to deliver any of the Units except
upon payment for all of the Units to be purchased as provided herein.

          (b)  The Initial Purchasers have advised the Issuers that they propose
to offer the Units for resale upon the terms and subject to the conditions set
forth herein and in the Offering Memorandum.  Each Initial Purchaser, severally
and not jointly, represents, warrants and agrees that (i) it is purchasing the
Units pursuant to a private sale exempt from registration under the Securities
Act, (ii) it has not solicited offers for, or offered or sold, and will not
solicit offers for, or offer or sell, the Securities by means of any form of
general solicitation or

                                      -14-
<PAGE>

general advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D") or in any manner involving a public offering
                 ------------
within the meaning of Section 4(2) of the Securities Act and (iii) it has
solicited and will solicit offers for the Units only from, and has offered or
sold and will offer, sell or deliver the Units, as part of their initial
offering, only (A) within the United States (x) to persons whom it reasonably
believes to be qualified institutional buyers ("Qualified Institutional
                                                -----------------------
Buyers"), as defined in Rule 144A under the Securities Act ("Rule 144A"), or if
------                                                       ---------
any such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented to
it that each such account is a Qualified Institutional Buyer to whom notice has
been given that such sale or delivery is being made in reliance on Rule 144A and
in each case, in transactions in accordance with Rule 144A or (y) to a limited
number of other institutional investors reasonably believed by the Initial
Purchasers to be institutional "Accredited Investors", as defined under Rule
501(a)(1), (2), (3) or (7) under the Securities Act, and (B) outside the United
States to persons other than U.S. persons in reliance on Regulation S under the
Securities Act ("Regulation S").
                 ------------

          (c)  In connection with the offer and sale of Units in reliance on
Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:

          (i)   The Units have not been registered under the Securities Act and
     may not be offered or sold within the United States or to, or for the
     account or benefit of, U.S. persons except pursuant to an exemption from,
     or in transactions not subject to, the registration requirements of the
     Securities Act.

          (ii)  Such Initial Purchaser has offered and sold the Units, and will
     offer and sell the Units, (A) as part of their distribution at any time and
     (B) otherwise until 40 days after the later of the commencement of the
     offering of the Securities and the Closing Date, only in accordance with
     Regulation S, Rule 144A or Rules 501(a) (1), (2), (3) or (7) or any other
     available exemption from registration under the Securities Act.

          (iii) None of such Initial Purchaser or any of its affiliates or any
     other person acting on its or their behalf has engaged or will engage in
     any directed selling efforts with respect to the Units, and all such
     persons have complied and will comply with the offering restrictions
     requirement of Regulation S.

          (iv)  At or prior to the confirmation of sale of any Units sold in
     reliance on Regulation S, it will have sent to each distributor, dealer or
     other person receiving a selling concession, fee or other remuneration that
     purchase Units from it during the restricted period a confirmation or
     notice to substantially the following effect:

                                      -15-
<PAGE>

          "The Securities covered hereby have not been registered under the U.S.
          Securities Act of 1933, as amended (the "Securities Act"), and may not
          be offered or sold within the United States or to, or for the account
          or benefit of, U.S. persons (i) as part of their distribution at any
          time or (ii) otherwise until 40 days after the later of the
          commencement of the offering of the Securities and the date of
          original issuance of the Securities, except in accordance with
          Regulation S Rules 501(a)(1), (2), (3) or (7) or Rule 144A or any
          other available exemption from registration under the Securities Act.
          Terms used above have the meanings given to them by Regulation S."

          (v)   It has not and will not enter into any contractual arrangement
     with any distributor with respect to the distribution of the Units, except
     with its affiliates or with the prior written consent of the Company and
     Holdings.

Terms used in this Section 2(c) have the meanings given to them by Regulation S.

          (d)  Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and prior to the date
six months after the Closing Date will not offer or sell any Units to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Public Offers of Securities Regulations 1995 with
respect to anything done by it in relation to the Securities in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Units to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.

          (e)  Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Units purchased by such Initial
Purchaser from the Issuers pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Issuers shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale).  In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Issuers and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(d) and (e), counsel for the Issuers and for the Initial
Purchas-

                                      -16-
<PAGE>

ers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such
reliance.

          (f)  The Issuers acknowledge and agree that the Initial Purchasers may
sell Securities to any affiliate of an Initial Purchaser and that any such
affiliate may sell Securities purchased by it to an Initial Purchaser.

          3.  Delivery of and Payment for the Units. (a) Delivery of and payment
              -------------------------------------
for the Units shall be made at the offices of Kirkland & Ellis, New York, New
York, or at such other place as shall be agreed upon by the Initial Purchasers
and the Issuers, at 10:00 A.M., New York City time, on August 6, 1999, or at
such other time or date, not later than seven full business days thereafter, as
shall be agreed upon by the Initial Purchasers and the Issuers (such date and
time of payment and delivery being referred to herein as the "Closing Date").
                                                              ------------

          (b)  On the Closing Date, payment of the purchase price for the Units
shall be made to the Company and Holdings by wire or book-entry transfer of
same-day funds to such account or accounts as the Company and Holdings shall
specify prior to the Closing Date or by such other means as the parties hereto
shall agree prior to the Closing Date against delivery to the Initial Purchasers
of the certificates evidencing the Units, the Notes and the Warrants.  Time
shall be of the essence, and delivery at the time and place specified pursuant
to this Agreement is a further condition of the obligations of the Initial
Purchasers hereunder.  Upon delivery, the Units, the Notes and the Warrants
shall be in global form, registered in such names and in such denominations as
CSI on behalf of the Initial Purchasers shall have requested in writing not less
than two full business days prior to the Closing Date.  The Issuers agree to
make one or more global certificates evidencing the Units, the Notes and the
Warrants available for inspection by CSI on behalf of the Initial Purchasers in
New York, New York at least 24 hours prior to the Closing Date.

          4.   Further Agreements of the Issuers. Each of the Issuers agrees
               ---------------------------------
with each of the several Initial Purchasers:

          (a)  prior to the resale of the Units by the Initial Purchasers, to
     advise the Initial Purchasers promptly and, if requested, confirm such
     advice in writing, of the happening of any event which makes any statement
     of a material fact made in the Offering Memorandum untrue or which requires
     the making of any additions to or changes in the Offering Memorandum (as
     amended or supplemented from time to time) in order to make the statements
     therein, in the light of the circumstances under which they were made, not
     misleading; and upon receipt of such notice, each Initial

                                      -17-
<PAGE>

     Purchaser agrees to suspend use of the Offering Memorandum until the
     Issuers have amended or supplemented the Offering Memorandum to correct
     such misstatement or omission or to effect compliance with this paragraph
     (a); to advise the Initial Purchasers promptly of any order preventing or
     suspending the use of the Preliminary Offering Memorandum or the Offering
     Memorandum, of any suspension of the qualification of the Securities for
     offering or sale in any jurisdiction and of the initiation or threatening
     of any proceeding for any such purpose; and to use its best efforts to
     prevent the issuance of any such order preventing or suspending the use of
     the Preliminary Offering Memorandum or the Offering Memorandum or
     suspending any such qualification and, if any such suspension is issued, to
     obtain the lifting thereof at the earliest possible time;

          (b)  to furnish as soon as available to each of the Initial Purchasers
     and counsel for the Initial Purchasers, without charge, as many copies of
     the Preliminary Offering Memorandum and the Offering Memorandum (and any
     amendments or supplements thereto) as may be reasonably requested;

          (c)  prior to making any amendment or supplement to the Offering
     Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
     counsel for the Initial Purchasers and not to effect any such amendment or
     supplement to which the Initial Purchasers shall reasonably object by
     notice to the Issuers after a reasonable period to review;

          (d)  if, at any time prior to completion of the resale of the
     Securities by the Initial Purchasers, any event shall occur or condition
     exist as a result of which it is necessary, in the opinion of counsel for
     the Initial Purchasers or counsel for the Issuers, to amend or supplement
     the Offering Memorandum in order that the Offering Memorandum will not
     include an untrue statement of a material fact or omit to state a material
     fact necessary in order to make the statements therein, in the light of the
     circumstances existing at the time it is delivered to a purchaser, not
     misleading, or if it is necessary to amend or supplement the Offering
     Memorandum to comply with applicable law, to promptly prepare such
     amendment or supplement as may be necessary to correct such untrue
     statement or omission or so that the Offering Memorandum, as so amended or
     supplemented, will comply with applicable law;

          (e)  for so long as any Securities are outstanding and are "restricted
     securities" within the meaning of Rule 144(a)(3) under the Securities Act,
     to furnish to holders of the Securities and prospective purchasers of the
     Securities designated by such holders, upon request of such holders or such
     prospective purchasers, the information required to be delivered pursuant
     to Rule 144A(d)(4) under the Securities Act, unless

                                      -18-
<PAGE>

     the Issuers are then subject to and in compliance with Section 13 or 15(d)
     of the Exchange Act (the foregoing agreement being for the benefit of the
     holders from time to time of the Securities and prospective purchasers of
     the Securities designated by such holders);

          (f)  for so long as any Securities are outstanding, to furnish to each
     Initial Purchaser, as soon as practicable after the end of each fiscal
     year, a copy of its annual report to stockholders for such year and, as
     soon as available, a copy of each report filed by the Company with the
     Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
     be designated by the Commission, and such other documents, reports and
     information as shall be furnished by the Company or Holdings to the
     Trustee, the Warrant Agent or to the holders of the Securities pursuant to
     the Indenture, the Warrant Agreement or the Exchange Act or any rule or
     regulation of the Commission thereunder;

          (g)  to promptly take from time to time such actions as the Initial
     Purchasers may reasonably request to qualify the Securities for offering
     and sale under the securities or Blue Sky laws of such jurisdictions as the
     Initial Purchasers may designate and to continue such qualifications in
     effect for so long as required for the resale of the Securities; and to
     arrange for the determination of the eligibility for investment of the
     Securities under the laws of such jurisdictions as the Initial Purchasers
     may reasonably request; provided that Holdings and its subsidiaries shall
                             --------
     not be obligated to qualify as foreign corporations in any jurisdiction in
     which they are not so qualified or to file a general consent to service of
     process in any jurisdiction;

          (h)  to assist the Initial Purchasers in arranging for the Units, the
     Notes and the Warrants to be designated Portal Market ("Portal Market")
                                                             -------------
     securities in accordance with the rules and regulations adopted by the
     National Association of Securities Dealers, Inc. ("NASD") relating to
                                                        ----
     trading in the Portal Market and for the Securities to be eligible for
     clearance and settlement through The Depository Trust Company ("DTC");
                                                                     ---
          (i)  not to, and to cause its affiliates not to, sell, offer for sale
     or solicit offers to buy or otherwise negotiate in respect of any security
     (as such term is defined in the Securities Act) which could be integrated
     with the sale of the Securities in a manner which would require
     registration of the Securities under the Securities Act;

          (j)  except following the effectiveness of the Exchange Offer
     Registration Statement or the Shelf Registration Statement, as the case may
     be, not to, and to cause its affiliates not to, and not to authorize or
     knowingly permit any person acting on their

                                      -19-
<PAGE>

     behalf to, solicit any offer to buy or offer to sell the Securities by
     means of any form of general solicitation or general advertising within the
     meaning of Regulation D or in any manner involving a public offering within
     the meaning of Section 4(2) of the Securities Act; and not to offer, sell,
     contract to sell or otherwise dispose of, directly or indirectly, any
     securities under circumstances where such offer, sale, contract or
     disposition would cause the exemption afforded by Section 4(2) of the
     Securities Act to cease to be applicable to the offering and sale of the
     Securities as contemplated by this Agreement and the Offering Memorandum;

          (k)  for a period of 180 days from the date of the Offering
     Memorandum, not to offer for sale, sell, contract to sell or otherwise
     dispose of, directly or indirectly, or file a registration statement for,
     or announce any offer, sale, contract for sale of or other disposition of
     any debt securities issued or guaranteed by any of the Issuers (other than
     the Securities) without the prior written consent of the Initial
     Purchasers;

          (l)  during the period from the Closing Date until two years after the
     Closing Date, without the prior written consent of the Initial Purchasers,
     not to, and not permit any of its affiliates (as defined in Rule 144 under
     the Securities Act) to, resell any of the Securities that have been
     reacquired by them, except for Securities purchased by the Company or any
     of its affiliates and resold in a transaction registered under the
     Securities Act;

          (m)  not to, for so long as the Securities are outstanding, be or
     become, or be or become owned by, an open-end investment company, unit
     investment trust or face-amount certificate company that is or is required
     to be registered under Section 8 of the Investment Company Act, and to not
     be or become, or be or become owned by, a closed-end investment company
     required to be registered, but not registered thereunder;

          (n)  in connection with the offering of the Securities, until CSI on
     behalf of the Initial Purchasers shall have notified the Company of the
     completion of the resale of the Securities, not to, and to cause its
     affiliated purchasers (as defined in Regulation M under the Exchange Act)
     not to, either alone or with one or more other persons, bid for or
     purchase, for any account in which it or any of its affiliated purchasers
     has a beneficial interest, any Securities, or attempt to induce any person
     to purchase any Securities; and not to, and to cause its affiliated
     purchasers not to, make bids or purchase for the purpose of creating
     actual, or apparent, active trading in or of raising the price of the
     Securities;

                                      -20-
<PAGE>

          (o)  in connection with the offering of the Securities, to make its
     officers, employees, independent accountants and legal counsel reasonably
     available upon request by the Initial Purchasers;

          (p)  to furnish to each of the Initial Purchasers on the date hereof a
     copy of the independent accountants' report included in the Offering
     Memorandum signed by the accountants rendering such report;

          (q)  to do and perform all things required to be done and performed by
     it under this Agreement that are within its control prior to or after the
     Closing Date, and to use its best efforts to satisfy all conditions
     precedent on its part to the delivery of the Securities;

          (r)  to not take any action prior to the execution and delivery of the
     Transaction Documents which, if taken after such execution and delivery,
     would have violated any of the covenants contained in the Transaction
     Documents;

          (s)  to not take any action prior to the Closing Date which would
     require the Offering Memorandum to be amended or supplemented pursuant to
     Section 4(d);

          (t)  prior to the Closing Date, not to issue any press release or
     other communication directly or indirectly or hold any press conference
     with respect to any Issuer, its condition, financial or otherwise, or
     earnings, business affairs or business prospects (except for routine oral
     marketing communications in the ordinary course of business and consistent
     with the past practices of such Issuer and of which the Initial Purchasers
     are notified), without the prior written consent of the Initial Purchasers,
     unless in the judgment of such Issuer and its counsel, and after
     notification to the Initial Purchasers, such press release or communication
     is required by law; and

          (u)  to apply the net proceeds from the sale of the Units as set forth
     in the Offering Memorandum under the heading "Use of Proceeds".

          5.   Conditions of Initial Purchasers' Obligations.  The respective
               ---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and, in all material respects, as of the
Closing Date, of the representations and warranties of each of the Issuers
contained herein, to the accuracy of the statements of each of the Issuers and
its officers made in any certificates delivered pursuant hereto, to the
performance by each of the Issuers of its respective obligations hereunder, and
to each of the following additional terms and conditions:

                                      -21-
<PAGE>

          (a)  The Offering Memorandum (and any amendments or supplements
     thereto) shall have been printed and copies distributed to the Initial
     Purchasers as promptly as practicable on or following the date of this
     Agreement or at such other date and time as to which the Initial Purchasers
     may agree; and no stop order suspending the sale of the Securities in any
     jurisdiction shall have been issued and no proceeding for that purpose
     shall have been commenced or shall be pending or threatened.

          (b)  None of the Initial Purchasers shall have discovered and
     disclosed in writing to any of the Issuers on or prior to the Closing Date
     that the Offering Memorandum or any amendment or supplement thereto
     contains an untrue statement of a fact which, in the opinion of counsel for
     the Initial Purchasers, is material or omits to state any fact which, in
     the opinion of such counsel, is material and is required to be stated
     therein or is necessary to make the statements therein not misleading.

          (c)  All corporate proceedings and other legal matters incident to the
     authorization, form and validity of each of the Transaction Documents and
     the Offering Memorandum, and all other legal matters relating to the
     Transaction Documents and the transactions contemplated thereby, shall be
     satisfactory in all material respects to the Initial Purchasers, and each
     Issuer shall have furnished to the Initial Purchasers all documents and
     information that they or their counsel may reasonably request to enable
     them to pass upon such matters.

          (d)  Kirkland & Ellis shall have furnished to the Initial Purchasers
     their written opinion, as counsel to the Issuers, addressed to the Initial
     Purchasers and dated the Closing Date, in the form and substance set forth
     in Annex B hereto.
        -------

          (e)  Hunton & Williams, local Virginia counsel to Holdings, shall have
     furnished to the Initial Purchasers their written opinion, addressed to the
     Initial Purchasers and dated the Closing Date in form and substance
     reasonably acceptable to the Initial Purchasers.

          (f)  The Initial Purchasers shall have received from Cahill Gordon &
     Reindel, counsel for the Initial Purchasers, such opinion or opinions,
     dated the Closing Date, with respect to such matters as the Initial
     Purchasers may reasonably require, and each Issuer shall have furnished to
     such counsel such documents and information as they reasonably request for
     the purpose of enabling them to pass upon such matters.

          (g)  Each of the Issuers shall have furnished to the Initial
     Purchasers a letter (the "Initial Letter") of each of Deloitte & Touche LLP
                               --------------
     and KPMG LLP addressed to

                                      -22-
<PAGE>

     the Initial Purchasers and dated the date hereof, in form and substance
     satisfactory to the Initial Purchasers.

          (h)  Each of the Issuers shall have furnished to the Initial
     Purchasers a letter (the "Bring-Down Letter") of Deloitte & Touche LLP and
                               -----------------
     KPMG LLP, addressed to the Initial Purchasers and dated the Closing Date
     (i) confirming that they are independent public accountants with respect to
     the Issuers and their subsidiaries within the meaning of Rule 101 of the
     Code of Professional Conduct of the AICPA and its interpretations and
     rulings thereunder, (ii) stating, as of the date of the Bring-Down Letter
     (or, with respect to matters involving changes or developments since the
     respective dates as of which specified financial information is given in
     the Offering Memorandum, as of a date not more than three business days
     prior to the date of the Bring-Down Letter), that the conclusions and
     findings of such accountants with respect to the financial information and
     other matters covered by the Initial Letter are accurate and (iii)
     confirming in all material respects the conclusions and findings set forth
     in the Initial Letter.

          (i)  Each of the Company and Holdings shall have furnished to the
     Initial Purchasers a certificate, dated the Closing Date, of its vice
     presidents stating that (A) such officers have carefully examined the
     Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of
     its date, did not include any untrue statement of a material fact and did
     not omit to state a material fact required to be stated therein or
     necessary in order to make the statements therein, in the light of the
     circumstances under which they were made, not misleading, and since the
     date of the Offering Memorandum, no event has occurred which should have
     been set forth in a supplement or amendment to the Offering Memorandum so
     that the Offering Memorandum (as so amended or supplemented) would not
     include any untrue statement of a material fact and would not omit to state
     a material fact required to be stated therein or necessary in order to make
     the statements therein, in the light of the circumstances under which they
     were made, not misleading and (C) as of the Closing Date, the
     representations and warranties of such Issuer in this Agreement are true
     and correct in all material respects, such Issuer has complied with all
     agreements and satisfied all conditions on its part to be performed or
     satisfied hereunder on or prior to the Closing Date, and subsequent to the
     date of the most recent financial statements contained in the Offering
     Memorandum, there has been no material adverse change in the financial
     position or results of operation of the Company or any of the Subsidiaries,
     or any change, or any development including a prospective change, in or
     affecting the condition (financial or otherwise), results of operations,
     business or prospects of the Company and the Subsidiaries taken as a whole,
     except as set forth in the Offering Memorandum.

                                      -23-
<PAGE>

          (j)  The Initial Purchasers shall have received a counterpart of each
     Registration Rights Agreement which shall have been duly executed and
     delivered by a duly authorized officer of each of the applicable Issuers.

          (k)  The Indenture shall have been duly executed and delivered by each
     of the Notes Issuers and the Trustee in form and substance reasonably
     satisfactory to the Initial Purchasers, and the Notes shall have been duly
     executed and delivered by the Company and duly authenticated by the Trustee
     and the Guarantee of each Guarantor shall have been endorsed thereon.

          (l)  The Units shall have been duly executed and delivered by each of
     the Issuers and the Unit Agent in form and substance reasonably
     satisfactory to the Initial Purchasers.

          (m)  The Warrants shall have been duly executed and delivered by
     Holdings and the Warrant Agent in form and substance reasonably
     satisfactory to the Initial Purchasers.

          (n)  The Securities shall have been approved by the NASD for trading
     in the Portal Market.

          (o)  If any event shall have occurred that requires the Issuers under
     Section 4(d) to prepare an amendment or supplement to the Offering
     Memorandum, such amendment or supplement shall have been prepared, the
     Initial Purchasers shall have been given a reasonable opportunity to
     comment thereon, and copies thereof shall have been delivered to the
     Initial Purchasers reasonably in advance of the Closing Date.

          (p)  There shall not have occurred any invalidation of Rule 144A under
     the Securities Act by any court or any withdrawal or proposed withdrawal of
     any rule or regulation under the Securities Act or the Exchange Act by the
     Commission or any amendment or proposed amendment thereof by the Commission
     which in the reasonable judgment of the Initial Purchasers would materially
     impair the ability of the Initial Purchasers to purchase, hold or effect
     resales of the Securities as contemplated hereby.

          (q)  Subsequent to the execution and delivery of this Agreement or, if
     earlier, the dates as of which information is given in the Offering
     Memorandum (exclusive of any amendment or supplement thereto), there shall
     not have been any change in the capital stock or long-term debt or any
     change, or any development involving a prospective change, in or affecting
     the condition (financial or otherwise), results of op-

                                      -24-
<PAGE>

     erations, business or prospects of the Issuers taken as a whole, the effect
     of which, in any such case described above, is, in the reasonable judgment
     of the Initial Purchasers, so material and adverse as to make it
     impracticable or inadvisable to proceed with the sale or delivery of the
     Securities on the terms and in the manner contemplated by this Agreement
     and the Offering Memorandum (exclusive of any amendment or supplement
     thereto).

          (r)  No action shall have been taken and no statute, rule, regulation
     or order shall have been enacted, adopted or issued by any governmental
     agency or body which would, as of the Closing Date, prevent the issuance or
     sale of the Securities; and no injunction, restraining order or order of
     any other nature by any federal or state court of competent jurisdiction
     shall have been issued as of the Closing Date which would prevent the
     issuance or sale of the Securities.

          (s)  Subsequent to the execution and delivery of this Agreement (i) no
     downgrading shall have occurred in the rating accorded the Notes or any of
     the Company's other debt securities or preferred stock by any "nationally
     recognized statistical rating organization", as such term is defined by the
     Commission for purposes of Rule 436(g)(2) of the rules and regulations of
     the Commission under the Securities Act and (ii) no such organization shall
     have publicly announced that it has under surveillance or review (other
     than an announcement with positive implications of a possible upgrading),
     its rating of the Notes or any of the Company's other debt securities or
     preferred stock.

          (t)  Subsequent to the execution and delivery of this Agreement there
     shall not have occurred any of the following: (i) trading in securities
     generally on the New York Stock Exchange, the American Stock Exchange or
     the over-the-counter market shall have been suspended or materially
     limited, or minimum prices shall have been established on any such exchange
     or market by the Commission, by any such exchange or by any other
     regulatory body or governmental authority having jurisdiction, or trading
     in any securities of the Issuers on any exchange or in the over-the-counter
     market shall have been suspended or (ii) any moratorium on commercial
     banking activities shall have been declared by federal or New York state
     authorities or (iii) an outbreak or escalation of hostilities or a
     declaration by the United States of a national emergency or war or (iv) a
     material adverse change in general economic, political or financial
     conditions (or the effect of international conditions on the financial
     markets in the United States shall be such) the effect of which, in the
     case of this clause (iv), is, in the reasonable judgment of the Initial
     Purchasers, so material and adverse as to make it impracticable or
     inadvisable to proceed with the sale or the delivery of the

                                      -25-
<PAGE>

     Units on the terms and in the manner contemplated by this Agreement and in
     the Offering Memorandum (exclusive of any amendment or supplement thereto).

          (u)  On or before the Closing Date, (i) the Credit Agreement shall
     have been entered into in form and substance reasonably satisfactory to the
     Initial Purchasers, (ii) the Initial Purchasers and counsel for the Initial
     Purchasers shall have received executed copies of the Credit Agreement,
     dated the Closing Date, and such other documents, opinions and reliance
     letters as they shall have reasonably requested, (iii) all conditions
     necessary for the effectiveness of the Credit Agreement shall have been
     satisfied without waiver or amendment, (iv) after giving effect to the
     transactions contemplated by this Agreement and the application of the
     proceeds received by the Company from the sale of the Units, no condition
     that would constitute a default or event of default under the Credit
     Agreement shall exist and (v) no amount shall be outstanding under the
     Credit Agreement on the Closing Date (after giving effect to all borrowings
     on the Closing Date).

          (v)  The Company shall contemporaneously consummate the
     Recapitalization and the related transactions on substantially the terms
     described in the Offering Memorandum, including the Merger, the Credit
     Agreement and the Equity Investment, each as described in the Offering
     Memorandum, and there shall have been no material amendments, alterations,
     modifications or waivers of any material provisions of the Transaction
     Agreement as of the Closing Date.

          (w)  The Initial Purchasers shall have received from Murray Devine &
     Co. a solvency opinion with respect to the Issuers, addressed to the
     Initial Purchasers and dated the Closing Date, in form and substance
     reasonably satisfactory to the Initial Purchasers.

          (x)  Each of the Transaction Documents shall have been duly executed
     and delivered by each of the applicable Issuers in form and substance
     reasonably satisfactory to the Initial Purchasers.

          All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.

          6.   Termination.  The obligations of the Initial Purchasers hereunder
               -----------
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Company prior to delivery of and payment for
the Units if, prior to that time,

                                      -26-
<PAGE>

any of the events described in Section 5(p), (q), (r), (s) and (t) shall have
occurred and be continuing.

          7.   Defaulting Initial Purchasers.  (a)  If one or more Initial
               -----------------------------
Purchaser defaults in its obligation to purchase Units hereunder and the number
of Units that such defaulting Initial Purchasers agreed but failed to purchase
does not exceed 10% of the total number of Units, CSI may make arrangements
satisfactory to the Issuers for the purchase of such Units by other persons,
including other Initial Purchasers, but if no such arrangements are made by the
Closing Date, the non-defaulting Initial Purchasers shall be obligated to
purchase the Units that such defaulting Initial Purchaser agreed but failed to
purchase. If one or more Initial Purchasers so defaults and the number of Units
with respect to which such default occurs exceeds 10% of the total number of
Units and arrangements satisfactory to CSI and the Issuers for the purchase of
such Units by other persons are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of the non-
defaulting Initial Purchasers or the Issuers, except that the Issuers will
continue to be liable for the payment of expenses to the extent set forth in
Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not
terminate and shall remain in effect. As used in this Agreement, the term
"Initial Purchasers" includes, for all purposes of this Agreement unless the
context otherwise requires, any party not listed in Schedule I hereto that,
                                                    ----------
pursuant to this Section 7, purchases Units which a defaulting Initial Purchaser
agreed but failed to purchase.

          (b)  Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Issuers or any non-defaulting
Initial Purchaser for damages caused by its default.  If other persons are
obligated or agree to purchase the Units of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or the Issuers may postpone the
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Issuers or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or arrangement, and the Issuers agree to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes.

          8.   Reimbursement of Initial Purchasers' Expenses.  If (a) this
               ---------------------------------------------
Agreement shall have been terminated pursuant to Section 6 or 7, (b) the Issuers
shall fail to tender the Units for delivery to the Initial Purchasers for any
reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Units for any reason permitted under this Agreement, the
Issuers, jointly and severally, shall reimburse the Initial Purchasers for such
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
as shall have been reasonably incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase and resale of the Units. If this
Agreement is terminated pursuant to

                                      -27-
<PAGE>

Section 7 by reason of the default of one or more of the Initial Purchasers, the
Issuers shall not be obligated to reimburse any defaulting Initial Purchaser on
account of such expenses.

          9.   Indemnification.  (a)  Each of the Issuers, jointly and
               ---------------
severally, shall indemnify and hold harmless each Initial Purchaser, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls any Initial Purchaser within the
meaning of the Securities Act or the Exchange Act (collectively referred to for
purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of the Units), to which that
Initial Purchaser may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or in any information provided by the Issuers pursuant to Section 4(e)
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
                                                           --------  -------
that the Issuers shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Initial Purchasers' Information; and provided, further, that with respect to any
                                     --------  -------
such untrue statement in or omission from the Preliminary Offering Memorandum,
the indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale by such Initial Purchaser and any such loss, claim, damage, liability or
action of or with respect to such Initial Purchaser results from the fact that
both (A) to the extent required by applicable law, a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Units to such person and (B) the untrue
statement in or omission from the Preliminary Offering Memorandum was corrected
in the Offering Memorandum unless, in either case, such failure to deliver the
Offering Memorandum was a result of non-compliance by the Issuers with Section
4(b).

                                      -28-
<PAGE>

          (b)  Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless each of the Issuers, its affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls any Issuer within the meaning of the Securities Act
or the Exchange Act (collectively referred to for purposes of this Section 9(b)
and Section 10 as the "Issuers"), from and against any loss, claim, damage or
                       -------
liability, joint or several, or any action in respect thereof, to which the
Issuers may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Initial Purchasers' Information, and shall
reimburse the Issuers for any legal or other expenses reasonably incurred by the
Issuers in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred.

          (c)  Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
                                                                  --------
however, that the failure to notify the indemnifying party shall not relieve it
-------
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
                                          --------  -------
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9.  If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party.  After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
                                                      --------  -------
indemnified party shall have the right to employ its own

                                      -29-
<PAGE>

counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based upon advice of counsel to the indemnified party)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based upon advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 9(a) and 9(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.

          The obligations of the Issuers and the Initial Purchasers in this
Section 9 and in Section 10 are in addition to any other liability that the
Issuers or the Initial Purchasers, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.

          10.  Contribution.  If the indemnification provided for in Section 9
               ------------
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage

                                      -30-
<PAGE>

or liability, or action in respect thereof, (i) in such proportion as shall be
appropriate to reflect the relative benefits received by the Issuers on the one
hand and the Initial Purchasers on the other from the offering of the Units or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuers on the one hand and the Initial Purchasers on the other with respect
to the statements or omissions that resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Units purchased under this Agreement (before deducting expenses) received
by or on behalf of the Issuers, on the one hand, and the total discounts and
commissions received by the Initial Purchasers with respect to the Securities
purchased under this Agreement, on the other, bear to the total gross proceeds
from the sale of the Units under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to the Issuers or information supplied by the Issuers on
the one hand or to any Initial Purchasers' Information on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Issuers
and the Initial Purchasers agree that it would not be just and equitable if
contributions pursuant to this Section 10 were to be determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 10 shall be deemed
to include, for purposes of this Section 10, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending or preparing to defend any such action or claim. Notwithstanding
the provisions of this Section 10, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the Units
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute as provided in this Section 10 are several in
proportion to their respective purchase obligations and not joint.

                                      -31-
<PAGE>

          11.  Persons Entitled to Benefit of Agreement.  This Agreement shall
               ----------------------------------------
inure to the benefit of and be binding upon the Initial Purchasers, each of the
respective Issuers and their respective successors. This Agreement and the terms
and provisions hereof are for the sole benefit of only those persons, except as
provided in Sections 9 and 10 with respect to affiliates, officers, directors,
employees, representatives, agents and controlling persons of the Issuers and
the Initial Purchasers and in Section 4(e) with respect to holders and
prospective purchasers of the Securities. Nothing in this Agreement is intended
or shall be construed to give any person, other than the persons referred to in
this Section 11, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.

          12.  Expenses.  Each of the Issuers, jointly and severally, agree
               --------
with the Initial Purchasers to pay (a) the costs incident to the authorization,
issuance, sale, preparation and delivery of the Securities and any taxes payable
in that connection; (b) the costs incident to the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
any amendments or supplements thereto; (c) the costs of reproducing and
distributing each of the Transaction Documents; (d) the costs incident to the
preparation, printing and delivery of the certificates evidencing the
Securities, including stamp duties and transfer taxes, if any, payable upon
issuance of the Securities; (e) the fees and expenses of the Issuers' counsel
and independent accountants; (f) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided in
Section 4(h) and of preparing, printing and distributing Blue Sky Memoranda
(including related fees and expenses of counsel for the Initial Purchasers); (g)
any fees charged by rating agencies for rating the Securities; (h) the fees and
expenses of the Trustee, the Unit Agent and the Warrant Agent and any paying
agent (including related fees and expenses of any counsel to such parties); (i)
all expenses and application fees incurred in connection with the application
for the inclusion of the Securities on the Portal Market and the approval of the
Securities for book-entry transfer by DTC; and (j) all other costs and expenses
incident to the performance of the obligations of the Issuers under this
Agreement which are not otherwise specifically provided for in this Section 12;
provided, however, that except as provided in this Section 12 and Section 8,
--------  -------
the Initial Purchasers shall pay their own costs and expenses.

          13.  Survival.  The respective indemnities, rights of contribution,
               --------
representations, warranties and agreements of the Issuers and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Issuers or
the Initial Purchasers pursuant to this Agreement or any certificate delivered
pursuant hereto shall survive the delivery of and payment for the Units and
shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
of them or any of their respective affiliates, officers, directors, employees,
representatives, agents or controlling persons.

                                      -32-
<PAGE>

          14.  Notices, etc.  All statements, requests, notices and agreements
               ------------
hereunder shall be in writing, and:

          (a)  if to the Initial Purchasers, shall be delivered or sent by mail
     or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
     York, New York 10017, Attention: James C. Neary (telecopier no.: (212) 270-
     0994); or

          (b)  if to the Issuers, shall be delivered or sent by mail or telecopy
     transmission to the address of the Company set forth in the Offering
     Memorandum, Attention: Jon Studner (telecopier no.: (301) 856-0380);

provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
--------
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof.  Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.  The Issuers shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.

          15.  Definition of Terms.  For purposes of this Agreement, (a) the
               -------------------
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.

          16.  Initial Purchasers' Information.  The parties hereto acknowledge
               -------------------------------
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: the statements concerning the
Initial Purchasers contained in the third paragraph, the fifth and sixth
sentences of the eighth paragraph and the ninth and tenth paragraphs, in each
case, under the heading "Plan of Distribution".

          17.  Governing Law.  This Agreement shall be governed by and
               -------------
construed in accordance with the laws of the State of New York.

          18.  Counterparts.  This Agreement may be executed in one or more
               ------------
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.

          19.  Amendments.  No amendment or waiver of any provision of this
               ----------
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.

                                      -33-
<PAGE>

          20.  Headings.  The headings herein are inserted for convenience of
               --------
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.

                            [Signature Pages Follow]

                                      -34-
<PAGE>

          If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement between each of the Issuers and the
several Initial Purchasers in accordance with its terms.

                            Very truly yours,

                            MATTRESS DISCOUNTERS CORPORATION

                                  /s/ Jon Studner
                            By: _____________________________________________
                                Name: Jon Studner
                                Title: Senior Vice President

                            T.J.B., INC., as a Guarantor

                                  /s/ Jon Studner
                            By: _____________________________________________
                                Name: Jon Studner
                                Title: Senior Vice President

                            THE BEDDING EXPERTS, INC.,
                                as a Guarantor

                                 /s/ Jon Studner
                           By: _____________________________________________
                                Name: Jon Studner
                                Title: Senior Vice President

                            MATTRESS DISCOUNTERS HOLDING
                                CORPORATION

                                  /s/ Michael Krupka
                            By: _____________________________________________
                                Name: Michael Krupka
                                Title:

                                      -35-
<PAGE>

Accepted:

CHASE SECURITIES INC.

        /s/ Ira Ginsburg
By: ___________________________________________
          Authorized Signatory

Address for notices pursuant to Section 9(c):

   1 Chase Plaza, 25th floor
   New York, New York 10081
   Attention: Legal Department

CIBC WORLD MARKETS CORP.

        /s/ Kevin Migiel
By: ___________________________________________
          Authorized Signatory

Address for notices pursuant to Section 9(c):

   CIBC World Markets Corp.
   425 Lexington Avenue
   New York, New York 10017
   Attention: Kevin Migiel

BANCBOSTON ROBERTSON STEPHENS INC.

        /s/ Greg Foy
By: ___________________________________________
          Authorized Signatory

Address for notices pursuant to Section 9(c):

   BancBoston Robertson Stephens Inc.
   100 Federal Street, Mail Stop D1-11-03
   Boston, Massachusetts 02110
   Attention: Greg Foy

                                      -36-
<PAGE>

                                                                      SCHEDULE I
                                                                      ----------

                                                                        Number
Initial Purchasers                                                     of Units
------------------                                                    ----------
Chase Securities Inc.                                                   98,000

CIBC World Markets Corp.                                                28,000

BancBoston Robertson Stephens Inc.                                      14,000
                                                                      ----------

          Total                                                        140,000
<PAGE>

                                                                       ANNEX A-1
                                                                       ---------

                 [Form of Notes Registration Rights Agreement]
<PAGE>

                                                                       ANNEX A-2
                                                                       ---------

                 [Form of Stock Registration Rights Agreement]
<PAGE>

                                                                         ANNEX B
                                                                         -------

                 [Form of Opinion of Counsel for the Issuers]

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