Document:

Exhibit 10.9

 

AMENDMENT NUMBER FOUR TO FINANCING AGREEMENT

 

This AMENDMENT
NUMBER FOUR TO FINANCING AGREEMENT (this “Amendment”), dated
as of July 1, 2005, is entered into by and among MATTRESS FIRM, INC., a Delaware corporation
(“MFI”), and MATTRESS FIRM-GEORGIA,
INC. (formerly known as Georgia Mattress Corp.), a Georgia
corporation (“MFGI”; and together with MFI, each a “Borrower” and
collectively and jointly and severally, the “Borrowers”), MATTRESS HOLDING CORP., a Delaware
corporation (“Parent”), each Subsidiary of the Parent listed as a “Guarantor”
on the signature pages hereto (together with the Parent, each a “Guarantor”
and collectively, jointly and severally, the “Guarantors”), the lenders
from time to time party hereto (each a “Lender” and collectively, the “Lenders”),
ABLECO FINANCE LLC, a Delaware
limited liability company (“Ableco”), as collateral agent for the
Lenders (in such capacity, together with any successor collateral agent, the “Collateral
Agent”), and Ableco as administrative agent for the Lenders (in such
capacity, together with any successor administrative agent, the “Administrative
Agent” and together with the Collateral Agent, each an “Agent” and
collectively, the “Agents”).

 

W I T N E S S E T H

 

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

 

WHEREAS, at the request of the Loan Parties
and subject to the satisfaction of the conditions set forth herein, the Agents
and the Lenders are willing to amend the Financing Agreement as set forth
herein.

 

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

 

1.             DEFINITIONS

 

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

 

2.             AMENDMENTS TO
FINANCING AGREEMENT

 

(a)           The Financing Agreement hereby is
amended by changing each reference to “Borrower” to “Borrowers” and, as
necessary, amending any text of the Financing Agreement that refers to the “Borrower”
to properly refer to the “Borrowers”.

 

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

 

“The Borrowers
have asked the Lenders to extend credit to the Borrowers consisting of (a) a
term loan designated as Term Loan A in the aggregate principal amount of
$27,993,889.58 after giving effect to the new term

 

 

loan advance
described below that is being funded on the Fourth Amendment Effective Date and
(b) a revolving credit facility in an aggregate amount not to exceed $6,000,000
at any time outstanding.  On the Fourth
Amendment Effective Date, the Term Loan A Lenders are making a new term loan
advance to the Borrowers in the principal amount of $16,005,147.06 (hereinafter
referred to as the “Term Loan A Fourth Amendment Advance”) for the
purpose of providing funds for the Borrowers to pay in full the Sealy
Subordinated Debt owing to Subco, which will permit Subco to pay in full the
indebtedness owing under that certain Financing Agreement (the “Subco
Financing Agreement”), dated as of March 31, 2004, by and among Subco,
the lenders party from time to time thereto, and Ableco, as collateral agent
and administrative agent for the lenders. 
The existing principal balances under Term Loan A and under the term
loan formerly referred to hereunder as “Term Loan B” are being combined with
the new term loan advance and hereafter such combined loan will be referred to
as Term Loan A.  The Lenders are
severally, and not jointly, willing to extend such credit to the Borrowers subject
to the terms and conditions hereinafter set forth.”

 

(c)           Section 1.01 of the
Financing Agreement hereby is amended by deleting the following defined terms:

 

“Term Loan B”,
“Term Loan B Commitment”, “Term Loan B Lender”, “Term Loan B Obligations”, “Term
Loan B PIK Amount”, “Total Term Loan B Commitment”.

 

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

 

“Commitments”
means, with respect to each Lender, such Lender’s Revolving Credit Commitment
and Term Loan A Commitment.

 

“Fourth
Amendment” means that certain Amendment Number Four to Financing Agreement,
dated as of July 1, 2005, among the Borrowers, Parent, the Guarantors, the
Agents, and the Lenders.

 

“Fourth
Amendment Effective Date” means the date that all of the conditions set
forth in Section 4 of the Fourth Amendment shall be satisfied (or
waived by the Collateral Agent in its sole discretion).

 

“Loan”
means Term Loan A or any Revolving Loan made by an Agent or a Lender to the
Borrowers pursuant to Article II hereof.

 

“Obligations”
means all present and future indebtedness, obligations, and liabilities of each
Loan Party to the Agents and the Lenders, or any of them, under the Loan
Documents, whether or not the right of payment in

 

2

 

respect of
such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured, unsecured, and
whether or not such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 9.01.  Without limiting the generality of the
foregoing, the Obligations of each Loan Party under the Loan Documents include (a) the
obligation to pay principal, interest, charges, expenses, fees, attorneys’ fees
and disbursements, indemnities and other amounts payable by such Person under
the Loan Documents (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, whether or not allowed or allowable
in whole or in part as a claim in any such Insolvency Proceeding), and (b) the
obligation of such Person to reimburse any amount in respect of any of the foregoing
that any Agent or any Lender (in its sole discretion) may elect to pay or
advance on behalf of such Person.

 

“Pro Rata Share” means:

 

(a)           with respect to a Lender’s obligation
to make Revolving Loans and receive payments of interest, fees, and principal
with respect thereto, the percentage obtained by dividing (i) such Lender’s
Revolving Credit Commitment, by (ii) the Total Revolving Credit
Commitment, provided, that, if the Total Revolving Credit Commitment has been
reduced to zero, the numerator shall be the aggregate unpaid principal amount
of such Lender’s Revolving Loans (including Collateral Agent Advances) and the
denominator shall be the aggregate unpaid principal amount of all Revolving
Loans (including Collateral Agent Advances),

 

(b)           with respect to a Lender’s obligation
to make Term Loan A and receive payments of interest, fees, and principal with
respect thereto, the percentage obtained by dividing (i) such Lender’s
Term Loan A Commitment, by (ii) the Total Term Loan A Commitment, provided
that if the Total Term Loan A Commitment has been reduced to zero, the
numerator shall be the aggregate unpaid principal amount of such Lender’s
portion of Term Loan A and the denominator shall be the aggregate unpaid
principal amount of Term Loan A,

 

(c)           with respect to all other matters
(including, without limitation, the indemnification obligations arising under Section 10.05),
the percentage obtained by dividing (i) the sum of such Lender’s Revolving
Credit Commitment and the unpaid principal amount of such Lender’s portion of
Term Loan A, by (ii) the sum of the Total Revolving Credit Commitment and
the aggregate unpaid principal amount of Term Loan A, provided, that, if such
Lender’s Revolving Credit Commitment shall have been reduced to zero, such Lender’s
Revolving Credit Commitment shall be deemed to be the aggregate unpaid
principal amount of such Lender’s Revolving Loans (including Collateral Agent
Advances) and if the Total

 

3

 

Revolving
Credit Commitment shall have been reduced to zero, the Total Revolving Credit
Commitment shall be deemed to be the aggregate unpaid principal amount of all
Revolving Loans (including Collateral Agent Advances).

 

“Simmons
Supplier Proceeds” means the proceeds received by any Loan Party, or any
Subsidiary of any Loan Party, in the amount of $7,000,000 pursuant to that
certain Simmons New Dealer Incentive Agreement by and among Simmons Bedding
Company, Mattress Firm, Inc. and certain wholly-owned subsidiaries of
Mattress Firm, Inc. dated as of June 10, 2005.

 

“Subco
Financing Agreement” has the meaning specified therefor in the recitals
hereto.

 

“Term Loan
A Fourth Amendment Advance” means a Loan in the principal amount of
$16,005,147.06 to be made by the Term Loan A Lenders on the Fourth Amendment
Effective Date.

 

“Term Loan
Lenders” means the Term Loan A Lenders.

 

“Term Loans”
means Term Loan A.

 

“Total Term
Loan A Commitment” means $27,993,889.58, which amount is the sum of the
amounts of the Lenders’ Term Loan A Commitments.

 

“Total Term
Loan Commitment” means the Total Term Loan A Commitment.

 

(e)           Section 1.01 of the
Financing Agreement hereby is amended by deleting “$1,500,000” in clauses (d) and
(e) of the definition of “Permitted Indebtedness” and replacing it with “$2,500,000”.

 

(f)            Section 2.01(a) of
the Financing Agreement hereby is amended by deleting clause (iii) thereof
and amending and restating clauses (i) and (ii) thereof in their
entirety as follows:

 

“(i)          each Revolving Loan Lender severally
agrees to make Revolving Loans to the Borrowers at any time and from time to
time from the Effective Date to the Final Maturity Date, or until the earlier
reduction of its Revolving Credit Commitment to zero in accordance with the
terms hereof, in an aggregate principal amount of Revolving Loans at any time
outstanding not to exceed the amount of such Lender’s Revolving Credit
Commitment or its Pro Rata Share of the then extant Borrowing Base; and

 

(ii)           each Term Loan A Lender severally
agrees to make its portion of the Term Loan A Fourth Amendment Advance to the
Borrowers on the Fourth Amendment Effective Date.  Prior to funding the Term Loan A

 

4

 

Fourth
Amendment Advance, the outstanding principal balance of Term Loan A, as of the
Fourth Amendment Effective Date, is $5,853,186.26 and the outstanding principal
balance of the term loan formerly referred to herein as “Term Loan B”
(including accrued “paid-in-kind” interest), as of the Fourth Amendment
Effective Date, is $6,135,556.26.  On the
Fourth Amendment Effective Date, these existing term loan balances are being
combined with the Term Loan A Fourth Amendment Advance and such combined loan
hereafter shall be referred to as Term Loan A. 
The outstanding principal balance of Term Loan A, as of the Fourth
Amendment Effective Date, after giving effect to the foregoing transactions is
$27,993,889.58.”

 

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

 

“(ii)         Any principal amount of Term Loan A
that is repaid or prepaid may not be reborrowed.”

 

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

 

(i)            Section 2.03(b) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

“(b)         The outstanding principal of Term Loan
A shall be repayable in twenty-one (21) consecutive monthly installments on the
first day of each month commencing on July 1, 2005, consisting of (i) two
(2) consecutive monthly installments, each in an amount equal to $200,000,
followed by (ii) seven (7) consecutive monthly installments, each in
an amount equal to $100,000, followed by (iii) twelve (12) consecutive
monthly installments, each in an amount equal to $175,000.  The outstanding principal of all Loans, shall
be due and payable in full on the Final Maturity Date.”

 

(j)            Section 2.04 of the
Financing Agreement hereby is amended and restated in its entirety as follows:

 

(k)           “Section 2.04  Interest.

 

(a)           Term Loan A and Revolving Loans.  Except as provided in Section 2.04(b) below,
Term Loan A and any Revolving Loan shall bear interest on the principal amount
thereof from time to time outstanding, from the date of the making of the Loans
until such principal is repaid, at a rate per annum equal to the Reference Rate
plus 4.00 percentage points.

 

5

 

(b)           Default Interest.  To the extent permitted by law, upon the
occurrence and during the continuance of an Event of Default, the principal of,
and all accrued and unpaid interest on, all Loans, fees, indemnities, or any
other Obligations of the Loan Parties under this Agreement and the other Loan
Documents, shall bear interest, from the date such Event of Default occurred
until the date such Event of Default is cured or waived in writing in
accordance herewith, at a rate per annum equal at all times to the Post-Default
Rate.

 

(c)           Interest Payment.  Interest on each Loan shall be payable
monthly, in arrears, on the first day of each month, commencing on the first
day of the month following the month in which such Loan is made and at maturity
(whether upon demand, by acceleration or otherwise).  Interest at the Post-Default Rate shall be
payable on demand.  The Borrowers hereby
authorize the Administrative Agent to, and the Administrative Agent may, from
time to time, charge the Loan Account pursuant to Section 4.02 with
the amount of any interest payment due hereunder.

 

(d)           General.  All interest shall be computed on the basis
of a year of 360 days for the actual number of days, including the first day
but excluding the last day, elapsed.”

 

(l)            Section 2.05(a)(ii) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

“(ii)         The Total Term Loan A Commitment shall
terminate upon the making of Term Loan A in the aggregate principal amount of
the Total Term A Loan Commitment.”

 

(m)          Section 2.05(b)(iii) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

“(iii)        [Intentionally Omitted]”

 

(n)           Section 2.05(c) of
the Financing Agreement hereby is amended by adding the following new clause “(viii)”
to read as follows:

 

“(viii)      Within three Business Days of the receipt
by any Loan Party, or any Subsidiary of any Loan Party, of the Simmons Supplier
Proceeds, the Borrowers are required to use such proceeds to prepay the Term
Loan A in an amount of $500,000; such prepayment shall be applied against the
remaining installments of principal due on the Term Loan A in the inverse order
of maturity.”

 

(o)           Section 2.05(d)(i) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

6

 

“(i)          Each prepayment of the Loans made
pursuant to subsections (c)(iv), (c)(v), and (c)(vi) above shall be
applied, first, to Term Loan A until paid in full, and second, to
the Revolving Loans until paid in full; provided, that any prepayment of
the Loans pursuant to subsection (c)(vi) from Extraordinary Receipts
on account of proceeds of insurance or casualty proceeds, to the extent that
such Extraordinary Receipts relate to Eligible Inventory, shall be applied first
to the Revolving Loans until paid in full, and second, to Term Loan A
until paid in full.  Each such prepayment
of Term Loan A shall be applied against the remaining installments of principal
of Term Loan A in the inverse order of their maturity.  Each prepayment of the Revolving Loans
pursuant to the foregoing application of payments provision (other than
pursuant to the proviso set forth in the first sentence of this subsection (d)(i))
shall also reduce the Total Revolving Credit Commitment by an equivalent amount
and a reserve shall be imposed against the Borrowing Base in an equivalent
amount.”

 

(p)           Section 2.06(d) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

“(d)         Anniversary Fee.  The Borrowers shall pay to the Administrative
Agent, for the ratable benefit solely of the Term Loan A Lenders in accordance
with their Pro Rata Shares with respect to the Term Loan A, a non-refundable
anniversary fee (the “Anniversary Fee”) equal to 2% of the principal amount of
Term Loan A then outstanding on the date such Anniversary Fee is due, which
shall be fully earned on the Effective Date and payable on each anniversary of
the Effective Date occurring prior to the date on which all Obligations are
paid in full in cash and all Commitments have been terminated.”

 

(q)           Section 4.04(b) of
the Financing Agreement hereby is amended and restated in its entirety as
follows:

 

“(b)         After the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, and upon the
direction of the Required Lenders shall, apply all payments in respect of any
Obligations and all proceeds of the Collateral, subject to the provisions of
this Agreement, (i) first, ratably to pay the Obligations in
respect of any fees, expense reimbursements, indemnities and other amounts then
due to the Agents until paid in full; (ii) second, ratably to pay
any fees and indemnities then due to the Revolving Loan Lenders until paid in
full; (iii) third, ratably to pay interest due in respect of the
Revolving Loans and Collateral Agent Advances until paid in full; (iv) fourth,
ratably to pay principal of the Revolving Loans and Collateral Agent Advances
until paid in full; (v) fifth, ratably to pay any fees and
indemnities then due to the Term Loan A Lenders until paid in full; (vi) sixth,
ratably to pay

 

7

 

interest due
in respect of Term Loan A until paid in full; (vii) seventh,
ratably to pay principal of Term Loan A until paid in full, and (viii) eighth,
to the ratable payment of all other Obligations then due and payable.”

 

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

 

“(t)          Use of Proceeds.  The proceeds of the Loans shall be used (a) in
the case of the Term Loan A Fourth Amendment Advance to pay to Subco in full
the outstanding Sealy Subordinated Debt under the Subordinated Note, (b) to
pay fees and expenses in connection with the transactions contemplated hereby,
and (c) to fund working capital of the Borrowers and the Guarantors,
including the making of scheduled payments on the Elite Shareholder Notes so
long as, with respect to each such scheduled payment (a) no Event of
Default exists immediately before or immediately after giving effect to such
payment and (b) there is Availability of at least $3,000,000 at all times
within 30 days prior to the date of such payment and immediately after giving
effect to such payment.”

 

(s)           Schedule C-1 of the
Financing Agreement hereby is replaced in its entirety with a new version of Schedule C-1,
which is attached hereto and incorporated herein by this reference.

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

4.             CONDITIONS
PRECEDENT TO AMENDMENT

 

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

 

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

 

(b)           Administrative Agent shall have
received the fully executed payoff letter, dated as of the date hereof, by and
among the Borrowers and Subco, with respect to the repayment of the
Subordinated Note, which shall include, among other things, an authorization
for the Borrowers to file termination statements for all financing statements
filed by any holder of the Sealy Subordinated Debt.

 

(c)           Administrative Agent shall have
received the fully executed payoff letter, dated as of the date hereof, by and
between Subco and Ableco, with respect to the repayment of the indebtedness
under the Subco Financing Agreement.

 

(d)           Administrative Agent shall have
received the fully executed flow of funds agreement dated as of the date hereof
by and among the Borrowers, Subco, the Agents, the Lenders, and the lenders and
agents under the Subco Financing Agreement.

 

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

 

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

 

(g)           No injunction, writ, restraining
order, or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein shall have been

 

9

 

issued and remain in force by
any Governmental Authority against any Loan Party, either Agent, or any Lender.

 

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

 

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

 

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

 

8.             MISCELLANEOUS.

 

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

 

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

 

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

 

10

 

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

 

[SIGNATURE PAGES FOLLOW]

 

11

 

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

 

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM, INC.,

  
	
   

  	
  a Delaware
  corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer & Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM-GEORGIA, INC.,

  
	
   

  	
  a Georgia
  corporation,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer & Secretary

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER FOUR TO FINANCING AGREEMENT]

 

S-1

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  MATTRESS HOLDING CORP.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  MATTRESS FIRM INVESTMENT

  MANAGEMENT, INC.,

  
	
   

  	
  an Arizona
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael McCowvery

  
	
   

  	
   

  	
  Name: Michael McCowvery

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  FESTRO, INC.,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name:Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer & Secretary

  
	
   

  	
   

  
	
   

  	
  TEAMEXCEL MANAGEMENT COMPANY,

  
	
   

  	
  a Texas
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer & Secretary

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER FOUR TO FINANCING AGREEMENT]

 

S-2

 

	
   

  	
  MATTRESS FIRM OPERATING, LTD.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
   

  	
  By: 
  Festro, Inc., its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
   

  	
  Title: Treasurer & Secretary

  
	
   

  	
   

  
	
   

  	
  MATTRESS VENTURE INVESTMENT

  MANAGEMENT, LLC,

  
	
   

  	
  an Arizona
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael McCowvery

  
	
   

  	
   

  	
  Name: Michael McCowvery

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  FESTRO II, LLC,

  
	
   

  	
  a Texas
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
  Title: Treasurer & Secretary

  
	
   

  	
   

  
	
   

  	
  THE MATTRESS VENTURE, L.P.,

  
	
   

  	
  a Texas
  limited partnership

  
	
   

  	
   

  
	
   

  	
   

  	
  By: 
  Festro, Inc., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim R. Black

  
	
   

  	
   

  	
   

  	
  Name: Jim R. Black

  
	
   

  	
   

  	
   

  	
  Title: Treasurer & Secretary

  
					

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER FOUR TO FINANCING AGREEMENT]

 

S-3

 

	
   

  	
  COLLATERAL
  AGENT, ADMINISTRATIVE

  AGENT, AND LENDER:

  
	
   

  	
   

  
	
   

  	
  ABLECO FINANCE LLC, a Delaware limited

  liability company, on behalf of itself and its affiliate

  assigns

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel Wolf

  
	
   

  	
   

  	
  Name: Daniel Wolf

  
	
   

  	
   

  	
  Title: SVP

  

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER FOUR TO FINANCING AGREEMENT]

 

S-4

 

SCHEDULE C-1

 

Lenders and
Lenders’ Commitments

 

	
  LENDER

  	
   

  	
  REVOLVING

  CREDIT

  COMMITMENT

  	
   

  	
  TERM LOAN A

  COMMITMENT

  	
   

  	
  TOTAL

  COMMITMENT

  	
   

  
	
  Ableco Finance LLC and its affiliate
  assigns

  	
   

  	
  $

  	
  6,000,000

  	
   

  	
  $

  	
  27,993,889.58

  	
   

  	
  $

  	
  33,993,889.58

  	
   

  
	
  All Lenders

  	
   

  	
  $

  	
  6,000,000

  	
   

  	
  $

  	
  27,993,889.58

  	
   

  	
  $

  	
  33,993,889.58QuickLinks
 -- Click here to rapidly navigate through this document
  

Exhibit 10.10  

Confidential information redacted and filed separately with the Commission. 

Omitted portions are indicated by [*]. 

 
 

AMENDED BRANDED PRODUCT SUPPLY AGREEMENT    
    

        This Amended Branded Product Supply Agreement (this "Agreement") is entered into as of November 12, 2003, by and between Sealy Mattress Company ("Sealy"),
an Ohio corporation with offices at One Office Parkway Trinity, North Carolina 27370, and Mattress Firm, Inc. ("MFI"), a Delaware corporation (formerly known as MMA Acquisition
Company, Inc.) with offices at 5815 Gulf Freeway Houston, Texas 77023. 

        WHEREAS,
Sealy and MFI entered into that certain Branded Product Supply Agreement, dated as of October 18, 2002 (the "Prior Agreement"); 

        WHEREAS,
Sealy and MFI desire to amend the Prior Agreement and replace it with this Agreement; 

        WHEREAS,
Sealy desires to sell to MFI and MFI desires to purchase from Sealy on the terms and conditions provided herein mattress and foundation products utilizing the brand names of
Sealy®, Sealy Posturepedic®, Sealy Posturepedic Crown Jewel®, Sealy Correct Comfort®, Reflection® by Sealy InnovationsTM and
Stearns & Foster® (collectively, "Sealy Products"). 

        NOW
THEREFORE, Sealy, and MFI hereby agree as follows: 

	1.
	DEFINITIONS

        The
following definitions shall apply for purposes of this Agreement: 

	a.
	Agreement
shall mean this Amended Branded Product Supply Agreement.

	b.
	Balance
of Share or BOS, for any period, shall mean for any vendor's products, MFI's total dollar expenditures, excluding Clearance Bedding, for wholesale new mattress purchases of the
vendor's Beds, expressed as a percentage of MFI's total dollar expenditures on all vendors' Beds, excluding Clearance Bedding.

	c.
	Bed,
Bedding or Beds shall mean any type of conventional bedding product including but not limited to innerspring, air, latex foam, or waterbed.

	d.
	Clearance
Bedding refers to products purchased by MFI from any manufacturer for clearance purposes or for MFI's clearance stores. Notwithstanding the foregoing, premium and
non-premium products purchased by MFI, from any manufacturer, that are displayed in MFI's non-clearance retail floors (normal locations) and displayed in MFI's clearance
outlets (hybrid locations that display both clearance and regular inventory) shall be included in the BOS calculations.

	e.
	Contract
Year shall mean the twelve-month period beginning on the Commencement Date or any anniversary thereof.

	f.
	Commencement
Date shall mean October 18, 2002 and shall terminate no earlier than May 1, 2009. 

Confidential
Information Redacted 

1

 

	g.
	Competitive
and Competitiveness shall be determined as provided in Section 7 below.

	h.
	Competitors'
Products shall mean any or all of the Beds purchased by MFI manufactured by any company other than Sealy and sold by MFI at any price.

	i.
	Equitable
Floor Treatment shall mean the manner in which MFI merchandises and markets Sealy Products, Sealy Premium Products, Competitors' Products and National Brand Premium Products
so as to give Sealy and MFI the fair opportunity to meet the Balances of Share set out in Sections 3 and 4 of this Agreement in each respective category. MFI must treat all Sealy Products (both
premium and non-premium) fairly. MFI must compensate and treat its employees equally with regard to incentives for selling Bedding products. MFI shall also treat Sealy Products no less
favorably than it treats non-Sealy product in MFI's advertising, promotion and sales commissions. Notwithstanding anything to the contrary herein, MFI retains the right to establish the
sales prices for Bedding products it sells. MFI also reserves the right to promote and advertise products at its sole discretion, provided that MFI's advertising during any period shall not be
disadvantageous to Sealy or Sealy products.

	j.
	MFI's
Performance Factor shall mean a percentage calculated by dividing the percentage of MFI's sales of Sealy Premium Products by  [*] (the minimum Sealy Premium Product BOS percentage). In the event that
MFI's Performance Factor is at 100%, MFI cannot be in
default of the Sealy Premium BOS requirements set out in this Agreement.

	k.
	National
Brand Premium Product shall mean any assortment (of [*] or more Beds displayed and sold in at least  [*] of MFI's stores) of product manufactured by one
nationwide manufacturer of Beds (such as Serta, Simmons, Spring Air, King
Koil or any other national manufacturer of Beds) at retail price points in MFI's stores of [*] and above. MFI is not required to
carry [*] or more Beds of another nationwide manufacturer in at least  [*] of MFI's stores, but if MFI does not do so during any "Review Period" or "Cure
Period" (as set forth in paragraph 5
hereof) then Sealy shall be deemed to be fully Competitive and Sealy's Performance Factor shall be 100% for such period.

	l.
	Net
Purchases shall mean gross purchases by MFI of Sealy Products less cash discounts and return credits of Bedding purchases, excluding Clearance Bedding.

	m.
	Non-Premium
or Promotional Products, for any vendor, shall mean any product sold by MFI at retail price points under  [*] in queen size, or in the case of Sealy, any product that does not qualify as a Sealy Premium
Product.

	n.
	Product
Competitiveness Factor for Sealy Premium Products, (also called Sealy's Competitiveness Factor) will be determined by dividing the total sales of Sealy Premium Product by
Sealy's average number of Sealy Premium Product SKU's

Confidential
Information Redacted 

2

 

displayed
by MFI. Any other National Brand Premium Product's Competitiveness Factor will be determined in the same manner 

	o.
	Premium
Products shall mean Sealy Premium Products and National Brand Premium Products sold at MFI.

	p.
	Private
Label shall mean products specially manufactured by Sealy for MFI or non-Sealy branded products which Sealy currently specially produces for MFI or may in the
future agree to produce for MFI.

	q.
	Prior
Agreement shall mean the supply agreement between Sealy and MFI signed on October 18, 2002.

	r.
	Sealy
shall mean Sealy Mattress Company.

	s.
	Sealy's
Performance Factor shall be a percentage calculated by dividing Sealy's Product Competitiveness Factor by the Product Competitiveness Factor for National Brand Premium
Products. If MFI does not carry a full [*] or more bed assortment of a National Brand Premium Product in at least  [*] of its stores during the entire
period being then measured, then Sealy shall be deemed to be fully Competitive and Sealy's
Performance Factor shall be 100% for such period.

	t.
	Sealy
Products shall mean mattress and foundation products utilizing the brand names of Sealy®, Sealy Posturepedic®, Sealy Posturepedic Crown Jewel®
Sealy Correct Comfort®, Reflexion® by Sealy Innovations® and Stearns & Foster®.

	u.
	Sealy
Premium Products shall mean Sealy Posturepedic,® Sealy Posturepedic Crown Jewel,® Sealy Correct Comfort®, Reflexion® by Sealy
Innovations® and Stearns & Foster®, and any other new product brands that Sealy and MFI may agree are Sealy Premium Products.

	2.
	TIMING
AND BASE TERM 

        This
Agreement becomes effective on the Commencement Date and shall continue for a Base Term until no earlier than May 1, 2009, unless extended pursuant to the terms of this
Agreement or unless duly terminated under the terms of this Agreement. 

	3.
	SEALY
PRODUCTS BOS 

        At
least [*] of MFI's total dollars in wholesale new mattress purchases during each Review Period shall be Sealy
Products. Private label or non-Sealy branded products which Sealy currently produces for MFI or may in the future agree to produce for MFI are not covered by this Agreement. 

	4.
	SEALY
PREMIUM PRODUCTS BOS 

        At
least [*] of MFI's total dollars in wholesale new mattress purchases during each Review Period shall be sales
of Sealy Premium Products. 

Confidential
Information Redacted 

3

 
	5.
	REVIEW
AND CURE PERIODS 

        For
the purposes of determining whether Sealy is Competitive as that term is used under the terms of this Agreement or whether MFI is maintaining the requisite Minimum BOS, the parties
agree to conduct reviews of the obligations herein for Minimum BOS and Competitiveness, for Review Periods equal to approximate six-month periods (last Wednesday in January to the last
Tuesday in July and last Wednesday in July to the last Tuesday in January ("Review Periods"). The Review Date for each Review Period shall be the first mutually agreeable business date after each
Review Period, provided that the Review Date shall be within 10 days of the end of the Review Period. The initial Review Date shall be July 28, 2004 and shall review the Review Period
from January 28, 2004 through July 27, 2004 ("Initial Review Period"). Neither party shall be deemed to be in breach of their respective obligations to maintain a Minimum BOS or be
Competitive, as provided for herein until the Initial Review Period. MFI shall maintain the Non-Breach Minimum Sku Count until Sealy is deemed in breach of its Competitiveness obligations
set forth below. Notwithstanding the
above, any other breach of the Agreement can occur at any time during the Agreement and the non-breaching party shall have full rights under the Agreement to seek the appropriate cure
and/or remedy. A Cure Period begins on the Review Date for each Review Period during which there has been a breach by either party and extends to the end of the next Review Period (either
January-July or July-January) for each year of the Agreement. 

        MFI
and Sealy agree to review the BOS and Competitiveness for the Review Periods listed below, as well as during each 6-month extension period which may be created under
Section 6D of this Agreement: 

	Initial Review Period:	 	January 28, 2004 through July 27, 2004
	Review Period 1:	 	July 28, 2004 through January 25, 2005
	Review Period 2:	 	January 26, 2005 through July 26, 2005
	Review Period 3:	 	July 27, 2005 through January 31, 2006
	Review Period 4:	 	February 1, 2006 through July 26, 2006
	Review Period 5:	 	July 27, 2006 through January 30, 2007
	Review Period 6:	 	January 31, 2007 through July 31, 2007
	Review Period 7:	 	August 1, 2007 through January 29, 2008
	Review Period 8:	 	January 30, 2008 through July 29, 2008
	Review Period 9:	 	July 30, 2008 through January 27, 2009
	Review Period 10:	 	January 28, 2009 through April 30, 2009

	6.
	OBLIGATIONS
OF MFI DURING TERM OF AGREEMENT

	A.
	MINIMUM
SKU COUNT

	1.
	Without
a Second National Brand

	a.
	Without
BOS Breach—If MFI meets the BOS requirement of this Agreement and MFI has not placed and is not selling at least  [*] different beds of a National Brand Premium Product in at least  [*] of its stores ("National Brand Placement"), then MFI shall

Confidential
Information Redacted 

4

 

have
no minimum Sku requirements for either Sealy Product or Sealy Premium Products. 

	b.
	After
BOS Breach—If the BOS requirements under this Agreement are breached during any Review Period and MFI during such Review Period has not had a National Brand
Placement; then (subject to the terms below) within forty-five (45) days after the end of said Review Period MFI shall maintain a minimum of  [*] Sku's of Sealy Product of which [*] Sku's will be
Sealy Premium Products for so long as MFI is in breach of the BOS requirements (including extensions, if any) ("Standard Minimum Sku Count").

	2.
	Without
a Second National Brand Placement

	a.
	SKU
Requirement with a Second Brand—If MFI makes a National Brand Placement, then (subject to the provisions below) MFI agrees to maintain a Minimum Sku Count of at least  [*] Sku's of Sealy Products
(of which [*] Sku's will be
Sealy Premium Products), for so long as MFI has a National Brand Placement (including extensions, if any) ("Standard Minimum Sku Count").

	b.
	Sealy
Net Competitive Exception—If all of the following factors exist: 

            i.  MFI
has a National Brand Placement, 

           ii.  MFI
has breached during a Review Period any of its BOS requirements under this Agreement, 

          iii.  During
the same Review Period Sealy is not "Competitive" (as defined below), and 

          iv.  Sealy
for the same Review Period has a lower "Performance Factor" than MFI (as defined below); 

then,
during any Cure Period related to such breach MFI's minimum Sku requirement shall be reduced to [*] Sku's of Sealy Product
of which [*] Sku's will be Sealy Premium Products ("Competitive Breach Minimum Sku Count"). 

        Collectively,
the Standard Minimum Sku Count and the Competitive Breach Minimum Sku Count shall be known as the "Minimum Sku Count". The Minimum Sku Count shall exclude Clearance Bedding
and shall apply to each of MFI's retail stores with more than [*] square feet of showroom. In MFI stores with less than  [*] square feet of showroom space
or in MFI clearance centers, MFI will keep the ratio of national brands the same as the ratio
in MFI's retail stores with more than [*] square feet of showroom. Information

Confidential
Information Redacted 

5

 

regarding
MFI's Sku Count shall be provided by MFI to Sealy on a quarterly basis. 

	B.
	MINIMUM
SEALY PREMIUM PRODUCTS BOS 

        MFI
agrees that it will provide Sealy Equitable Floor Treatment so as to allow Sealy to meet a BOS of [*] for
Sealy Premium Products during each Review Period, provided that Sealy Premium Products are "Competitive" as defined below. 

	C.
	MINIMUM
SEALY PRODUCTS BOS 

        MFI
agrees that it will provide Sealy Equitable Floor Treatment so as to allow Sealy to meet a BOS of [*] for
Sealy Products during each Review Period. MFI can comply with this [*] BOS requirement if: (i) at least  [*] of MFI's sales of all Products during the
relevant period are Sealy Promotional Products; and (ii) MFI is either in
compliance with the [*] BOS for Sealy Premium Products or MFI's non-compliance with such  [*] BOS requirement is deemed to not be a breach under the terms
of this Agreement. 

	D.
	CONSEQUENCES
IN THE EVENT MFI FAILS TO MEET MINIMUM BOS 

        To
the extent that during any Contract Year, MFI does not meet the Minimum Sealy Premium Products BOS and/or the Minimum Sealy Products BOS, and Sealy is Competitive as defined below,
MFI shall be in breach of Minimum BOS provisions of this Agreement and the terms set out below shall apply: 

        In
the event that MFI is in breach of the Minimum BOS provisions of this Section, MFI can cure during the Cure Period by purchasing additional Sealy Promotional Products or Sealy Premium
Products, as the case may be, to increase its BOS. If MFI does not cure the breach of the Minimum BOS by the end of the Cure Period, then a new 6-month extension period will be added onto
the Base Term of this Agreement. Each additional six-month period that MFI fails to cure (whether or not successive) will result in another 6-month extension to the Base
Term of this Agreement, up to six half-year (six month) extensions for a total of three years. 

        To
the extent that during any Review Period, MFI is not meeting the Sealy Premium Products BOS or the Sealy Products BOS, but Sealy is not Competitive as defined below, a mathematical
calculation will be made to determine whether MFI's Performance Factor is lower than Sealy's Performance Factor (as set out below in Section 7.D.). If Sealy's Performance Factor is lower than
MFI's Performance Factor, all of the Cures and consequences set out below in Section 7 apply, and MFI shall be deemed not to be in breach of this clause of the Agreement. If both parties are in
breach, Sealy nevertheless must cure during the Cure Period as defined below, and MFI must continue to maintain the Minimum Sku Count as defined above and MFI is obligated to the MFI Cure set out
below. 

	7.
	CONDITIONS
FOR MAINTAINING REQUIRED BOS 

        MFI's
obligations to maintain the BOS requirements set out above in Section 6 above shall be conditioned on Sealy Premium Products being Competitive with the National Brand
Premium Products displayed and sold at MFI's stores. Sealy Competitiveness shall be defined as follows:

Confidential
Information Redacted 

6

 

        A.    Competitive
Sealy Premium Products. Sealy Premium Products are Competitive, if during any Review Period, MFI's aggregate sales of Sealy Premium Products at all MFI stores
during that period divided by the average number of Sealy Premium Products displayed on the floors at MFI are equal or better than the aggregate sales of the other National Branch Premium Product
divided by the average number of the other National Brand's Premium Products displayed on MFI's floors. To the extent that different MFI stores display and sell different Sealy Products and/or
National Brand Premium Products, each MFI store shall aggregate and divide and then the amounts shall be totaled across all stores to determine whether Sealy Products or Sealy Premium Products are
Competitive across all MFI stores. If MFI does not display and sell at least [*] different beds of a National Branch Premium
Product in at least [*] of its stores, then Sealy's Premium Product shall be deemed to be fully Competitive and Sealy's
Performance Factor shall be deemed to be a greater percentage than MFI's Performance Factor. 

        As
an example only, if the total sales of Sealy Premium Products for January 1, 2004 through June 30, 2004 are  [*] and MFI has displayed an average of [*] models of
Sealy Premium Products at its stores, then Sealy Premium Products sales per displayed unit are [*]. If MFI sells  [*] of the other National Brand Premium
Products and displays an average of  [*] models of the National Brand Premium Products at its stores then the National Brand Premium Products sales per displayed
unit are [*] and as Sealy's sales per displayed unit is higher than the National Brand's Premium Product, then Sealy Premium
Products are "Competitive." 

	B.
	Consequences
of Sealy's Failure to be Competitive. 

        If
during the Initial Review Period (or any other Review Period), Sealy Premium Products are not Competitive as defined above in this Section 7, then the parties agree to work
during the six months immediately following the written notification of Non-Compliance (known as the "Cure Period") in an effort to cure the Non-Compliance(s) and return Sealy
Products or Sealy Premium Products to Competitiveness. MFI will also have the following remedies during the Cure Period for such Premium Products Competitiveness breach: 

	i.
	MFI
is relieved of its Minimum Premium Product BOS Requirements 

        If
Sealy fails to be Competitive on Premium Products and Sealy's Performance Factor is lower than MFI's Performance Factor, MFI does not have to meet the Minimum Sealy Premium Product
BOS and may continue to do so until Sealy meets its Competitiveness obligation. 

	ii.
	MFI
may decrease the display of Sealy product(s). 

        If
Sealy cannot cure and cannot again become Competitive on Premium Products during the Cure Period, and MFI has met its obligation to provide Sealy Equitable Floor Treatment (and MFI's
Performance Factor is equal to or greater than Sealy's Performance Factor, after the Cure Period, MFI may decrease Sealy's Minimum Sku Count to  [*] (no fewer than [*]
 Sealy Premium Products) (or less
for stores under [*] square feet of showroom floor but nevertheless in ratio to MFI stores that have over  [*] square feet) during the Period in which Sealy
is not Competitive on Premium Products. Should Sealy again become Competitive
on

Confidential
Information Redacted 

7

 

Premium
Products as determined on a subsequent Review Date, MFI is obligated to return to the Sealy Product and Sealy Premium Product Minimum BOS requirements and the Non-Breach Minimum
Sku Count. 

	C.
	MFI's
Failure to achieve notwithstanding Sealy's Competitiveness. 

        To
the extent that MFI does not achieve the Sealy Product BOS of [*] or Sealy Premium Product  [*] BOS and Sealy is Competitive as set out above, then
Section 6 applies. During any Breach and Cure Period, both
parties are obligated to work together to cure the Breach. 

	D.
	Performance
Factor. 

        If
MFI does not achieve the [*] Sealy Premium Product BOS and Sealy Premium Product is not Competitive, then there
shall be a determination of which party is "more in breach." If Sealy's Performance Factor is a greater percentage than MFI's Performance Factor percentage, then MFI shall be deemed to be in breach.
If MFI's Performance Factor is a greater percentage than or equal to Sealy's Performance Factor percentage, then Sealy shall be deemed to be in breach for purposes of Premium Products under
Section 6 and 7 of this Agreement. 

        The
following are various illustrations of possible Performance Factor scenarios in practical
terms: [*]

        Sealy
is not in breach; MFI is in breach because its Sealy Premium Product BOS is below the requisite [*]  minimum. [*]

Confidential
Information Redacted 

8

 

        Sealy
is in breach because its performance against the other National Brand Premium Product is less than 100%, but MFI is "more in breach"
because MFI's Sealy Premium Product BOS is at [*] of the BOS target, while Sealy's percentage performance is better at  [*] vis a vis the other National
Brand Premium
Product. [*]

        Sealy
is in breach because its performance rate is only [*] against the other brand  and MFI is achieving a greater [*] of its Sealy Premium Product minimum BOS. 

	E.
	Dispute
Resolution Regarding BOS, Product Mix or Competitiveness. 

        To
the extent that the parties dispute whether there is a default of this clause or any other clause of this Agreement, either party may resort to the terms of the Mediation/Arbitration
Clause set out below in Section 27, upon written notice to the other part setting forth the issue in dispute subject to mediation or arbitration. 

	8.
	MINIMUM
STORES 

        During
the term of this Agreement, MFI shall continuously own and operate at least [*] MFI mattress retail stores
(not including leased departments or franchisee stores). Sealy acknowledges and agrees that, in the event that MFI breaches its obligations pursuant to this Section 8 and such breach is not
cured within 30 days following notice thereof from Sealy, Sealy shall have the right to terminate this Agreement, which right of termination shall be Sealy's sole and exclusive remedy, whether
at law or in equity for such breach. Notwithstanding the foregoing, any such termination shall not release MFI from its obligations incurred as a result of actions taken during the term of this
Agreement, including the obligation to pay for goods ordered and received under this Agreement prior to termination. 

	9.
	CO-OP
ADVERTISING, PROMO, REBATES AND SUBSIDIES 

        During
the term of this Agreement, Sealy shall monthly accrue total trade support funds for MFI in an amount equal to  [*] of Net Purchases ("Net Purchases" shall mean purchases less cash discounts and returns
allowances) of Sealy Premium Products
by MFI during the preceding month and to [*] of Net Purchases of Sealy Products

Confidential
Information Redacted 

9

 

other
than Sealy Premium Products by MFI during the preceding month. Such funds will be credited monthly to MFI's account with Sealy within 10 days of month-end close. Effective
with the execution of this Agreement, Sealy will provide MFI, within 10 days of Sealy's month-end, with an electronic listing of the invoices to which such monthly credit applies
("Electronic Listing"). MFI will apply earned credits on a dollar-for-dollar basis against the amount due on invoices paid in the month subsequent to when the prior month's
credit is provided. Sealy shall work diligently to develop the capability to show earned credits on the face of individual purchase invoices. Once Sealy provides earned credits on the face of
individual purchase invoices, MFI will thereafter have the option, but not the requirement, to apply such credits directly against the payment of the invoice on which the credit was earned. In the
event that payment of all accounts is not made in a timely manner by MFI or all accounts with Sealy are not current, the trade support funds attributable to any outstanding invoice that has not been
paid within its prescribed payment terms will accrue, but will not be credited, until such time as payment of such invoice has been made. MFI agrees to comply with the terms and conditions of all
Sealy and Stearns & Foster brand image policies and dealer agreements. Other than the trade support provided above (which must be used for Sealy and Stearns & Foster brand advertising),
there will be no promo, subsidies, incentives, volume or other rebates on purchases under this Agreement. 

	10.
	FLOOR
SAMPLES 

        During
the term of this Agreement, Sealy shall provide to MFI a [*] discount on the wholesale price less  [*] returns credit, on initial floor
sample orders whenever a different product is placed on the sales floor and initial floor samples purchased for new stores. Floor samples shall not be replaced more than once per year at such discount
unless a product change out is reasonably necessary. All other floor samples shall be supplied at MFI's regular wholesale prices. Co-operative advertising will not be earned on floor
sample discounted orders. 

	11.
	POINT-OF-PURCHASE
MATERIALS ("POP") 

        During
the term of this Agreement, Sealy shall offer MFI [*] per Agreement Year in POP. This  [*] amount will be adjusted annually to reflect any increase or
decrease in the Consumer Price Index. 

	12.
	NEW
STORE SUPPORT 

        During
the term of this Agreement, Sealy shall pay MFI [*] in new store opening support for each new mattress
store (not including leased departments or franchisee stores) opened by MFI during the term of this Agreement, up to a maximum each contract year equal to  [*] of MFI's Net Purchases of Sealy Products
during the prior contract year (the initial year's cap shall be based on the
12 month period prior to commencement of this Agreement in MFI's continuing markets). Sealy shall also contribute to MFI up to  [*] of POP to each such new store at the time of its opening.

Confidential
Information Redacted 

10

 

	13.
	PRICING

        During
the term of this Agreement, MFI shall receive Sealy's [*] tier of pricing on Sealy Products. Currently,
Sealy's [*] pricing tier is [*] pricing. Tier pricing
levels are not affected by temporary price discounts offered on selected items by Sealy. If Sealy creates a [*] price tier
during the term of this Agreement, then Sealy shall so inform MFI and MFI shall be entitled to [*]. 

	14.
	PAYMENT
TERMS 

        Payment
terms for payments from MFI to Sealy under this Agreement shall be two percent (2%) percent 45 days, net 60 days. In the event that a Sealy Plant Manager requests
that orders for key holidays be shipped to MFI more than two weeks prior to the holiday event, then the payments terms for such purchases shall be extended by the period requested by the Sealy Plant
Manager in excess of the normal two week holiday order period. Holidays under this section are Memorial Day, Fourth of July, and Labor Day. 

	15.
	RETURNS

        Each
month, Sealy shall provide a credit to MFI in an amount equal to [*] of MFI's purchases of Sealy Products
from Sealy during such month (the "Return Credit"), which credit shall be the limit of Sealy's responsibility for defective or returned products. The Return Credit will be deducted from MFI's
invoices. Sealy shall not pick-up or take back any defective or returned products. MFI will have the right to reject Factory Defective product at the point of receipt (either direct off
loading, from dropped trailers, or errors in manufacture such as wrong label upon delivery, improper manufacturing of floor samples) and Factory Recalls (e.g. Odor, Tick Yellowing) will be excluded
from the Return Credit and accepted for return. 

	16.
	DELIVERY

        Sealy
shall place the MFI's company owned stores on 48-hour delivery status if they are located in areas where Sealy's facilities and delivery schedules are such that
48-hour delivery can be reasonably successfully achieved, but only to the extent MFI complies with Sealy's "order by time" that is determined by Sealy plants to facilitate
48-hour delivery. Sealy and MFI shall jointly determine reasonable delivery schedules for MFI's other stores. Sealy can not
guaranty that deliveries will be made in 48 hours to stores placed on 48-hour delivery status. 

	17.
	TICK
SELECTION 

        As
long as Purchaser has at least 125 stores, Sealy shall offer Purchaser the opportunity to select ticks for new products approximately thirty (30) days before the High Point,
North Carolina furniture markets. 

	18.
	DISTRIBUTION

        During
the term of this agreement so long as MFI remains a Sealy Only dealer, Sealy will refrain from entering into agreements with Sleep Shops that are not current Sealy Only dealers to
establish new Sealy Only Sleep Shops in Markets where MFI currently has Sleep Shops. For purposes of this Agreement the following terms shall have the means set forth below: 

	a.
	"Sealy
Only" means stores in which the only branded, non-branded and private label mattress and foundation products sold are manufactured by Sealy and/or Stearns & Foster;

	b.
	"Sleep
Shops" shall mean bedding specialty stores where over [*] of sales dollars are from the sale of
mattresses and foundations (This shall not include departments within other stores, furniture stores, warehouse clubs, or department stores); and

	c.
	"Markets"
are the areas established by Neilsen's Designated Market Area Report. 

11

 

	19.
	SEALY
EXCLUSIVE PRODUCT 

        During
the term of this agreement so long as MFI remains a Sealy Only dealer, Sealy will continue to develop and manufacture exclusive Branded Product for MFI, using specifications to be
mutually agreed upon by Sealy and MFI. 

	20.
	TOLL
FREE PHONE NUMBERS 

        During
the term of this agreement so long as MFI remains a Sealy Only dealer, Sealy will continue to make available to MFI one of its reserved toll free phone numbers containing "Sealy"
as part of the phone number. MFI will make such phone number available to its franchisees that remain Sealy Only dealers. 

	21.
	DEALER
AGREEMENTS 

        MFI
and Sealy each acknowledge that Sealy and MFI have entered into and remain bound by multiple dealer agreements ("Dealer Agreement") with Sealy and Stearns & Foster. Those
Dealer Agreements and Sealy's Standard Terms and Conditions of Sale shall remain in force and valid after the execution of this Agreement. MFI agrees that to the extent that the terms in the following
documents are in conflict that the order of precedence shall be: (i) this Agreement, (ii) Dealer Agreement, (iii) Sealy's Standard Terms and Conditions of Sale, and
(iv) terms on any issued purchase order. The parties agree that the termination of one or more of the Dealer Agreements shall not by itself be grounds for termination of this Agreement. The
parties further agree that during the term of this Agreement that neither party shall terminate a Dealer Agreement between them without cause. Cause to terminate a dealer agreement shall include:
(i) a material breach of any Sealy or Stearns & Foster Dealer Agreement which breach continues after having been given thirty (30) days written notice to cure; (ii) failure
to support Sealy's and Stearns & Foster's brand image policies as required by Dealer Agreement, for which a notice and an opportunity to cure need not be given; (iii) a party filing a
petition for reorganization under the federal Bankruptcy Act; (iv) a party being adjudicated to be bankrupt; (v) appointment of a receiver for a party's business; (vi) a party
making a general assignment for the benefit of such party's creditors; and (vii) the filing of an involuntary bankruptcy petition against a party and such petition has not been discharged
within sixty (60) calendar days of it being brought. 

Confidential
Information Redacted 

12

 

	22.
	CONFIDENTIALITY

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

	23.
	TRADEMARKS

        Except
as expressly granted hereunder or under any other agreement between the parties hereto, MFI acknowledges and agrees that MFI has no right or interest in or to any trademarks or
trade names owned or used by Sealy ("Trademarks") and, in connection with its sales of Sealy Products. MFI agrees that it shall only use the Trademarks in strict accordance with Sealy's policies as
may be amended by Sealy from time to time. MFI agrees that it shall not at any time alter any Trademarks or use Trademarks for any purpose other than the promotion, advertising and sale of Sealy
Products to the public. 

	24.
	[*]

	25.
	AMENDMENT 

        This
Agreement may only be amended or modified by a written agreement between Sealy and MFI. 

Confidential
Information Redacted 

13

 

	26.
	SEVERABILITY

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

	27.
	SETTLEMENT

        In
the event of any dispute between the parties relating to this Agreement, the parties agree to have a meeting between representatives of each party to the dispute with authority to
settle the dispute and make a good faith effort to resolve their differences prior to instituting any proceeding for the resolution of the dispute. In the event that the parties are unable to reach an
agreement between themselves to resolve the dispute, the parties agree to submit the issue to mediation under the Commercial Mediation rules of the American Arbitration Association in Houston Texas. 

	28.
	NONASSIGNABILITY

        Except
as expressly provided for or contemplated in this Agreement, neither party may assign, transfer or subcontract any of the rights or obligations arising under this Agreement
(except, with respect to Sealy, any assignment to an affiliate or subsidiary of Sealy then supplying Sealy Products) other than to a successor to its entire business by reason of merger or sale of
assets without the prior written consent of the other party, and any attempted assignment without such consent shall be void and without effect. 

	29.
	WAIVER

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

	30.
	NOTICES 

        In
case of any material breach of this Agreement by any party hereto, the breaching party shall be given notice of the breach and be given thirty (30) days to cure such breach,
except in the case of a failure to make a payment when due for which only five (5) days notice shall be required. If the breaching party fails to cure the breach within such notice period then
the non-breaching party may within six months of the expiration of such notice period if the breaching party as not then cured such breach, give notice of the termination of this
Agreement. 

        All
notices and other communications under this Agreement must be delivered in writing and shall be deemed to have been given when (i) delivered by hand or (ii) one
(1) day after deposit

Confidential
Information Redacted 

14

 

thereof
for overnight delivery with a nationally recognized overnight delivery service (receipt requested) to the appropriate address as set forth below (or to such other address as a party may
designate by notice to the other parties): 

	MFI:
	Mattress
Firm, Inc.

5815 Gulf Freeway

Houston, Texas 77023

Attention: President

	Sealy:
	Sealy
Mattress Company

One Office Parkway

Trinity, North Carolina 27370

Attention: President

	31.
	FORCE
MAJEURE 

        Other
than with respect to the payment of monies, if the performance of any part of this Agreement by either party, or of any obligation under this Agreement, is prevented, restricted,
interfered with or delayed by reason of a cause beyond reasonable control of the party liable to perform, unless conclusive evidence to the contrary is provided, the party so effected shall, on giving
written notice to the other party, be excused from such performance to the extent of and for the period of such prevention, restriction, interference or delay, provided that the effected party shall
use commercially reasonable efforts to avoid or remove such causes of nonperformance and shall continue to perform with the utmost dispatch whenever such causes are removed. When such circumstances
arise, the parties shall cooperate in good faith in order to determine any modification to the terms of this Agreement that may be required in order to arrive and an equitable solution. 

Confidential
Information Redacted 

15

 
*
* * * * 

        IN
WITNESS WHEREOF, each of the parties hereto have caused this Supply Agreement to be duly executed by a properly authorized individual with full authority to execute this Supply
Agreement on their behalf as of the date first written above. 

	 	 	SEALY MATTRESS COMPANY
	

 	
 	

By:	
 	

/s/James B. Hirshorn
 James Hirshorn

Corporate Vice President, CFO
	

 	
 	

MATTRESS FIRM, INC.
	

 	
 	

By:	
 	

/s/Gary Fazio
 Gary Fazio

Chief Executive Officer

Confidential
Information Redacted 

16

QuickLinks

AMENDED BRANDED PRODUCT SUPPLY AGREEMENT

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