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                                                               Exhibit 10.27


                         SIMMONS RETIREMENT SAVINGS PLAN





                        EFFECTIVE DATE: FEBRUARY 1, 1987

                     AMENDED AND RESTATED: DECEMBER 28, 1997

               SUBSEQUENTLY AMENDED AND RESTATED: JANUARY 1, 2001


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                                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               Page
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SECTION 1.        INTRODUCTION....................................................................................1

SECTION 2.        DEFINITIONS.....................................................................................2

                  (a)      Administrator..........................................................................2
                  (b)      Affiliated Company.....................................................................2
                  (c)      Beneficiary............................................................................2
                  (d)      Board of Directors.....................................................................2
                  (e)      Break in Service.......................................................................2
                  (f)      Code...................................................................................2
                  (g)      Company................................................................................2
                  (h)      Early Retirement Age...................................................................2
                  (i)      Eligible Employee......................................................................2
                  (j)      Employee...............................................................................3
                  (k)      Employer...............................................................................3
                  (l)      Enrollment Date........................................................................3
                  (m)      ERISA..................................................................................3
                  (n)      Highly Compensated Employee............................................................3
                  (o)      Hour of Service........................................................................4
                  (p)      Investment Manager.....................................................................5
                  (q)      Non-Highly Compensated Employee........................................................5
                  (r)      Non-Vested Amounts.....................................................................5
                  (s)      Normal Retirement Age..................................................................5
                  (t)      Participant............................................................................6
                  (u)      Plan...................................................................................6
                  (v)      Plan Year..............................................................................6
                  (w)      Qualified Election.....................................................................6
                  (x)      Qualified Joint and Survivor Annuity...................................................6
                  (y)      Salary.................................................................................7
                  (z)      Salary Deferral........................................................................7
                  (aa)     Section 415 Compensation...............................................................7
                  (bb)     Trust..................................................................................7
                  (cc)     Trustee................................................................................7
                  (dd)     Units..................................................................................7
                  (ee)     Valuation Date.........................................................................7
                  (ff)     Year of Service........................................................................8
                  (gg)     Employer Matching Contribution.........................................................8
                  (hh)     Employer Non-Elective Contributions....................................................8
SECTION 3.        PARTICIPATION IN THE PLAN.......................................................................9
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                  (a)      Initial Enrollment.....................................................................9
                  (b)      Transfer from Another Plan.............................................................9
                  (c)      Termination and Reinstatement..........................................................9

SECTION 4.        SALARY DEFERRALS...............................................................................10

                  (a)      Deferrals from Salary.................................................................10
                  (b)      Maximum Amount of Contributions.......................................................11
                  (c)      Transfers from other Plans............................................................12
                  (d)      Return of Contributions...............................................................13

SECTION 5.        NONDISCRIMINATION LIMIT ON SALARY DEFERRALS....................................................14

                  (a)      General Rules.........................................................................14
                  (b)      Actual Deferral Percentage............................................................14
                  (c)      Highly Compensated Eligible Employee..................................................14
                  (d)      Refund of Excess Contributions........................................................15
                  (e)      Reduction of Excess Contributions.....................................................15
                  (f)      Testing Provisions....................................................................16

SECTION 6.        CHANGES IN DEFERRALS AND VOLUNTARY TERMINATION.................................................17

SECTION 7.        EMPLOYER CONTRIBUTIONS.........................................................................18

                  (a)      Employer Non-Elective Contributions...................................................18
                  (b)      Previous Employer Contributions.......................................................18

SECTION 8.        INVESTMENT OPTIONS.............................................................................19

                  (a)      Investment Direction..................................................................19
                  (b)      Change in Investment Direction........................................................19
                  (c)      ERISA ss.404(c).......................................................................19

SECTION 9.        MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS............................................20

                  (a)      Maintenance of Separate Accounts......................................................20
                  (b)      Valuation of Accounts.................................................................20



SECTION 10.       RIGHTS TO BENEFITS.............................................................................21
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<TABLE>
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                  (a)      Retirement............................................................................21
                  (b)      Disability Retirement.................................................................21
                  (c)      Death.................................................................................21
                  (d)      Other Terminations of Employment......................................................21
                  (e)      Forfeitures...........................................................................22

SECTION 11.       DISTRIBUTION OF BENEFITS.......................................................................23

                  (a)      Distribution in Lump Sum on Retirement or on
                                    Termination of Employment Due to Disability..................................23
                  (b)      Distribution in Other Than a Lump Sum on Retirement
                                    or on Termination of Employment Due to Disability............................23
                  (c)      Deferral of Distribution on Retirement or on Termination
                                    of Employment Due to Disability..............................................23
                  (d)      Payment on Death......................................................................24
                  (e)      Distribution on Other Terminations of Service.........................................25
                  (f)      Accounts of $5,000 or Less............................................................25
                  (g)      Accounts of More Than $5,000..........................................................25
                  (h)      Required Distributions................................................................25
                  (i)      Eligible Rollover Distributions.......................................................26

SECTION 12.       WITHDRAWALS....................................................................................28

                  (a)      Hardship..............................................................................28
                  (b)      Attainment of Age 59-1/2 or 65........................................................29
                  (c)      Other Withdrawals.....................................................................29

SECTION 13.       LOANS TO PARTICIPANTS..........................................................................30

                  (a)      Requests for Loans....................................................................30
                  (b)      Security..............................................................................31
                  (c)      Amount of Loans.......................................................................31
                  (d)      Repayment.............................................................................31
                  (e)      Administration of Loans...............................................................32

SECTION 14.       ADMINISTRATION BY TRUSTEE......................................................................33

                  (a)      Trust Agreement.......................................................................33
                  (b)      Investment Responsibility.............................................................33
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<TABLE>
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                  (c)      Other Powers..........................................................................34
                  (d)      Uninvested Funds......................................................................35
                  (e)      Audit.................................................................................35

SECTION 15.       LEAVE OF ABSENCE, LAYOFF AND ABSENCE ON DISABILITY.............................................36

SECTION 16.       DESIGNATION OF BENEFICIARIES...................................................................37

SECTION 17.       BENEFITS NOT ASSIGNABLE........................................................................38

                  (a)      In General............................................................................38
                  (b)      Qualified Domestic Relations Orders...................................................38

SECTION 18.       EXPENSES.......................................................................................40

SECTION 19.       MODIFICATION OR MERGER OF PLAN.................................................................41

SECTION 20.       TERMINATION OF PLAN............................................................................42

SECTION 21.       NOTICES, REPORTS AND STATEMENTS................................................................43

                  (a)      General...............................................................................43
                  (b)      Qualified Joint and Survivor Annuities................................................43

SECTION 22.       ADMINISTRATION AND INTERPRETATION OF PLAN......................................................44

SECTION 23.       TOP-HEAVY PROVISIONS...........................................................................46

                  (a)      Top-Heavy Determination...............................................................46
                  (b)      Compensation..........................................................................46
                  (c)      Vesting...............................................................................47
                  (d)      Minimum Benefits......................................................................47
                  (e)      Multiple Top-Heavy Plans..............................................................48

SECTION 24.       MISCELLANEOUS PROVISIONS.......................................................................49

                  (a)      No Employment Rights Created..........................................................49
                  (b)      Rights to Trust Assets................................................................49
                  (c)      Severability..........................................................................49
                  (d)      Facility of Payment...................................................................49
                  (e)      Missing Persons.......................................................................49
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<TABLE>
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                  (f)      Military Service......................................................................50
                  (g)      Electronic Means of Communication.....................................................50
                  (h)      Plan Conversions......................................................................50

SECTION 25.       EXECUTION......................................................................................51
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                         SIMMONS RETIREMENT SAVINGS PLAN

SECTION 1.     INTRODUCTION.

         The Simmons Retirement Savings Plan (the "Plan") was adopted effective
February 1, 1987. The Plan was subsequently amended in certain respects by
several amendments adopted in 1988 and 1989. The Company contributions to the
Plan that were suspended effective January 1, 1989, were resumed as set forth in
Section 7 of the Plan as of January 1, 2001.

         The Plan was amended and restated effective May 1, 1991. The primary
purpose of that amendment and restatement of the Plan was to bring the Plan into
compliance with certain changes in applicable law. A further purpose was to
consolidate into a single document the operative provisions of the Plan. In
connection with that amendment and restatement of the Plan, contributions to the
Plan were permitted to resume effective July 1, 1991.

         The Plan herein was amended and restated in order to comply with
applicable provisions of the Uruguay Round Agreements Act, the Uniformed
Services Employment and Reemployment Rights Act of 1994, the Small Business Job
Protection Act of 1996, the Taxpayer Relief Act of 1997, and the Internal
Revenue Service Restructuring and Reform Act of 1998. The effective date of the
above-described amendment and restatement of this Plan is generally December 28,
1997, and such amendment and restatement shall applies only to a Participant who
is credited with an Hour of Service on or after that date, except as may be
otherwise stated herein. The rights and benefits of a Participant who is not
credited with an Hour of Service on or after December 28, 1997, shall be
determined in accordance with the provisions of the Plan as in effect on the
Participant's termination of employment with the Employer.

         The effective date of this amendment and restatement of this Plan is
January 1, 2001. The purpose of this amendment and restatement is to provide for
the making of Employer Non-Elective Contributions and to allow participants to
make additional salary deferral contributions to the Plan. This amendment and
restatement applies only to a Participant who is credited with an Hour of
Service on or after that date, except as may be otherwise stated herein. The
rights and benefits of a Participant who is not credited with an Hour of Service
on or after January 1, 2001, shall be determined in accordance with the
provisions of the Plan as in effect on the Participant's termination of
employment with the Employer.

         The purpose of the Plan is to provide Eligible Employees with an
opportunity to accumulate retirement income through a program of Eligible
Employee contributions. The Plan is intended to be a profit sharing plan for
purposes of Sections 401, 402, 412 and 417 of the Internal Revenue Code of 1986,
as amended ("Code"), containing a cash or deferred arrangement, qualified under
Sections 401 (a) and 401 (k) of the Code.

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SECTION 2.     DEFINITIONS.

         For the purposes of the Plan, the following terms shall have the
following meanings:

        (a) "ADMINISTRATOR" shall mean the Company or other person or entity
appointed to administer the Plan in accordance with Section 22.

        (b) "AFFILIATED COMPANY" shall mean any corporation that is a member of
a controlled group of corporations of which the Company is a part, any trade or
business (whether or not incorporated) that is under common control with the
Company, any member of an affiliated service group of which the Company is a
member, and any other entity required to be aggregated with the Company under
section 414(o) of the Code, as determined under sections 414(b) and 414(c) (as
modified by section 415(h) of the Code for purposes of Section 4(b) hereof),
section 414(m) and section 414(o) of the Code and the regulations thereunder.

        (c) "BENEFICIARY" shall mean the person or persons entitled under
Section 16 to receive benefits under the Plan upon the death of the Participant.

        (d) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.

        (e) "BREAK IN SERVICE" shall mean a Plan Year during which a Participant
does not complete more than 500 Hours of Service.

        (f) "CODE" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, or any successor Federal income tax law. Any
reference to a section of the Code shall be deemed to include all regulations
and regulatory guidance promulgated thereunder.

        (g) "COMPANY" shall mean Simmons Company, a Delaware corporation, and
any successor thereto.

        (h) "EARLY RETIREMENT AGE" shall mean the date on which the Participant
attains at least age 55 if the Participant has 10 Years of Service.

        (i) "ELIGIBLE EMPLOYEE" shall mean, for purposes of making Salary
Deferral contributions, any Employee employed by the Employer for at least 12
weeks who has attained age 21 (effective as of January 1, 2000, any Employee
employed by the Employer for at least 12 weeks who has attained age 18) and is
either (i) not included in a unit of employment covered by a collective
bargaining agreement between Employee representatives and the Employer where
retirement benefits were the subject of good faith bargaining between such
Employee representatives and the Employer or (ii) covered by such a collective
bargaining agreement that expressly provides for participation in the Plan. A
leased employee is not an Eligible Employee. The term "leased employee" means
any person (other than an employee of the Employer) who, pursuant to an
agreement between the

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Employer and any other person (the "leasing organization"), has performed
services for the Employer (or for the Employer and any related persons
determined in accordance with section 414(n)(6) of the Code) on a substantially
full time basis for a period of at least one year, and such services are
performed under the primary direction or control of the Employer. Contributions
or benefits provided a leased employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as provided
by the Employer. Notwithstanding the above, for purposes of receiving an
Employer Non-Elective Contribution, a Year of Service shall be substituted for
the 12-week period described above.

         (j) "EMPLOYEE" shall mean any individual employed by the Company or an
Affiliated Company, including any leased employee, as defined in the preceding
paragraph.

         (k) "EMPLOYER" shall mean the Company and any Affiliated Company that
has been designated by the Board of Directors as eligible to adopt the Plan and
which has adopted this Plan.

         (1) "ENROLLMENT DATE" shall mean, for purposes of making Salary
Deferral Contributions, every January 1, April 1, July 1 and October 1
coinciding with or following the completion of 12 weeks of service and, for
purposes of receiving an Employer Non-Elective Contribution, shall mean every
January 1, April, July 1 and October 1 coinciding with or following the
completion of a Year of Service.

         (m) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as it may be amended from time to time. Any reference to a section of
ERISA shall include all regulations and regulatory guidance thereunder.

         (n) "HIGHLY COMPENSATED EMPLOYEE" shall mean, for Plan Years beginning
on and after December 28, 1997:

                  (i) Any Employee (1) who, during the current or the preceding
Plan Year, was at any time a 5-percent owner (as such term is defined in section
416(i)(1) of the Code), or (2) for the preceding Plan Year, received
compensation from the Company and all Affiliated Companies in excess of the
amount in effect for such Plan Year under section 414(q)(1)(B) of the Code and
was in the top paid group of Employees for such Plan Year.

                  (ii) "Highly Compensated Employee" shall include a former
Employee whose termination of employment occurred prior to the Plan Year and who
was a Highly Compensated Employee for the Plan Year in which his termination of
employment occurred or for any Plan Year ending on or after his 55th birthday.

                  (iii) For the purposes of this Section, the term
"compensation" shall mean (1) for the period prior to December 27, 1998, the sum
of an Employee's section 415 Compensation and the Employee's Salary Deferrals
under this Plan (subject to the dollar limitation described in section 401 (a)(1
7) of the Code) and elective or salary reduction contributions pursuant to a
cafeteria plan under

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section 125 of the Code, and (2) for the period commencing with the Plan
Year beginning on December 27, 1998, an Employee's compensation under section
415 of the Code (subject to the limitation described in section 40l(a)(17) of
the Code). For purposes of this Section, the term "top paid group of Employees"
shall mean that group of Employees of the Company and all Affiliated Companies
consisting of the top 20 percent (20%) of such Employees when ranked on the
basis of compensation paid by the Company and all Affiliated Companies during
the preceding Plan Year.

         (o) "HOUR OF SERVICE" shall mean an hour for which an Employee is
credited, in accordance with section 2530.200b-2(a) of the United States
Department of Labor Regulations for Minimum Standards for Employee Pension
Benefit Plans, which provides:

                  (i) An Hour of Service is each hour for which an Employee is
paid, or entitled to payment, for the performance of duties for the Employer
during the applicable computation period;

                  (ii) An Hour of Service is each hour for which an Employee is
paid, or entitled to payment, by the Employer on account of a period of time
during which no duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty, or leave of absence.
Notwithstanding the preceding sentence, (a) no more than 501 Hours of Service
are required to be credited under this paragraph (ii) to an Employee on account
of any single continuous period during which the Employee performs no duties
(whether or not such period occurs in a single computation period); (b) an hour
for which an Employee is directly or indirectly paid, or entitled to payment, on
account of a period during which no duties are performed is not required to be
credited to the Employee if such payment is made or due under a plan maintained
solely for the purpose of complying with applicable worker's compensation,
unemployment compensation, or disability insurance laws; and (c) Hours of
Service are not required to be credited for a payment which solely reimburses an
Employee for medical or medically related expenses incurred by the Employee;

                  (iii) An Hour of Service is each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by the
Employer. The same hours of service shall not be credited both under paragraph
(i) or paragraph (ii), as the case may be, and under this paragraph (iii);

                  (iv) An Hour of Service is each hour which was not a
compensated hour during a period of absence from the Employer for service in the
armed forces of the United States if the Employee returns to work for the
Employer at a time when he has re-employment rights under federal law; and

                  (v) Solely for purposes of determining whether or not a Break
in Service has occurred, an Hour of Service is each non-compensated hour during
a period of absence from the Employer (a) by reason of the Employee's pregnancy,
(b) by reason of the birth of the Employee's child, (c) by reason of the
placement of a child with the Employee in connection with the adoption of the
child by the Employee, (d) for purposes of caring for such child for a period
beginning immediately following such birth or placement, or (e) on account of an
approved leave of absence

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taken pursuant to the Family and Medical Leave Act of 1993. For purposes of this
paragraph (e) the following special rules will apply:

                           (A) any Hour of Service credited with respect to an
absence shall be credited (1) only in the Plan Year in which the absence begins,
if the Employee would be prevented from incurring a Break in Service in such
year solely because of Hours of Service credited hereunder for such absence, or
(2) in any other case, in the immediately following Plan Year;

                           (B) no Hours of Service shall be credited hereunder
unless the Employee furnishes the Administrator with such information as the
Administrator may reasonably require establishing (1) that the absence from work
is an absence described hereunder and (2) the number of days the absence lasted;

                           C) in no event shall more than 501 Hours of Service
be credited to an Employee hereunder for any absence by reason of any one
pregnancy or the placement of any one child.

         Hours of Service to be credited to an individual under paragraphs (i),
(ii), and (iii) above will be calculated and credited in accordance with section
2530.200b-2(b) and (c) of the Department of Labor Regulations, which are
incorporated herein by reference. However, an Employee will be considered to
have completed 45 Hours of Service for each week in which such Employee
completes at least one Hour of Service. Hours of Service to be credited to an
Employee during an absence described in paragraphs (iv) and (v) above will be
determined by the Administrator with reference to the individual's most recent
normal work schedule; provided that if the Administrator cannot so determine the
number of Hours of Service to be credited, there shall instead be credited 10
Hours of Service for each day of absence.

         (p) "INVESTMENT MANAGER" shall mean an investment manager as defined in
section 3(38) of ERISA.

         (q) "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean an Eligible Employee
who is not a Highly Compensated Employee.

         (r) "NON-VESTED AMOUNTS" shall mean, with respect to an Employee whose
employment terminates for reasons other than retirement, disability, or death
(in accordance with Section 10), all amounts which, as of the date of
determination, are attributable to contributions made by the Employer and which
are forfeitable in accordance with the vesting schedule set forth in Section
10(d).

         (s) "NORMAL RETIREMENT AGE" shall mean the date on which the
Participant attains age 65.

         (t) "PARTICIPANT" shall mean an Eligible Employee participating in the
Plan as provided under Section 3, and whose participation has not terminated as
provided in the Plan. If a Participant


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becomes represented by a collective bargaining agent after electing to
participate in the Plan, the right to continue to participate shall not be
affected, except as provided under any collective bargaining agreement.

         (u) "PLAN" shall mean this Simmons Retirement Savings Plan, as amended
and restated effective December 28, 1997, as subsequently amended and restated
effective January 1, 2001, together with any and all amendments and supplements
hereto.

         (v) "PLAN YEAR" shall mean the annual period ending on the last
Saturday in December of each such annual period, or such other annual period
that the Company may elect for its tax year.

         (w) "QUALIFIED ELECTION" shall mean a waiver of a Qualified Joint and
Survivor Annuity or a qualified pre-retirement survivor annuity. Any waiver of a
Qualified Joint and Survivor Annuity or a qualified pre-retirement survivor
annuity shall not be effective unless: (i) the Participant's spouse consents in
writing to the election; (ii) the election designates a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent (or the spouse expressly permits
designation by the Participant without any further spousal consent); (iii) the
spouse's consent acknowledges the effect of the election; and (iv) the spouse's
consent is witnessed by a Plan representative or notary public. Additionally, a
Participant's waiver of the Qualified Joint and Survivor Annuity shall not be
effective unless the election designates a form of benefit payment which may not
be changed without spousal consent (or the spouse expressly permits designations
by the Participant without any further spousal consent). If it is established to
the satisfaction of a Plan representative that there is no spouse or that the
spouse cannot be located, a waiver will be deemed a Qualified Election. Any
waiver of the Qualified Joint and Survivor Annuity must take place during the
90-day period ending on the Participant's annuity starting date (as defined in
section 417(f) of the Code).

         Any consent by a spouse (or establishment that the consent of a spouse
may not be obtained) shall be effective only with respect to such spouse. A
consent that permits designations by the Participant without any requirement of
further consent by such spouse must acknowledge that the spouse has the right to
limit consent to a specific Beneficiary, and a specific form of benefit where
applicable, and that the spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior waiver may be made by a Participant
without the consent of the spouse at any time before the commencement of
benefits. The number of revocations shall not be limited. No consent obtained
under this definition shall be valid unless the Participant has received notice
as provided in Section 21 (b).

         (x) "QUALIFIED JOINT AND SURVIVOR ANNUITY" shall mean an immediate
annuity for the life of the Participant with a survivor annuity for the life of
the spouse which is not less than 50% and not more than 100% of the amount of
the annuity which is payable during the joint lives of the Participant and the
spouse and, in any case, is the amount of the annuity benefit which can be
purchased with the amount of the Participant's account which is nonforfeitable.

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         (y) "SALARY" shall mean an Employee's total cash compensation,
including Salary Deferrals, but excluding any daily allowances or expenses
reimbursed in connection with the performance of duties, as determined from the
payroll records of the Employer.

         For Plan Years beginning on or after January 1, 1989, compensation
taken into account for any Participant for any Plan Year shall not exceed
$200,000, subject to adjustment by the Secretary of the Treasury in the same
manner as under Section 415(d) of the Code, except that the dollar increase in
effect on January I of any calendar year and the first adjustment to the
$200,000 limitation is effective on January 1, 1990.

         In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Salary of each Employee taken
into account under the Plan shall not exceed the OBRA '93 annual compensation
limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the
Commissioner of Internal Revenue for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment
in effect for a calendar year applies to any period, not exceeding 12 months,
over which compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12. For Plan Years beginning on or after January 1,
1994, any reference in this Plan to the limitation under Section 401(a)(17) of
the Code shall mean the OBRA '93 annual compensation limit set forth herein.

         (z) "SALARY DEFERRAL" shall mean the amounts contributed to the Plan on
an Eligible Employee's behalf by the Employer at the election of the Eligible
Employee. It is intended that such amounts not be includable in a Participant's
compensation subject to Federal income tax for the Plan Year for which the
contribution is made.

         (aa) "SECTION 415 COMPENSATION" shall mean compensation as defined in
section 415(c)(3) of the Code and in applicable Internal Revenue Service
regulations thereunder.

         (bb) "TRUST" shall mean the trust or trusts created by the trust
agreement referred to in Section 14 between the Company and the Trustee.

         (cc) "TRUSTEE" shall mean the trustee or trustees (and any successor
trustee or trustees) under the trust agreement referred to in Section 14.

         (dd) "UNITS" shall mean the Units referred to in Section 9.

         (ee) "VALUATION DATE" shall mean the last day of each Plan Year and
each day on which the New York Stock Exchange is open for trading.

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         (ff) "YEAR OF SERVICE" shall mean a computation period in which an
Eligible Employee completes 1,000 Hours of Service. The computation period shall
be (i) the 12-consecutive-month period beginning with an Eligible Employee's
employment commencement date, and (ii) each Plan Year ending after the initial
anniversary of the Eligible Employee's commencement date.

         (gg) "EMPLOYER MATCHING CONTRIBUTIONS" shall mean the amounts
contributed to the Plan, if any, with respect to a Participant's Salary Deferral
Contributions. It is intended that such amounts not be includable in a
Participant's compensation subject to federal income tax for the Plan Year for
which the contribution is made.

         (hh) "EMPLOYER NON-ELECTIVE CONTRIBUTIONS" shall mean the amounts
contributed to the Plan on an Employee's behalf by the Employer. It is intended
that such amounts not be includable in a Participant's compensation subject to
federal income tax for the Plan Year for which the contribution is made.

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SECTION 3.        PARTICIPATION IN THE PLAN.

         (a)      INITIAL ENROLLMENT.

                  (i) For purposes of making Salary Deferrals, an Eligible
Employee may elect to participate in the Plan, beginning on any Enrollment Date.
Such Eligible Employee may authorize a Salary Deferral in accordance with
Section 4 and shall direct the investment of deferrals in accordance with
Section 8. Such authorization and direction shall be given by the Eligible
Employee at a time and in a manner specified by the Administrator.

                  (ii) For purposes of receiving an Employer Non-Elective
Contribution, an Eligible Employee shall participate in the Plan beginning on
the first Enrollment Date coinciding with or following the completion of a Year
of Service. Such Participant shall direct the investment of the Employer
Non-Elective Contribution in accordance with Section 8. Such authorization and
direction shall be given by the Eligible Employee at a time and in a manner
specified by the Administrator.

         (b)      TRANSFER FROM ANOTHER PLAN.

         Notwithstanding the provision of paragraph (a) above, an Eligible
Employee whose account in another qualified plan sponsored or maintained by the
Employer (or any current or previous parent or affiliate of the Employer) has
been transferred to the Plan in accordance with Section 4(c) shall participate
in the Plan beginning on the date of such transfer, whether or not such date is
an Enrollment Date. An Eligible Employee whose account in another qualified plan
not sponsored or maintained by the Employer (or any current or previous parent
or affiliate of the Employer) has been transferred to the Plan in accordance
with Section 4(c) shall participate in the Plan in accordance with paragraph (a)
above.

         (c)      TERMINATION AND REINSTATEMENT.

         If an individual who has ceased to be a Participant because such
Participant ceases to be an Eligible Employee, the individual will again become
a Participant in the Plan on the first Enrollment Date following the first date
on which he again completes an Hour of Service as an Eligible Employee.

                                      - 9 -

<PAGE>   16




SECTION 4.      SALARY DEFERRALS.

         (a)      DEFERRALS FROM SALARY.

                  (i) Prior to the 2001 Plan Year, an Eligible Employee may
authorize a Salary Deferral of 1%, 2%, 3 %, 4%, 5%, or 6% of Salary in any Plan
Year. For Plan Years beginning on and after January 1, 2001, an Eligible
Employee may authorize a Salary Deferral of between 1% and 17%. Notwithstanding
the above, the Administrator may reduce the amount of Eligible Employees' Salary
Deferrals in any Plan Year and/or require that all Salary Deferrals cease for
any part of any Plan Year for the purpose of complying with (A) paragraph (b)
below, (B) Section 5, and (C) reasonable, nondiscriminatory limitations
established by the Administrator to comply with contractual obligations of the
Company regarding the allocation of the limitations of paragraph (b) below
between this Plan and the Simmons Company Employee Stock Ownership Plan. The
amount of any such reduction shall be the amount determined by the Administrator
in accordance with such limitations to be necessary for such compliance and
shall be, in the case of a reduction described in clauses (A) and (B) of the
preceding sentence, an amount determined individually for any Participant and,
in the case of a reduction described in clause (C) of the preceding sentence, an
aggregate amount determined for all Eligible Employees making Salary Deferrals
in such Plan Year, which amount shall be allocated pro rata among such Eligible
Employees to reduce such Salary Deferrals in 1% increments of such Eligible
Employees' Salary.

                  (ii) For Plan Years beginning prior to January 1, 2001, or to
the extent that Code Section 401(k)(3)(E) is not applicable after such date, all
Salary Deferrals shall be subject to the limitation described in Section 5.

                  (iii) A Participant's deferrals are intended, for federal
income tax purposes, to be a direct contribution by the Employer and are
intended to be not includable in the Participant's compensation subject to
Federal income tax for the year the deferrals are made. A Participant shall be
entitled to contribute to the Plan only through Salary Deferrals except as
described in paragraph (c) below. No after-tax contributions by Participants
shall be required or permitted under the Plan.

                  (iv) Deferrals will begin with the first payroll period ending
after the Enrollment Date on which the Eligible Employee begins participation in
the Plan. Salary Deferrals made by or for a Participant shall be transmitted by
his Employer to the Trustee as soon as practicable, but in any event not later
than 15 days after the end of the month in which such amounts are withheld or
would otherwise have been paid to the Participant. Deferrals shall be credited
to a Participant's account from the date of receipt by the Trustee.

                  (v) All Salary Deferrals shall be immediately vested and shall
not be subject to forfeiture.



                                     - 10 -

<PAGE>   17




         (b)      MAXIMUM AMOUNT OF CONTRIBUTIONS.

         With respect to any Participant in any Plan Year, the annual addition
to a Participant's account may not exceed the lesser of $30,000 or 25% of a
Participant's Section 415 Compensation for such Plan Year. The annual addition
shall be the sum, credited to a Participant's accounts under this Plan and all
other plans maintained by the Company or an Affiliated Company, of :

                  (i) Employer contributions, including Employer Non-Elective
Contributions;

                  (ii) forfeitures;

                  (iii) Participant contributions, provided that Participant
contributions for plan years beginning prior to January 1, 1987 that were
disregarded under the provisions in effect prior to that date shall continue to
be disregarded;

                  (iv) amounts allocated to an individual medical account (as
defined in section 415(l) of the Code) which is part of a defined benefit plan
maintained by the Company or an Affiliated Company; and

                  (v) amounts (derived from contributions paid after December
31, 1985, in taxable years ending after such date) attributable to
post-retirement medical benefits allocated to the separate account of a key
Employee (as defined in section 419A(d)(3) of the Code) maintained by the
Company or an Affiliated Company.

         Notwithstanding the foregoing, the 25% limitation in this paragraph (b)
and section 415(c)(1)(B) of the Code shall not apply to any contribution for
medical benefits (within the meaning of section 419A(f)(2) or 401(h)) that is
otherwise treated as an annual addition.

         Notwithstanding this paragraph (b) and any provision of any other plan
with which this Plan must be aggregated for purposes of the limitations set
forth herein, to the extent annual additions must be reduced, the annual
addition to this Plan shall be reduced first, in the manner described in
paragraph (d) below, before the reduction of any Participant's annual addition
to each other plan in which the Participant participates, but only to the extent
necessary to comply with the contractual obligations of the Company regarding
the allocation of the limitations on annual additions between this Plan and the
Simmons Company Employee Stock Ownership Plan, and thereafter, to the extent
annual additions must be reduced further, the annual addition to each other plan
in which a Participant participates shall be reduced before any further
reduction of such Participant's annual addition under this Plan.

         In the event that any Participant is or was covered under both a
defined benefit plan and a defined contribution plan maintained by the Company
or an Affiliated Company:

                           (A) Notwithstanding any other provision of this
paragraph (b), and as required by the Code, the sum of the Participant's defined
benefit plan fraction and defined


                                     - 11 -



<PAGE>   18



contribution plan fraction may not exceed 1.0 in any Plan Year (which shall also
be the limitation year); provided, however, that the limitation described in
this paragraph (A) shall cease to apply for limitation years beginning on and
after December 31, 2000.

                           (B) The defined benefit plan fraction is a fraction,
the numerator of which is the sum of the Participant's projected annual benefits
under all defined benefit plans (whether or not terminated) maintained by the
Company and any Affiliated Company, and the denominator of which is the lesser
of (1) 1.25 times the dollar limitation of section 415(b)(1)(A) of the Code in
effect for the Plan Year, or (2) 1.4 times the Participant's average Section 415
Compensation for the three consecutive years that produce the highest average.
"Projected annual benefit" means the annual benefit to which the Participant
would be entitled under the terms of the defined benefit plan if the Participant
continued employment until normal retirement age (or actual age, if later) and
the Participant's Section 415 Compensation for the Plan Year and all other
relevant factors used to determine such benefit remained constant until Normal
Retirement Age (or actual age, if later).

                           (C) The defined contribution plan fraction is a
fraction, the numerator of which is the sum of the annual additions to the
Participant's accounts under all defined contribution plans maintained by the
Company or an Affiliated Company (whether or not terminated) for the current and
all prior Plan Years, and the denominator of which is the sum of the lesser of
the following amounts determined for such year and for each prior year of
service with the Company or an Affiliated Company (or a predecessor to the
extent permitted under the Code): (1) 1.25 times the dollar limitation effect
under section 415(c)(1)(A) of the Code for such year, or (2) 1.4 times the
amount which may be taken into account under section 415(c)(1)(B) of the Code.

                  (vi) If, in any Plan Year, the sum of the defined benefit plan
fraction and the defined contribution plan fraction will exceed 1.0, the rate of
benefit accrual under the defined benefit plan(s) will be reduced so that the
sum of the fractions equals 1.0.

         Notwithstanding anything to the contrary in this Section, in no event
shall a Participant's Salary Deferrals exceed $7,000 for any calendar year (as
adjusted under section 415(d) of the Code) when aggregated with other deferrals
by the Participant pursuant to any other cash or deferred arrangement maintained
by the Company br an Affiliated Company under section 401(k) of the Code.

         (c)     TRANSFERS FROM OTHER PLANS.

         The Administrator shall receive on behalf of a Participant (or on
behalf of an individual who would be an "Eligible Employee" but for the fact
that such individual has not yet satisfied the minimum age and service
requirements contained in the definition of "Eligible Employee" in Section 2 of
this plan) a transfer to the Plan of all or a portion of the amount of any of
the following distributions:

                  (i) any distribution from a terminated pension or profit
sharing plan that was qualified under section 401(a) of the Code, including any
plan sponsored by the Company or any current or previous Affiliated Company; and

                                     - 12 -

<PAGE>   19


                  (ii) an eligible rollover distribution (within the meaning of
section 402 of the Code) from a pension or profit sharing plan that is qualified
under section 401(a) of the Code. However, in no event will such a transfer be
permitted if, in the sole opinion of the Administrator, such transfer would
adversely affect the qualification of the Plan under section 401(a) of the Code,
or would subject the Plan to the requirements of section 401(a)(11) or section
417 of the Code to which the Plan would not be subject but for the acceptance of
the transfer.

         For purposes of determining the maximum amount that may be contributed
on behalf of any Participant within any limits described in the Plan, no amount
transferred to the Plan pursuant to this paragraph (c) shall be included in such
determination.

         (d)      RETURN OF CONTRIBUTIONS.

                  (i) For Plan Years prior to January 1, 2001, or to the extent
that Code Section 401(k)(3)(F) is not applicable after such date, Salary
Deferrals in excess of the limitation described in Section 5 shall be returned
to the Participants who made such deferrals in accordance with Section 5.

                  (ii) Notwithstanding any provision to the contrary, if it is
determined that in any calendar year the sum of a Participant's Salary Deferrals
and deferrals to another plan described by section 401(k) of the Code and
maintained by the Company or an Affiliated Company exceeds $7,000 (as adjusted
under section 415(d) of the Code), the Administrator shall refund the excess
amount to the Participant. Where the Participant makes pretax deferrals to
another plan described in section 401(k) of the Code and not maintained by the
Company or an Affiliated Company that exceed this $7,000 limit when combined
with Salary Deferrals, the excess amount shall be refunded to the Participant if
he notifies the Administrator in writing of the excess amount before March 1 of
the next calendar year. The Plan shall return any such excess amount to the
Participant (together with any earnings attributable to such excess contribution
up to the end of the preceding calendar year) no later than April 15 of the
succeeding calendar year. Any earnings attributable to such excess contribution
shall be determined by multiplying the total earnings of the Participant's
account for the year by a fraction, the numerator of which is the amount of
excess Salary Deferrals for the Plan Year and the denominator of which is the
sum of the account balance of the Participant as of the beginning of the Plan
Year attributable to Salary Deferrals, plus Salary Deferrals for the year.

                                     - 13 -

<PAGE>   20

SECTION           5. NONDISCRIMINATION LIMIT ON SALARY DEFERRALS (FOR PLAN YEARS
                  BEGINNING PRIOR TO JANUARY 1, 2001, OR TO THE EXTENT THAT CODE
                  SECTION 401(k)(3)(E) IS NOT APPLICABLE).

         (a)     GENERAL RULES.

         Notwithstanding any provision of the Plan to the contrary, for any Plan
Year, the Average Actual Deferral Percentage (as defined in paragraph (b) of
this Section) for the group of Highly Compensated Eligible Employees for such
Plan Year shall not exceed the greater of (a) 125% of the Average Actual
Deferral Percentage for all other Eligible Employees for the preceding Plan Year
or (b) the lesser of (i) 200% of the Average Actual Deferral Percentage for all
other Eligible Employees for the preceding Plan Year, or (ii) the Average Actual
Deferral Percentage for the preceding Plan Year for all other Eligible Employees
plus 2 percentage points. If two or more plans which include cash or deferred
arrangements are considered as one plan for purposes of sections 401(a)(4) or
410(b) of the Code, such arrangements included in such plans shall be treated as
one arrangement for the purposes of this Section; and if any Highly Compensated
Eligible Employee is a participant under two or more cash or deferred
arrangements maintained by the group consisting of the Company and all
Affiliated Companies, all such arrangements shall be treated as one cash or
deferred arrangement for purposes of determining the Actual Deferral Percentage
with respect to such Highly Compensated Eligible Employee.

         (b)     ACTUAL DEFERRAL PERCENTAGE.

         For the purposes of this Section, the Average Actual Deferral
Percentage for a specified group of Eligible Employees for a Plan Year shall be
the average of the ratios ("Actual Deferral Percentages") (calculated separately
for each Eligible Employee in such group) of (a) the amount of Salary Deferrals
actually paid to the Trust for each such Eligible Employee for such Plan Year
(including any "excess deferrals" described in Section 4(d)(ii)) to (b) the
Eligible Employee's compensation for such Plan Year. For the purpose of this
Section, the term "compensation" shall mean (i) for the period prior to December
27, 1998, the sum of an Eligible Employee's section 415 Compensation and his
Salary Deferrals (subject to the dollar limitation described in section
401(a)(17) of the Code) and (ii) for the period commencing on and after December
27, 1998, an Eligible Employee's compensation under section 415(c)(3) of the
Code (subject to the limitations described in section 401(a)(17) of the Code).

         (c)     HIGHLY COMPENSATED ELIGIBLE EMPLOYEE.

         For the purposes of this Section, the term "Highly Compensated Eligible
Employee" for a particular Plan Year shall mean any Highly Compensated Employee
who is an Eligible Employee.

         (d)     REFUND OF EXCESS CONTRIBUTIONS.

                                     - 14 -

<PAGE>   21


         In the event that excess contributions (as such term is hereinafter
defined) are made to the Trust for any Plan Year, then, prior to March 15 of the
following Plan Year, such excess contributions (and any income allocable
thereto) shall be distributed to the Highly Compensated Eligible Employees on
the basis of the respective portions of the excess contributions attributable to
each such Eligible Employee. The excess contributions, and the portion of the
excess contributions to be distributed, shall be calculated in the following
manner:

                  (i) The excess contributions with respect to a Highly
Compensated Eligible Employee for a Plan Year are determined by reducing the
Salary Deferrals of the Highly Compensated Eligible Employee with the highest
Actual Deferral Percentage by the amount required to cause the individual's
Actual Deferral Percentage to equal the Actual Deferral Percentage of the Highly
Compensated Eligible Employee with the next highest such percentage. If a lesser
reduction would enable the arrangement to satisfy the test described in Section
5(a), only this lesser reduction will be made. This process must be repeated
until the test described in Section 5(a) would be satisfied.

                  (ii) The total of the reductions in the amounts of Salary
Deferrals, determined in accordance with (i) above, shall be determined.

                  (iii) After the total in (ii) above has been determined, the
Salary Deferrals of the Highly Compensated Eligible Employee with the highest
dollar amount of Salary Deferrals shall be reduced by the amount required to
cause that Highly Compensated Eligible Employee's Salary Deferrals to equal the
dollar amount of the Salary Deferrals of the Highest Compensated Eligible
Employee with the next highest dollar amount of Salary Deferrals. This amount is
then distributed to the Highly Compensated Eligible Employee with the highest
dollar amount of Salary Deferrals. However, if a lesser reduction, which added
to the total dollar amount already distributed under this step would equal the
total excess contributions determined under (ii) above, the lesser reduction
amount is distributed to the appropriate Participant.

                  (iv) If the total amount distributed under (iii) above is less
than the total excess contributions determined under (ii) above, then the
procedure described in (iii) is repeated until the full amount of the excess
contributions, determined under (ii) above, has been distributed to
Participants.

         (e)      REDUCTION OF EXCESS CONTRIBUTIONS.

         Notwithstanding the foregoing, any excess contributions to be
distributed hereunder shall be reduced by any excess deferrals previously
distributed under Section 4(d)(ii) with respect to the same Plan Year.

         (f)      TESTING PROVISIONS.


                                     - 15 -

<PAGE>   22



         In applying the limitations set forth in Sections 5(a) and 4(d)(ii),
the Administrator may, at its option, utilize such testing procedures as may be
permitted under sections 401(a)(4), 401(k), 401(m) or 410(b) of the Code,
including, without limitation, (a) aggregation of the Plan with one or more
other qualified plans of the Company and the Affiliated Companies, (b) inclusion
of qualified matching contributions, qualified nonelective contributions or
elective deferrals described in, and meeting the requirements of, Treasury
Regulations under sections 401(k) and 401(m) of the Code to any other qualified
plan of the Company and the Affiliated Companies in applying the limitations set
forth in Sections 5(a) and 4(d)(ii), (c) effective December 26, 1999, exclusion
of all Eligible Employees (other than Highly Compensated Eligible Employees) who
have not met the minimum age and service requirements of section 410(a)(1)(A) of
the Code in applying the limitations set forth in Section 5(a), or (d) any
permissible combination thereof.

                                     - 16 -

<PAGE>   23


SECTION 6.        CHANGES IN DEFERRALS AND VOLUNTARY TERMINATION.

         A Participant, by giving notice to the Administrator at a time and in a
manner specified by the Administrator, may change the percentage of Salary
authorized as Salary Deferrals to another percentage specified in Section 4(a).
Any reduction or increase in this percentage shall be made in accordance with
procedures established by the Administrator. Also, a Participant may voluntarily
suspend his Salary Deferrals by giving notice to the Administrator at a time and
in a manner specified by the Administrator. In the event of a change in the
Salary of a Participant, the percentage of Salary Deferrals currently in effect
shall be applied as soon as practicable with respect to such changed Salary,
without action by the Participant.

                                     - 17 -

<PAGE>   24




SECTION 7.        EMPLOYER CONTRIBUTIONS.

         (a)      EMPLOYER NON-ELECTIVE CONTRIBUTIONS.

         For Plan Years beginning on January 1, 2001, and for those Eligible
Employees who have satisfied the requirements of Section 3(a)(ii) of the Plan,
the Employer shall make an Employer Non- Elective Contribution equal to 3% of a
Participant's Salary. All Employer Non-Elective Contributions shall be
immediately vested and shall not be subject to forfeiture.

         (b)      PREVIOUS EMPLOYER CONTRIBUTIONS.

         Beginning January 1, 1989, and ending December 31, 2000, no Employer
contributions shall be made to the Plan, other than Salary Deferrals. All
Employer contributions (other than Salary Deferrals) made to the Plan prior to
January 1, 1989 shall continue to be held in the Plan and shall be invested and
distributed in accordance with the terms of the Plan.


                                     - 18 -

<PAGE>   25


SECTION 8.        INVESTMENT OPTIONS.

         (a)      INVESTMENT DIRECTION.

         Each Eligible Employee shall direct the manner in which (i) Salary
Deferrals (ii) amounts transferred to the Plan in accordance with the provisions
of Section 4, (iii) Employer Non-Elective Contributions made after January 1,
2001, and (iv) Employer contributions to the Plan made on his behalf before
January 1, 1989, shall be invested in one of the investment options offered
under the Plan, as determined from time to time by the Administrator or the
Trustee. A Participant may elect to have these amounts allocated among each
investment option only in multiples of 5%.

         Earnings or gains received (or losses incurred) with respect to any
investment fund shall be allocated to and reinvested in that investment fund.

         (b)      CHANGE IN INVESTMENT DIRECTION.

         Any investment direction given by a Participant shall continue in
effect until changed by the Participant. A Participant may change investment
direction at such times (which shall be at least once each calendar quarter) as
the Administrator shall designate by providing notice to the Administrator, at a
time and in a manner specified by the Administrator, directing that the
Participant's future contributions and/or current account be allocated among the
investment options in any combination permitted by Section 8(a).

         The term "Participant" as used here shall include a former Participant
or a Beneficiary who has elected to defer the distribution of the Participant's
account pursuant to Section 11 and a former Participant who has elected to
receive an installment distribution pursuant to Section 11.

         (c)      ERISA Section 404(c).

         The provisions of this Section 8 shall be applied in a manner
consistent with United States Department of Labor Regulations ss. 2550.404c-1
(or any future regulations of the United States Department of Labor of similar
import) so that this Plan shall be an ERISA ss. 404(c) plan.

                                     - 19 -

<PAGE>   26




SECTION 9.        MAINTENANCE AND VALUATION OF PARTICIPANTS' ACCOUNTS.

         (a)      MAINTENANCE OF SEPARATE ACCOUNTS.

         There shall be established for each Participant a separate account,
which shall reflect all Salary Deferrals by the Participant, Employer
Non-Elective Contributions and all other related amounts contributed by the
Employer and the investment gains and losses from such amounts. Each Participant
shall be furnished a statement of account at times determined by the
Administrator, but no less frequently than annually.

         (b)      VALUATION OF ACCOUNTS.

         At such times as may be necessary to reflect Participants'
proportionate interests in collective investment vehicles offered under the
Plan, and at such other times as the Administrator shall determine, the interest
of a Participant in each type of investment shall be valued and credited to the
account. Any account or portion thereof of a Participant which is invested in a
certain fund shall only share in the gains or losses of such fund, and shall not
share in the gains or losses of any other Trust fund investment.

                                     - 20 -

<PAGE>   27




SECTION 10.       RIGHTS TO BENEFITS.

         (a)      RETIREMENT.

         Upon retirement at Normal Retirement Age or Early Retirement Age, each
Participant will have a fully vested and nonforfeitable interest in amounts
allocated to his account in the Trust. Upon retirement, a Participant's account,
valued as of the Valuation Date coinciding with or immediately succeeding the
date the Participant terminates service, will be distributed to him (or if
distributed in installments, will begin to be distributed to him) in accordance
with Section 11.

         (b)      DISABILITY RETIREMENT.

         A Participant may retire before his Normal Retirement Age or Early
Retirement Age if, because of a medically determinable physical or mental
impairment likely to result in death or to be long-continued and indefinite in
duration, he cannot engage in any substantial employment with the Employer and
as a result his employment with the Employer is terminated. In the event of such
termination of employment on account of disability, the Participant will have a
fully vested and nonforfeitable interest in amounts allocated to his account in
the Trust. A Participant's account, valued as of the Valuation Date coinciding
with or immediately succeeding the date the Participant terminates service, will
be distributed to him (or if distributed in installments, will begin to be
distributed to him) in accordance with Section 11.

         Whether the Participant is disabled will be determined by the
Administrator, in its sole discretion, on the basis of medical evidence
satisfactory to the Administrator.

         (c)      DEATH.

         If a Participant or former Participant dies, upon his death his
designated Beneficiary will have a fully vested and nonforfeitable interest in,
and will be entitled to receive, the amount of the Participant's account in the
Trust, valued as of the Valuation Date coinciding with or immediately preceding
the date of distribution. Distribution to the Beneficiary will be made (or if
distributed in installments, will commence) in accordance with Section 11.

         If a Participant dies, Salary Deferrals from the Participant's Salary
not deposited into the Plan prior to the Participant's death will be paid over
to the person or persons entitled thereto.

         (d)      OTHER TERMINATIONS OF EMPLOYMENT.

         If a Participant terminates employment with the Employer for reasons
other than retirement, disability, or death, then he will be entitled to a
benefit equal to (i) the balance of his account, less (ii) the Non-Vested
Amounts determined as of the Valuation Date immediately succeeding the date
the Participant terminates service. The vesting schedule for determining the
Non-Vested Amount of Employer Matching Contributions, if any, shall be as
follows:

                                     - 21 -

<PAGE>   28




                  Years of Service          Nonforfeitable Percentage
                  ----------------          -------------------------
                  Less than 1                                  0
                  1 but less than 2                           20
                  2 but less than 3                           40
                  3 but less than 4                           60
                  4 but less than 5                           80
                  5 or more                                  100

Notwithstanding any provision of the Plan to the contrary, Employer Non-Elective
Contributions shall be immediately vested and shall not be subject to
forfeiture.

         Distribution of a benefit under this paragraph (d) will be made in
accordance with Section 11. However, notwithstanding anything in this Section 10
to the contrary, any person who was an Employee of the Employer as of October
30, 1986, shall be deemed to have five Years of Service as of January 1, 1987.
In addition, for purposes of this paragraph (d), each Year of Service completed
by a Participant after attaining age 18 shall be counted.

         (e)     FORFEITURES.

         If a Participant terminates service before he has a I 00%
nonforfeitable interest in his account, then any Non-Vested Amounts shall be
forfeited and placed in a separate account on the date the Participant incurs a
Break in Service. This separate account shall be invested by the Administrator
or Trustee and shall share in the net income (or loss) of the Trust, but shall
not be entitled to an allocation of any contributions or forfeitures.

         If prior to incurring five consecutive Breaks in Service the
Participant becomes re-employed by the Employer, the amount of this separate
account shall be deemed not forfeited and shall be returned to the Participant's
account. Upon re-employment, the Participant's vested interest in his account
attributable to Employer contributions shall equal P(AB + (R x D)) - (R x D),
where P is the nonforfeitable percentage at the relevant time determined under
paragraph (d) above; AB is the account balance of the separate account at the
relevant time; D is the amount of the distribution attributable to Employer
contributions; and R is the ratio of the account balance of the separate account
at the relevant time to the account balance of such account immediately after
the distribution.

         Upon the Participant incurring five consecutive Breaks in Service, the
Participant shall permanently forfeit the amount of this separate account, and
this amount shall be used to pay expenses of administering the Plan pursuant to
Section 18.

                                     - 22 -

<PAGE>   29



SECTION 11.       DISTRIBUTION OF BENEFITS.

         (a) DISTRIBUTION IN LUMP SUM ON RETIREMENT OR ON TERMINATION OF
EMPLOYMENT DUE TO DISABILITY.

         In the case of a Participant who has retired after attaining Normal
Retirement Age or Early Retirement Age, or who has terminated employment because
of disability, unless the Participant elects an optional form of benefit
described in paragraph (b) below, a Participant's nonforfeitable account balance
will be paid in the form of a single lump-sum payment.

         (b) DISTRIBUTION IN OTHER THAN A LUMP SUM ON RETIREMENT OR ON
TERMINATION OF EMPLOYMENT DUE TO DISABILITY.

         In the case of Participant who has retired after attaining Normal
Retirement Age or Early Retirement Age, or who has terminated employment because
of disability, such Participant may elect, in accordance with paragraph (a)
above, to receive a distribution of the Participant's nonforfeitable account
balance in the form of a Qualified Joint and Survivor Annuity or a single life
annuity, or in approximately equal cash installments payable at least annually
over a period not to exceed the least of:

                  (i)      10 years,

                  (ii)     the life expectancy of the Participant, or

                  (iii)    if the Participant has a spouse who is the designated
Beneficiary, the life expectancy of both.

         Any Participant who has elected to receive a distribution in the form
of a Qualified Joint and Survivor Annuity or a single life annuity may revoke
this election and select another form of payment only by making a Qualified
Election as described in Section 2.

         (c) DEFERRAL OF DISTRIBUTION ON RETIREMENT OR ON TERMINATION OF
EMPLOYMENT DUE TO DISABILITY.

         In the case of retirement or termination of employment because of
disability, the Participant, in lieu of receiving a distribution under paragraph
(a) or (b) above at the time of such retirement or termination, may elect that
the Participant's account remain in the Plan; provided, however, that a
Participant's account shall be distributed, or begin to be distributed, no later
than April 1 of the calendar year following the taxable year in which the
Participant attains age 70-1/2, to the extent required in paragraph (h) of the
Section. Such an election shall be on a form provided for this purpose signed by
the Participant and delivered to the office designated by the Administrator
within 90 days before such retirement or termination. Thereafter, the
Participant, by giving notice to the Administrator at a time and in a manner
specified by the Administrator, shall be considered to have

                                     - 23 -

<PAGE>   30



retired at the end of such month for the purpose of the distribution of the
Participant's account under paragraphs (a) and (b) of this Section 11.

         (d)      PAYMENT ON DEATH.

         If a Participant dies after distribution of his nonforfeitable account
balance has commenced, the remaining nonforfeitable account balance shall be
distributed to the Participant's spouse or other Beneficiary, at least as
rapidly as under the method of distribution applicable to the Participant at the
time of death.

         If a Participant dies before distribution of his nonforfeitable account
balance has begun, distribution will commence no later than one year after the
Participant's death or, if the Participant's designated Beneficiary is the
Participant's surviving spouse, the date the Participant would have attained age
70-1/2 and will be made, as the Beneficiary shall elect, either in a single
lump-sum payment or in approximately equal cash installments payable at least
annually:

                  (i) over a period ending not later than the fifth anniversary
of the Participant's death, or

                  (ii) if the Participant has a designated Beneficiary who is
alive at the time benefits payments commence, over a period not to exceed the
life expectancy of the designated Beneficiary.

         In the event of a married Participant's death before the annuity
starting date (as defined in Section 417(f) of the Code), if he has elected to
receive payment in the form of a Qualified Joint and Survivor Annuity or a
single life annuity, his nonforfeitable account balance shall be used to
purchase an annuity for the life of his surviving spouse (which shall meet the
requirements of a qualified preretirement survivor annuity described in section
417(c) of the Code and which shall provide that benefit payments will begin
within a reasonable time after the Participant's death), unless the surviving
spouse elects a lump sum or installment form of benefit described in paragraphs
(a) and (b) above.

         With regard to a qualified preretirement survivor annuity as required
by the preceding paragraph, the Plan Administrator shall provide each
Participant within the Applicable Period for such Participant a written
explanation of the qualified preretirement survivor annuity.

         "Applicable Period" shall mean, with respect to a Participant,
whichever of the following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains age 32 and ending
with the close of the Plan Year preceding the Plan Year in which the Participant
attains age 35; and (b) a reasonable period ending after the individual becomes
a Participant. Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service in the case of a
Participant who separates from service before attaining age 35. For purposes of
applying this definition, a "reasonable period" ending after an event described
above is the end of the 2-year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date. In the case of a
Participant who separates from service before the Plan Year in which age 35 is
attained, the Applicable Period shall be the 2-year


                                     - 24 -

<PAGE>   31



period beginning one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to employment with the
Employer or an Affiliated Company, the Applicable Period for such Participant
shall be redetermined.

         (e)      DISTRIBUTION ON OTHER TERMINATIONS OF SERVICE.

         In the case of a Participant who terminates service for reasons other
than death, disability, or retirement after attaining Normal Retirement Age or
Early Retirement Age, such Participant shall receive a distribution in a single
lump-sum payment, as soon as practicable after the date of termination;
provided, however, if the Participant elects at a time and in a manner specified
by the Administrator, the Administrator shall instruct the Trustee to purchase
on behalf of the Participant a life annuity or Qualified Joint and Survivor
Annuity, except that the annuity starting date will be no earlier than the
Participant's attainment of age 59-1/2 and will be no later than the
Participant's attainment of age 65.

         (f)      ACCOUNTS OF $5,000 OR LESS.

         Notwithstanding any provision to the contrary, if the nonforfeitable
amount in a Participant's account is $3,500 or less ($5,000 or less on the date
of the Participant's termination of employment, effective as of January 1,
2000), the benefit shall be distributed in a single lump-sum payment.

         (g)      ACCOUNTS OF MORE THAN $5,000.

         If the nonforfeitable amount in a Participant's account is more than
$3,500 (more than $5,000 on the date of the Participant's termination of
employment effective as of January 1, 2000), no amount shall be distributed to a
Participant who has not attained Normal Retirement Age without his consent.
Unless the Participant has made an election in accordance with paragraph (c),
the Participant's entire account shall continue to be invested in accordance
with the terms of the Plan until the Participant reaches Normal Retirement Age
and shall then be distributed pursuant to this Section.

         (h)      REQUIRED DISTRIBUTIONS.

         Notwithstanding any other provisions of the Plan relating to the
distribution of a Participant's account, unless a Participant elects otherwise,
the distribution of benefits under the Plan will begin not later than the 60th
day after the latest of the close of the Plan Year in which (i) the Participant
attains age 65, (ii) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan, or (iii) the Participant
terminates service with the Employer. Notwithstanding any other provision of the
Plan, to the extent required under section 401(a)(9) of the Code, the entire
account balance of a Participant who is a 5% owner (as defined in section 416 of
the Code) or who attains age 70-1/2 prior to January 1, 2001 (i) shall be
distributed to him in a lump sum in cash not later than April 1 of the calendar
year following the calendar year in which he attains age 70-1/2 and, with
respect to such Participants who are Employees, on December 31 of such year and
each succeeding year or (ii) shall commence to be distributed to him in one of
the forms permitted under Section 11

                                     - 25 -

<PAGE>   32



(b) not later than the time specified in clause (i) of this paragraph. In
addition, the account balance of any other Participant must be distributed or
commence to be distributed not later than the April 1 of the calendar year
following the later of (i) the calendar year in which he attains age 70-1/2 or
(ii) the calendar year in which he incurs a termination of employment.

         Notwithstanding the foregoing, distributions under this Section shall
be made in accordance with the provisions of section 401(a)(9) of the Code and
Treasury Regulations issued thereunder, including Treasury Regulation Section
1.401(a)(9)-2, which provisions are hereby incorporated herein by reference,
provided that such provisions shall override the other distribution provisions
of the Plan only to the extent that such other Plan provisions provide for
distribution that is less rapid than required under such provisions of the Code
and Regulations. Nothing contained in this Section shall be construed as
providing any optional form of payment that is not available under the other
distribution provisions of the Plan.

         (i)      ELIGIBLE ROLLOVER DISTRIBUTIONS.

         This section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this paragraph, a distributee may elect, at
the time and in the manner prescribed by the Administrator, to have a portion of
an eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover. The Administrator shall
establish rules regarding the eligibility of a distributee to elect a direct
rollover in accordance with the requirements of section 401(a)(31) of the Code.

         The terms used in this paragraph shall be defined as follows:

                  (i) "ELIGIBLE ROLLOVER DISTRIBUTION" means a distribution of
all or any portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: (A) any distribution that is
one of a series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee and the
distributee's designated Beneficiary, or for a period of ten years or more; (B)
any distribution to the extent such distribution is required under section
401(a)(9) of the Code; (C) the portion of any distribution that is not
includable in gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities); (D) any hardship
distribution under Section 12(a) of this Plan; or (E) any other distribution
exempted under regulations or other guidance issued by the Internal Revenue
Service.

                  (ii) "ELIGIBLE RETIREMENT PLAN" means an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, or a qualified trust described
in section 401(a) of the Code that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to a
surviving spouse, an eligible retirement plan is an individual retirement
account or an individual retirement annuity.


                                     - 26 -

<PAGE>   33




                  (iii) "DISTRIBUTEE" includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is an alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.

                  (iv) "DIRECT ROLLOVER" means a payment by the Plan to the
eligible retirement plan specified by the distributees.


                                     - 27 -

<PAGE>   34




SECTION 12.       WITHDRAWALS.

         (a)      HARDSHIP.

         Any Participant who suffers a financial hardship may request a
withdrawal from his account in the Trust of any sum not in excess of the amount
of his Salary Deferrals contributed to such account, plus earnings on such
Salary Deferrals credited as of December 31, 1988, by written notice to the
Administrator setting forth the amount requested and the facts establishing the
existence of the financial hardship. For purposes of this Section 12, a
"financial hardship" is defined as an immediate and heavy financial need of the
Participant where such Participant lacks other available resources to meet this
need.

         The following are the only financial needs considered immediate and
heavy:

                  (i) Expenses for medical care (within the meaning of section
213(d) of the Code) incurred by the Participant or the Participant's spouse,
children, or dependents (as defined in section 152 of the Code) or necessary for
these persons to obtain such medical care;

                  (ii) The purchase (excluding mortgage payments) of a principal
residence for the Participant;

                  (iii) Payment of tuition and related educational fees for the
next 12 months of post- secondary education for the Participant or the
Participant's spouse, children, or dependents (as defined in section 152 of the
Code); or

                  (iv) The need to prevent the eviction of the Participant from,
or a foreclosure on the mortgage of, the Participant's principal residence.

         A hardship withdrawal, if approved, shall be limited to the amount
necessary to satisfy the financial hardship, and shall be paid to the
Participant in a single lump-sum payment. A Participant must obtain all
distributions (other than hardship distributions) and all nontaxable loans
currently available under the Plan and all other plans maintained by the
Employer in order for the distribution to be deemed necessary to satisfy the
financial hardship. A Participant receiving a hardship withdrawal shall not be
permitted to make Salary Deferrals for 12 months after receipt of the hardship
withdrawal, and shall not be permitted to make Salary Deferrals in the calendar
year after the calendar year of the hardship withdrawal in excess of $7,000 (as
adjusted under section 415(d) of the Code) less the amount of Salary Deferrals
for the calendar year of the hardship withdrawal.

         Determination of whether hardship exists, and the amount that may be
withdrawn in the event of hardship, shall be made by the Administrator, in its
sole discretion, on the basis of all relevant facts and circumstances.


                                     - 28 -

<PAGE>   35




         (b)      ATTAINMENT OF AGE 59-1/2 OR 65.

         A Participant who has attained age 59-1/2 may request a withdrawal of
all or a portion of his account, excluding Employer contributions made prior to
January 1, 1989, and earnings attributable thereto. Upon attainment of age 65, a
Participant may also request a withdrawal of all or a portion of his
nonforfeitable account balance attributable to Employer contributions and
related earnings.

         Upon receipt of such request the Administrator will direct the Trustee
to distribute the amount of the withdrawal to the Participant in a single lump
sum.

         (c)      OTHER WITHDRAWALS.

         A Participant may request a withdrawal of the entire amount of his
Salary Deferrals and Employer Non-Elective Contributions and the earnings
attributable thereto, if any of the following occur:

                  (i) termination of this Plan without the establishment of a
successor defined contribution Plan;

                  (ii) sale by the Company of substantially all of the assets it
uses in a trade or business (but only with respect to a Participant who is
employed with the entity acquiring such assets); or

                  (iii) sale by the Company of its interest in a subsidiary (but
only with respect to a Participant who is employed by such subsidiary).

         Upon receipt of such request, the Administrator will direct the Trustee
to distribute to the Participant in a single lump-sum payment the amount of the
withdrawal.

                                     - 29 -

<PAGE>   36



SECTION 13.        LOANS TO PARTICIPANTS.

         (a)        REQUESTS FOR LOANS.

         A Participant who has participated in the Plan for at least 24
consecutive months and is a "party-in-interest," as defined in section 3(14) of
ERISA, may request, on an application (the "Loan Application") prescribed by the
Administrator, that the Administrator direct the Trustee to make a loan from the
Trust to the Participant, subject to the terms and conditions of this Section. A
Participant is generally a "party-in-interest" if he is (i) a current employee
of the Employer, (ii) a former employee of the Employer who is a director,
officer, or 10% stockholder of the Employer, or (iii) a former employee of the
Employer who is an officer, director, or 10% stockholder of an entity owned 50%
or more by the Employer. A Participant who is otherwise eligible to request a
loan may do so only once every 12 months and may have only one loan from the
Plan outstanding at any time.

         Loans shall be available to all Participants on a reasonably equivalent
basis and shall not be made available to Highly Compensated Employees in an
amount greater than the amount made available to Non-Highly Compensated
Employees. However, the Administrator may make distinctions based on
creditworthiness, state law restrictions affecting payroll deductions, and any
other factor that may adversely affect the Trust's ability to assure repayment
through payroll deductions. The Administrator may reduce or refuse a requested
loan where it determines that timely repayment of the loan is not assured.

         A Participant may apply for a loan by completing and returning to the
Administrator the Loan Application. The Administrator shall review the Loan
Application and shall approve or deny a loan in its sole discretion. If
approved, the loan shall be documented by a promissory note, a payroll
withholding authorization, and certain other forms that the Participant will be
required to sign and which are described in the Loan Application. The Loan
Application also contains the following information:

                  (i)      the person authorized to administer loans made under
                           this Section;

                  (ii)     the procedure for applying for loans;

                  (iii)    the basis on which loans will be approved or denied;

                  (iv)     limitations on the types and amount of loans
available;

                  (v)      how the interest rate will be determined;

                  (vi)     the collateral required for a loan; and

                  (vii) events constituting a default and the action that will
be taken by the Plan in the event of a default.

                                     - 30 -

<PAGE>   37




         The Administrator is authorized to amend the Loan Application and the
other forms used to document and secure loans in such manner and at such times
as the Administrator, in its discretion, deems necessary or appropriate. The
Loan Application is incorporated in this Plan by this reference and is deemed to
be a part of this Plan.

         (b)      SECURITY.

         The Administrator shall require that each loan be evidenced by a note
executed in favor of the Trust and that the loan shall be secured by the entire
nonforfeitable amount in the Participant's account.

         Any note evidencing a loan to a Participant made under this Section
shall be deemed to be an asset of the Trust which is allocable to the borrowing
Participant's account. The fair market value of the note shall be equal to the
unpaid balance of the note plus any accrued interest.

         (c)      AMOUNT OF LOANS.

         The minimum amount of any loan is $1,000. The maximum amount of any
loan, together with the aggregate amount of principal and accrued interest owed
by the Participant with respect to any prior loan from the Trust, may not exceed
the lesser of:

                  (i)      $50,000 reduced by the excess (if any) of:

                           (A) the highest outstanding balance of loans from the
Plan to the Participant during the one-year period ending on the day before the
date on which such loan was made; or

                           (B) the outstanding balance of loans from the Plan to
the Participant on the date on which such loan was made; or

                  (ii) one-half the present value of the nonforfeitable accrued
balance of the Participant under the Plan determined as of the Valuation Date
immediately preceding the date the loan is requested.

         (d)     REPAYMENT.

         The loan shall be repayable by payroll deductions no less frequently
than monthly. Moreover, the payments of principal and interest shall be
amortized on a level basis over the life of the loan. No loan may exceed a
period of five years.

         Notwithstanding any other provision of the Plan, loan repayments will
be suspended under the Plan as permitted under section 414(u)(4) of the Code
(for Participants on a leave of absence for "qualified military service" (as
defined in Section 24(f) of the Plan)).

                                     - 31 -

<PAGE>   38




         Notwithstanding any other provision of the Plan, a loan made pursuant
to this Section shall be a first lien against the Participant's account. Any
amount of principal or interest due and unpaid on the loan at the time of any
default on the loan shall be satisfied by deduction from the Participant's
account, and shall be deemed to have been distributed to the Participant, as
follows:

                  (i) in the case of a Participant who is an Employee and who is
not, at the time of the default, eligible to receive a distribution of his
account, at such time as he first becomes eligible to receive a distribution of
his account; or

                  (ii) in the case of any other Participant, immediately upon
such default.

         (e)     ADMINISTRATION OF LOANS.

         The Administrator shall promulgate rules and procedures relating to
such loans. Without limiting the foregoing, the Administrator may require that
the spouse of a Participant requesting a loan consent in writing to the loan and
to the reduction that may result in the death benefit otherwise payable under
this Plan if there is a default on the loan. Such consent shall be obtained
within the 90-day period ending on the day the loan is made and shall satisfy
the spousal consent requirements of a Qualified Election. In addition to the
limitations contained in the Loan Application, the Administrator may further
limit the amount of a loan in order to maintain a reserve chargeable against a
Participant's account for income taxes which may have to be withheld by the
Trustee if the loan becomes a deemed distribution to the Participant. Any taxes
required to be withheld by the Trustee shall be charged to and shall reduce the
Participant's account to the extent possible and, if not payable from the
Participant's account, shall be an administrative expense of the Plan and shall
be reimbursed by the Participant.

                                     - 32 -

<PAGE>   39



SECTION 14.       ADMINISTRATION BY TRUSTEE.

         (a)      TRUST AGREEMENT.

         The Company has entered into a trust agreement appointing a Trustee
under the Plan. The trust agreement provides, among other things, that all funds
received by the Trustee thereunder will be held by the Trustee or its designee,
and that no part of the corpus or income of the Trust held by the Trustee or its
designee shall be used for, or diverted to, purposes other than for the
exclusive benefit of Participants or their Beneficiaries. The Company shall have
authority to remove such Trustee or any successor Trustee, and any Trustee or
any successor Trustee may resign. Upon removal or resignation of a Trustee, the
Company shall appoint a successor Trustee.

         The Company shall have authority to direct that there shall be more
than one Trustee under the trust agreement and to determine the portion of the
assets under the trust agreement to be held by each such Trustee. If such a
direction is given, the Company shall designate the additional Trustee or
Trustees, and each Trustee shall hold, administer, and keep records with respect
to the portion of such assets held by it.

         The Company shall also have the authority to direct that all or a
portion of the assets invested in any of the investment options available under
the Plan be segregated into one or more separate accounts, each of which shall
be invested by an Investment Manager (or such other person or entity) designated
by the Company, and to determine the flow of funds into, from, and between the
investment funds in a manner consistent with the investment instructions of
Participants.

         The Company shall have authority to issue general investment guidelines
governing investments by the Trustee and Investment Managers.

         (b)      INVESTMENT RESPONSIBILITY.

         Unless otherwise determined by the Trustee, the Trust assets shall be
invested in the investment funds available under the Plan. Each Participant or
Beneficiary shall direct the Trustee as to the investment of assets allocated to
his account in one or more of such investment funds pursuant to the provisions
of Section 8, and the Trustee shall be subject to the direction of the
Participant or Beneficiary. The Administrator shall be responsible for directing
Participants and Beneficiaries as to the manner in which information and
disclosure with respect to the investment funds may be obtained. The Trustee and
the Administrator shall develop reasonable administrative procedures governing
investment directions by Participants and Beneficiaries, including without
limitation, rules regarding the frequency of changes in investment elections and
the percentage of each account which may be invested in a particular investment
fund; provided, however, that changes in investment elections shall be permitted
no less frequently than once each calendar quarter. In such case, the
Participant or Beneficiary shall not be deemed to be a fiduciary by reason of
such exercise of control over the assets in his account, and no person who is
otherwise a fiduciary with respect to the Plan shall be liable for any loss or
by reason of any breach, which results from such Participant's or Beneficiary's
exercise of control. All investment-related expenses, including administrative
fees charged by brokerage houses,

                                     - 33 -

<PAGE>   40



may be charged against the account of the Participant or Beneficiary with
respect to which the Participant or Beneficiary directs the investment of
assets.

         Subject to the foregoing restrictions, the Trustee shall be authorized
and empowered to invest and reinvest all or any part of the Trust assets in any
property, including, but not limited to, capital or common, preferred or
preference stock (whether voting or nonvoting and whether or not currently
paying a dividend), shares of regulated investment companies, convertible
securities, and corporate and governmental obligations. Subject to the
applicable provisions of Title I of ERISA, the Trustee shall not be bound as to
the character of any investments by any statute, rule of court, or custom
governing the investment of Trust assets in making and retaining such
investments and reinvestments. Notwithstanding anything herein to the contrary,
the Trustee shall not maintain any indicia of ownership of any asset held in the
Trust outside the jurisdiction of the District Courts of the United States
unless such holding is approved through a ruling or regulation promulgated under
ERISA by the Secretary of Labor, nor shall the Trustee engage in any transaction
that would be prohibited under ERISA or the Code.

         (c)       OTHER POWERS.

         In addition to the authority and powers enumerated in the preceding
paragraph (b), the Trustee is authorized and empowered with respect to the
Trust:

                  (i) subject to the preceding paragraph (b), and subject to any
proper investment instructions from Participants pursuant to the terms of the
Plan, to sell, exchange, convey, transfer, or otherwise dispose of, either at
public or private sale, any property, real, personal, or mixed, at any time held
by it, for such consideration and on such terms and conditions as to credit or
otherwise as the Trustee may, in its sole discretion, deem to be in the best
interest of the Trust;

                  (ii) to vote, in person or by proxy, any stocks, bonds, or
other securities held by it; to exercise any options appurtenant to any stocks,
bonds, or other securities, or to exercise any rights to subscribe for
additional stocks, bonds, or other securities, and to make any and all necessary
payments therefor; to-join in, or to dissent from, and to oppose, the
reorganization, consolidation, liquidation, sale, or merger of corporations or
properties in which it may be interested as Trustee, upon such terms and
conditions as it may deem advisable;

                  (iii) to make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments that may
be necessary or appropriate to execute the powers granted herein;

                  (iv) to register any investment held in the Trust in the name
of the Trust or in the name of a nominee, and to hold any investment in bearer
form, but the books and records of the Trustee shall at all times show that all
such investments are part of the Trust;

                  (v) to employ suitable agents and counsel (who may also be
agents and/or counsel for the Employer) and to pay their reasonable expenses and
compensation; and

                                     - 34 -

<PAGE>   41


                  (vi) subject to Title I of ERISA, to borrow or raise monies
for the purpose of the Trust from any source and, for any sum so borrowed, to
issue a promissory note as Trustee, but nothing contained herein shall obligate
the Trustee to render itself liable in its individual capacity for the amount of
any such borrowing, and no person loaning money to the Trustee shall be bound to
see to the application of money loaned or to inquire into the validity or
propriety of such borrowing.

         Notwithstanding any provision in this paragraph (c) to the contrary,
the Trustee shall not engage in any transaction that would be prohibited under
ERISA or the Code.

         (d)     UNINVESTED FUNDS.

         The Trustee may keep uninvested an amount of cash sufficient in its
opinion to enable it to carry out the purposes of the Plan; provided, however,
that the Trustee shall be responsible for assuring, to the extent practicable
and subject to paragraphs, (b) and (c) above, the daily investment of all cash
balances at any time held by the Trustee, so as to maintain daily uninvested
cash balances at a minimum. No income shall accrue to an account of any
Participant on such uninvested funds.

         (e)     AUDIT.

         The Company shall select a firm of independent certified public
accountants to examine and report on the financial statements of the Plan at
such times and intervals as are required by law or determined by it to be
reasonable and appropriate.

                                     - 35 -

<PAGE>   42



SECTION 15.     LEAVE OF ABSENCE, LAYOFF AND ABSENCE ON DISABILITY.

         If a Participant is granted a leave of absence by the Employer, no
Salary Deferrals shall be permitted during the period of the leave, and
deferrals shall be deemed to be suspended during such period.

         If a Participant is laid off, no Salary Deferrals shall be permitted
during the period of layoff, and deferrals shall be deemed to be suspended
during such period. If at the end of 12 months the Participant has not returned
as an Employee in active service, then notwithstanding any other provision of
the Plan, the individual's participation in the Plan shall terminate at such
time, and employment shall be deemed to have terminated at such time for the
purpose of distribution under the Plan.

         If a Participant is absent on account of disability and is receiving
disability benefits under a plan of the Employer, there shall be no Salary
Deferrals during the period of the leave, and Salary Deferrals shall be deemed
to be suspended during such period.

                                     - 36 -

<PAGE>   43



SECTION 16.       DESIGNATION OF BENEFICIARIES.

         A Participant may designate a Beneficiary, or Beneficiaries, to receive
all or part of the amount in the Participant's account in case of death. A
designation of Beneficiary may be replaced by a new designation or may be
revoked by the Participant at any time. A designation or revocation shall be on
a form to be provided for such purpose and shall be signed by the Participant
and delivered to the Administrator prior to death.

         In case of the death of the Participant, the amount in the
Participant's account with respect to which a designation of Beneficiary has
been made (to the extent it is valid and enforceable under applicable law) shall
be distributed in accordance with the Plan to the designated Beneficiary or
Beneficiaries.

         The amount in the Participant's account distributable upon death and
not covered by such a designation shall be distributed to the Participant's
estate. If there shall be any question as to the legal right of any Beneficiary
to receive a distribution under the Plan, the amount in question may be paid to
the estate of the Participant, in which event the Trustee and the Employer shall
have no further liability to anyone with respect to such amount. The amount in
the Participant's account shall be distributed as a single payment as soon as
practicable after death.

         If the Participant's Beneficiary should die after the Participant but
before all or any payments or installments have been paid, a lump-sum payment of
the remaining amount will be made to such Beneficiary's estate.

         Notwithstanding the foregoing provisions of this Section 16 and subject
to the requirements for making a Qualified Election, if a Participant dies
leaving a surviving spouse, the Participant's surviving spouse shall be deemed
to be the Participant's designated Beneficiary for purposes of the Plan unless
the Participant has designated another person or entity as the Participant's
Beneficiary, the surviving spouse has consented in writing to such designation,
and the surviving spouse's consent acknowledges the effect of such designation
and has been witnessed by a notary public or a representative of the Plan.

                                     - 37 -

<PAGE>   44



SECTION 17.       BENEFITS NOT ASSIGNABLE.

         (a) IN GENERAL. Benefits or interests available hereunder will not be
subject to assignment or alienation, either voluntarily or involuntarily. For
purposes of this Section, a loan made to a Participant or Beneficiary shall not
be treated as an assignment or alienation if such loan is secured by the
Participant's nonforfeitable account balance and is exempt from the tax imposed
by section 4975 (relating to the tax on prohibited transactions) by reason of
section 4975(d)(1).

         (b) QUALIFIED DOMESTIC RELATIONS ORDERS.

                  (i) GENERAL RULE. The provisions of subsection (a) above shall
not apply to a "qualified domestic relations order," as defined in Section
414(p) of the Code and Section 206(d)(3) of ERISA, or any other domestic
relations order permitted to be treated as a "qualified domestic relations
order" by the Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to determine the
qualified status of domestic relations orders and to administer distributions
under such qualified orders. To the extent provided under a "qualified domestic
relations order," a former spouse of a Participant shall be treated as the
spouse or surviving spouse for all purposes under the Plan.

                  (ii) QDRO PROCEDURES.

                           (A) PROCEDURE UPON RECEIPT. Upon receiving a domestic
relations order, the Administrator shall notify all affected Participants and
any alternate payees (spouse, former spouse, child or other dependent of the
Participant, named in the order) that the order has been received. The
Administrator shall also notify the affected Participants and alternate payees
of its procedure for determining whether the domestic relations order is
qualified.

                           (B) PROCEDURE DURING DETERMINATION. During the period
the Administrator is determining the qualified status of the order, the
Administrator shall separately account for the amount (if any) that would be
payable to an alternate payee under this order (if any) that would be payable to
an alternate payee under this order (if it were a qualified domestic relations
order) during this period. If the Administrator determines the order is a
qualified domestic relations order during the 18-month period commencing on the
date the first payment would be required under the qualified domestic relations
order, then the alternate payee shall receive payment from the separate account.
If the Administrator cannot make a determination of the order's qualified status
during this 18-month period (or determines the order is not a qualified domestic
relations order), then the Trustee shall return the amounts in the separate
account to the account of the affected Participant as if no court order had been
received.

                  (iii) QDRO PAYOUTS.

                           (A) PAYMENT UPON RECEIPT OF QDRO. Notwithstanding any
provision of this Plan to the contrary, any amounts of a Participant's vested
Account balances which, due to the receipt of a domestic relations order
determined to be a qualified domestic relations order under

                                     - 38 -

<PAGE>   45



paragraph (ii) above, become the vested account balances of an alternate payee
under such order shall be distributed in the form of a single lump-sum payment
in cash to the alternate payee as of the earliest date (following the close of
the Plan Year in which the order is determined to be a qualified domestic
relations order) on which such amounts can be accurately determined and paid,
subject to any provisions of the qualified domestic relations order to the
contrary as to a different time of payment. No written consent of the alternate
payee shall be required for this distribution pursuant to Treas. Reg. ss.
1.411(a)-11(c)(6).

                           (B) SUBSEQUENT ADDITIONAL AMOUNTS. The preceding
subparagraph (A) shall apply to any amounts of a Participant's vested account
balances which, due to the receipt of a domestic relations order determined to
be a qualified domestic relations order under subsection (b) above, become the
vested account balances of an alternate payee under such order after a payment
under subparagraph (A) above due to additional vesting, allocation of
contributions or earnings, or any other reason.

         (iv) STATUS OF ALTERNATE PAYEE. An alternate payee under a qualified
domestic relations order shall be entitled to all rights of a Beneficiary
hereunder except as otherwise specified herein.

         Notwithstanding any provision of the Plan to the contrary, the Plan
shall honor a judgment, order, decree or settlement providing for the offset of
all or a part of a Participants benefit under the Plan, to the extent permitted
under Code section 401 (a)(13)(C); provided that the requirements of Code
Section 401(a)(13)(C)(iii) relating to the protection of the Participant's
spouse (if any) are satisfied.

                                     - 39 -

<PAGE>   46



SECTION 18.     EXPENSES.

         Except to the extent paid by an Employer in its sole discretion and
subject to the rules contained in ERISA, expenses of administering the Plan
shall be paid out of Trust assets and charged against Participants' accounts in
proportion to the balance of the accounts. All expenses of administering the
Trust, including but not limited to Trustee fees, investment management fees,
legal fees, expenses of any insurance company relating to any investment of the
Plan, and brokerage fees, transfer taxes, and other expenses incident to the
purchase or sale of securities by the Trustee shall be a charge to and borne by
the Trust. Such fees and expenses shall be allocated to each Participant's
account on the basis of the Participant's account balance as of the end of any
applicable accounting period. Taxes, if any, on any assets held or income
received by the Trustee shall be charged appropriately against the accounts of
Participants as the Administrator shall determine.

                                     - 40 -

<PAGE>   47



SECTION 19.       MODIFICATION OR MERGER OF PLAN.

         The Company may modify the Plan, provided that no part of the corpus or
income attributable to any funds received by the Trustee for the purposes of the
Plan shall be used for, or diverted to, purposes other than for the exclusive
benefit of Participants or their Beneficiaries. The Plan may be modified by
written resolution of the Board of Directors or any of its committees or, to the
extent authority with respect to modification of the Plan is delegated, by
written instrument signed by the Administrator. In this regard, the Company has
delegated authority to the Administrator to modify the Loan Application and the
other forms used to document and secure loans to Participants made in accordance
with Section 13. Any such modification shall be effective at such date as the
Company or the Administrator may determine, except that no such modification,
other than one of a minor nature, may apply to any period prior to the
announcement of the modification by the Company or the Administrator unless, in
the opinion of the Company or the Administrator, such modification is necessary
or advisable in order to comply with the provisions of the Code (including any
regulations or rulings thereunder) relating to the qualification of similar
plans or relating to the exemption of a trust established pursuant thereto or is
necessary or advisable in order to comply with any other applicable legal
requirements or would not adversely affect the rights of Participants in respect
of the Plan. Notice of any modification of the Plan shall be given promptly to
the Trustee.

         If the Plan's vesting schedule set forth in Section 10(d) is amended,
or if the Plan is amended in any way that directly or indirectly affects the
computation of the percentage of the Participant's account balance that is
nonforfeitable, or if the Plan is deemed amended by an automatic change to or
from a top-heavy vesting schedule in accordance with Section 23, each
Participant with at least three Years of Service may elect, within a reasonable
period after the later of the adoption or effective date of the amendment, to
have his nonforfeitable percentage computed under the Plan without regard to
such amendment or change.

         There shall be no merger or consolidation of the Plan with, or transfer
of assets or liabilities of the Plan to, any other Plan unless each Participant
in the Plan would (if the Plan terminated immediately thereafter) receive a
benefit immediately after the merger, consolidation, or transfer which is equal
to or greater than the benefit the Participant would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the Plan
had then terminated).

                                     - 41 -

<PAGE>   48



SECTION 20.    TERMINATION OF PLAN.

         The Company expects the Plan to be permanent, but the Company must
necessarily and does hereby reserve the right to terminate the Plan at any time,
for any reason whatsoever, by action of the Board of Directors. Upon a complete
or partial termination of the Plan or complete discontinuance of contributions
to the Plan (within the meaning of section 1.411(d)-2 of the Internal Revenue
Service regulations), no further contributions shall be made under the Plan on
behalf of affected Participants, the account of each affected Participant shall
fully vest, and unless otherwise directed by the Company, the accounts of any
affected Participants shall be distributed at the time and in the manner
specified in Sections 11 and 12.

                                     - 42 -

<PAGE>   49



SECTION 21.       NOTICES, REPORTS AND STATEMENTS.

         (a)      GENERAL.

         Notices, reports and statements to be given, made or delivered to an
Employee shall be deemed duly given, made or delivered, when hand delivered, or
when delivered by first class mail addressed to the Employee at his last known
business or home address.

         (b)      QUALIFIED JOINT AND SURVIVOR ANNUITIES.

         (i) In the case of a Participant who has elected to receive a Qualified
Joint and Survivor Annuity or a single life annuity, between 30 and 90 days
before the annuity starting date (as defined in section 417(f) of the Code)
(effective as of January. 1, 2000, between 7 and 90 days before the annuity
starting date), the Administrator shall provide each Participant a written
explanation of: (A) the terms and conditions of a Qualified Joint and Survivor
Annuity; (B) the Participant's right to make, and the effect and financial
consequences of, an election to waive the Qualified Joint and Survivor Annuity
form of benefit; (C) the relative values of the various optional forms of
benefit under the Plan; (D) the rights of a Participant's spouse regarding a
waiver of the Qualified Joint and Survivor Annuity; and (E) the right to make,
and the effect and financial consequences of, a revocation of a previous
election to waive the Qualified Joint and Survivor Annuity. A Participant's
waiver of the Qualified Joint and Survivor Annuity shall not be effective unless
made pursuant to a Qualified Election.

         The Administrator shall also provide each such Participant, within a
reasonable period after the Participant elects to receive a Qualified Joint and
Survivor Annuity or a single life annuity, a written explanation of the
qualified pre-retirement survivor annuity payable to the Participant's spouse if
the Participant dies prior to the annuity starting date in such terms and in
such manner as would be comparable to the explanation provided for meeting the
requirement of the notice described in the preceding paragraph for the Qualified
Joint and Survivor Annuity. A Participant's waiver of the qualified
pre-retirement survivor annuity shall not be effective unless made pursuant to a
Qualified Election.

                                     - 43 -

<PAGE>   50



SECTION 22.     ADMINISTRATION AND INTERPRETATION OF PLAN.

         The Company shall be the "administrator" and the "plan sponsor" of the
Plan, as those terms are defined in ERISA.

         The Company shall be or shall appoint another person (which may be a
person or entity related to the Company) to be the Administrator, which shall
have such powers as may be necessary to enable it to administer the Plan, except
for powers vested in the Company, the Trustee, and Investment Managers. The
Company and the Administrator may each employ persons to render advice with
regard to any of its responsibilities under the Plan.

         The Administrator shall have sole and absolute discretion (a) to
interpret the provisions of the Plan (including, without limitation, by
supplying omissions from, correcting deficiencies in, or resolving
inconsistencies or ambiguities in, the language of the Plan), (b) to make
factual findings with respect to any issue arising under the Plan, (c) to
determine the rights and status under the Plan of Participants and other
persons, (d) to decide disputes arising under the Plan and to make
determinations and findings (including factual findings) with respect to the
benefits payable thereunder and the persons entitled thereto as may be required
for the purposes of the Plan.

         In furtherance thereof, but without limiting the foregoing, the
Administrator is hereby granted the following specific authorities, which it
shall discharge in its sole and absolute discretion in accordance with the terms
of the Plan (as interpreted, to the extent necessary, by the Administrator): (a)
to resolve all questions (including factual questions) arising under the Plan as
to any individual's entitlement to become a Participant, (b) to determine the
amount of benefits, if any, payable with respect to any person under the Plan
(including, to the extent necessary, making any factual findings with respect
thereto), and (c) to conduct the claims and review procedure specified below in
this Section 22.

         All decisions of the Administrator as to the facts of any case and the
application thereof to any case as to the interpretation of any provision of the
Plan or its application to any case, and as to any other interpretative matter
or other determination or question related to the Plan shall be final and
binding on all parties affected thereby, subject to the provisions of the claims
and review procedure specified below in this Section 22.

         Claims will be processed in accordance with ERISA and regulations
thereunder, and shall include but not be limited to the following procedures:

                  (i) Claims by an Employee, or anyone claiming through an
Employee, shall be presented to the Company, which shall either arrange for
payment of the claim or refer it to the Administrator for decision. Adequate
notice shall be provided in writing to any person whose claim has been denied by
the Administrator, setting forth the specific reasons for such denial.

                                     - 44 -

<PAGE>   51



                  (ii) Any person whose claim for benefits has been denied may,
within 60 days after receipt of notice of denial, submit a written request for
review of the decision denying the claim. In such case, the Administrator shall
make a full and fair review of such decision within 60 days after receipt of a
request for review and notify the claimant in writing of the review decision,
specifying the reasons for such decision.

         The Company and the Administrator are each a named fiduciary as that
term is used in ERISA with respect to the particular duties and responsibilities
herein provided to be allocated to each of them, respectively. Any person, group
of persons, or any entity may serve in more than one fiduciary capacity with
respect to the Plan (including service both as a Trustee and as an
Administrator). The Company and the Administrator are each a named fiduciary as
that term is used in ERISA with respect to the particular duties and
responsibilities for the operation and administration of the Plan consistent
with the Plan's terms. The Company and other named fiduciaries may delegate any
of their responsibilities under the Plan by designating in writing other persons
to carry out any of such responsibilities (other than Trustee responsibilities
the delegation of which may be limited by law) under the Plan, and may employ
persons to advise them with regard to any such responsibilities. Any other
fiduciary of the Plan may delegate any responsibility with the written consent
of the Company.

         The Plan shall be governed by the laws of the State of Georgia (except
to the extent that such laws are preempted by ERISA or other federal law) and
applicable Federal law (including without limitation ERISA and the Code).

                                     - 45 -

<PAGE>   52



SECTION 23.       TOP-HEAVY PROVISIONS.

         In the event that the Plan is deemed a "Top-Heavy Plan" with respect to
any Plan Year (determined in accordance with paragraph (a) below), the following
provisions shall apply with respect to such Plan Year, notwithstanding any other
Plan provisions to the contrary:

         (a)      TOP-HEAVY DETERMINATION.

         This Plan shall be deemed a "Top-Heavy Plan" only with respect to any
Plan Year in which, as of the "Determination Date," the aggregate of the
accounts of "Key Employees" under the Plan exceeds 60% of the aggregate of the
accounts of all Participants under the Plan. For purposes of this Section 23,
"Determination Date" shall mean, with respect to any Plan Year, the last day of
the preceding Plan Year or, in the case of the first Plan Year, the last day of
such Plan Year. In determining whether or not this Plan is a "Top-Heavy Plan"
with respect to any Plan Year, the term "Key Employee" shall have the meaning
assigned to such term under section 416(i) of the Code, and the account balance
of any Participant who is not a "Key Employee" but who was a "Key Employee" in a
prior Plan Year, or who has not been credited with at least one Hour of Service
with the Employer at any time during the five-year period ending on the
Determination Date, shall not be taken into account. For purposes of determining
the amount of the account of any Participant, such amount shall be increased by
the aggregate distributions (if any) made with respect to such Participant under
this Plan during the five-year period ending on the "Determination Date."

         Each plan of an Employer required to be included in an "Aggregation
Group" shall be treated as a "Top-Heavy Plan" if such group is a "Top-Heavy
Group." For purposes of this paragraph (a), "Aggregation Group" shall mean: (i)
each plan of the Employer in which a "Key Employee" is a Participant, and (ii)
each other plan of an Employer which enables the plan or plans described in the
preceding clause (i) to meet the requirements of section 40l(a)(4) or 4l0 of the
Code. Any plan of an Employer that is not required to be included in an
"Aggregation Group" may be treated as part of such group if such group would
continue to meet the requirements of sections 401 (a)(4) and 410 of the Code.

         For purposes of this paragraph (a), "Top-Heavy Group" means any
"Aggregation Group" if the sum (as of the "Determination Date") of the present
value of the cumulative accrued benefits for "Key Employees" under all defined
benefit plans included in such group and the aggregate of the accounts of "Key
Employees" under all defined contribution plans included in such group exceeds
60% of a similar sum determined for all Employees.

         (b)      COMPENSATION

         For purposes of this Section 23, "compensation" shall mean Section 415
Compensation, but shall not exceed the amount determined by the Secretary of the
Treasury under section 401(a)(17) of the Code.

                                     - 46 -

<PAGE>   53


         (c)     VESTING.

         Notwithstanding Section 10(d), the following vesting schedule shall, to
the extent it results in more rapid vesting than provided for under Section
10(d), apply to any Participant hereunder, as provided in section 416 of the
Code:

                           Years of Service          Nonforfeitable Percentage
                               Less than 0                        0
                               3 or more                        100

If the Plan ceases to be a "Top-Heavy Plan," then any Employee who has at least
three Years of Service as of the last day of the last Plan Year in which the
Plan was "Top-Heavy" may elect that the provisions contained in the preceding
sentence shall continue to apply with respect to such Employee. For any other
Employee, such provisions shall apply only to the Units in the Employee's
account representing Non-Vested Amounts as of the last day of the last Plan Year
in which the Plan was "Top-Heavy."

         (d)     MINIMUM BENEFITS.

         Employer contributions (if any) allocated to the account of each
"non-key employee" for each Plan Year in which the Plan is "Top-Heavy" shall
equal the lesser of 3% of the compensation of each "non-key employee" for such
Plan Year or the largest percentage of compensation provided through Employer
contributions on behalf of any "Key Employee" for such Plan Year. However, in
the event that a plan sponsored by the Employer which is qualified under section
401(a) of the Code does not always use, for purposes of determining the
fractions under section 415(e), a factor of 1.0 of the applicable dollar
limitations, then the number 4% shall replace the number 3% in the previous
sentence, provided that the plan or group of plans would not be "Top-Heavy" if
"90%" were substituted for "60%" in making this determination. For this purpose,
a "non-key employee" shall mean any employee of an Employer who is not a "Key
Employee," and who is an Eligible Employee or who would be an Eligible Employee
after completing one Year of Service.

         The preceding paragraph shall not apply to any "non-key employee" who
is also covered by a defined benefit Plan sponsored by an Employer during a Plan
Year in which this Plan is "Top Heavy," if such Employee is entitled for such
Plan Year to a minimum benefit accrual under the defined benefit Plan, in
accordance with section 416(c)(1) of the Code.

         All Participants who have not terminated employment as of the last day
of the Plan Year must receive the minimum contribution. Employees who (i) failed
to complete one thousand (1,000) Hours of Service during the Plan Year, (ii)
declined to make mandatory contributions to the Plan or (iii) would have been
excluded from the Plan because their Compensation is less than a stated amount,
must nevertheless be considered Participants for purposes of the minimum
contribution in this Section 23(d) if such employees are required to be taken
into account in order for the Plan to satisfy the coverage requirements of
Section 410(b) of the Code in accordance with Section 401(a)(5) of the Code. The
minimum contribution is determined without regard to any Social Security
contribution.


                                     - 47 -

<PAGE>   54


         (e)      MULTIPLE TOP-HEAVY PLANS.

         In the event that a Participant in the Plan is also participating in a
defined benefit plan maintained by the Employer or an Affiliated Company during
a Plan Year in which both the Plan and such defined benefit plan are
"top-heavy," the Participant shall receive the minimum accrued benefit under the
defined benefit plan rather than the minimum contribution provided for in this
Plan In the event that a Participant in the Plan is also participating in
another defined contribution plan maintained by the Employer of an Affiliated
Company during a Plan Year in which both the Plan and such other defined
contribution plan are "top-heavy," the Participant shall receive the minimum
contribution under the other defined contribution plan rather than the minimum
contribution provided for in this Plan.

                                     - 48 -

<PAGE>   55



SECTION 24.       MISCELLANEOUS PROVISIONS.

         (a)      NO EMPLOYMENT RIGHTS CREATED.

         Neither the establishment nor the continuation of the Plan, nor
anything contained within the Plan, shall be deemed to give any person the right
to continued employment by the Company or an Affiliated Company, or to affect
the right of the Company or any Affiliated Company to terminate the employment
of any individual.

         (b)      RIGHTS TO TRUST ASSETS.

         No Participant or Beneficiary shall have any right to, or interest in,
any assets of the Trust upon termination of employment or otherwise, except as
specifically provided under the Plan, and then only to the extent of the
benefits payable under the Plan to the Participant or Beneficiary out of the
assets of the Trust. All payments of benefits under this Plan shall be made
solely out of assets of the Trust, and neither the Company, the Affiliated
Companies, nor any fiduciary shall be liable therefor in any manner.

         (c)      SEVERABILITY.

         In the event that any provision of this Plan is held invalid or illegal
for any reason, this invalidity or illegality shall not affect the remaining
parts of the Plan, and the Plan shall be enforced and construed as if the
provision had never been inserted herein.

         (d)     FACILITY OF PAYMENT.

         If the Administrator shall find that any person to whom a benefit is
payable from the Trust is unable to care for the person's own affairs because of
illness or accident, any payments due (unless a prior claim for the benefits has
been made by a duly appointed guardian, committee, or other legal
representative) may be paid to the recipient's spouse, child, parent, brother or
sister, or to any person deemed by the Administrator to have incurred expense
for the person otherwise entitled to payment. Any such payment shall be a
complete discharge of any liability under the Plan for these benefits.

         (e)      MISSING PERSONS.

         If the Administrator is unable to locate a proper payee within one year
after a benefit becomes payable, the Administrator may treat the benefit as a
forfeiture. However, if a claim for benefits is subsequently presented by a
person entitled to a payment, the forfeited amount shall be re-credited upon
verification of the claim, except for those amounts that have been paid pursuant
to an escheat or other applicable law.

         (f)      MILITARY SERVICE.


                                     - 49 -

<PAGE>   56


         Notwithstanding any provisions of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Section 414(u) of the Code.
"Qualified military service" means any service in the uniformed services (as
defined in chapter 43 of Title 38 of the United States Code) by any individual
if such individual is entitled to re-employment rights under such chapter with
respect to such service.

         (g)     ELECTRONIC MEANS OF COMMUNICATION.

         Whenever, under this Plan, a Participant or Beneficiary is required or
permitted to make an election, provide a notice, give a consent, request a
distribution, or otherwise communicate with the Company, the Administrator, the
Trustee or delegate of any of them, to the extent permitted by law, the
election, notice, consent, distribution request or other communication may be
transmitted by means of telephonic or other electronic communication, if the
administrative procedures under the Plan provide for such means of
communication.

         (h)     PLAN CONVERSIONS.

         Notwithstanding any provision of the Plan to the contrary, during any
conversion period, in accordance with procedures established by the
Administrator, the Administrator may temporarily suspend, in whole or in part,
certain provisions of the Plan, which may include, but are not limited to, a
Participant's right to change his contribution election, a Participant's right
to change his investment election and a Participant's right to borrow or
withdraw from his Account or obtain a distribution from his Account.

                                     - 50 -

<PAGE>   57


SECTION 25.       EXECUTION.

         To record the adoption of this Plan, the Company has caused this Plan
to be executed on its behalf this _____ day of _____________, 2001, effective as
of January 1, 2001.

                                           SIMMONS COMPANY

                                           By:
                                               --------------------------------
                                           Title:
                                                  -----------------------------



                                     - 51 -