<PAGE>   1
                                                                   Exhibit 10.12

                                      INDEX
                                      -----
<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                       PAGE
-------           -----                                                                                       ----
            
<S>               <C>                                                                                          <C>
    I             RECOGNITION AND UNION SECURITY..........................................................      1
                  Employees Covered.......................................................................      1
                  Union Security..........................................................................      1
                  Check-Off...............................................................................      2
                  Union Representative Seniority..........................................................      3
                  Leave of Absence for UNION Activity.....................................................      3
                  Union Representatives Business..........................................................      3
                  Specification Information ..............................................................      3 

    II            DISCIPLINARY PROCEDURE..................................................................      3
                  Just Cause..............................................................................      3
                  Interview and Hearing...................................................................      3
                  Good Faith Duties.......................................................................      4
                  Correction of Offense...................................................................      4
                  Disciplinary Policy.....................................................................      4

    III           GRIEVANCE PROCEDURE AND ARBITRATION.....................................................      4
                  Grievance Procedure.....................................................................      4
                  Grievances - Step 1.....................................................................      5
                  Grievances - Step 2.....................................................................      5
                  Grievances - Step 3.....................................................................      5
                  Resolution by Default...................................................................      6
                  Arbitration of Disputes.................................................................      6
                  Selection of Arbitrators................................................................      6
                  Authority of Arbitrator.................................................................      6
                  Expedited Arbitration...................................................................      7

    IV            HOURS OF WORK AND PREMIUM PAY...........................................................      7
                  Work Week...............................................................................      7
                  Overtime Hours..........................................................................      8
                  Saturday and Sunday Work................................................................      8
                  Availability for Scheduled Work.........................................................      8
                  No Pyramiding...........................................................................      9
                  Shift Schedule..........................................................................      9
                  Temporary Assignment....................................................................      10
                  Shift Premiums..........................................................................      10
                  Reporting Pay...........................................................................      10

    V             NO STRIKE - NO LOCKOUT..................................................................      10
</TABLE>



<PAGE>   2
<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                       PAGE
-------           -----                                                                                       ----
            
<S>              <C>                                                                                        <C>
    VI            MANAGEMENT RIGHTS CLAUSE................................................................      10

    VII           SENIORITY...............................................................................      11
                  Accumulation of Seniority...............................................................      11
                  Loss of Seniority Rights ...............................................................      11
                  Layoff..................................................................................      12
                  Right of Recall.........................................................................      14
                  Notice of Recall........................................................................      14
                  Change of Address.......................................................................      14
                  Definition and Notice of Layoff ........................................................      14
                  Furlough................................................................................      15
                  Job Bidding.............................................................................      15
                  Disqualification .......................................................................      16
                  Probationary Period ....................................................................      16
                  Return from Promotion out of Bargaining Unit............................................      17
                  Seniority List..........................................................................      17
                  Change in Union Representatives.........................................................      17

    VIII          WAGES...................................................................................      17
                  Skill Group Classifications and Labor Grade Rates ......................................      17
                  Hiring Rate.............................................................................      18
                  Training Rate...........................................................................      19
                  Incentive Compensation Plans............................................................      20
                  Inventory Work .........................................................................      20
                  General Wage Increases..................................................................      20
                  Reactivation of Old Classifications.....................................................      21
                  Establishment of New Classifications....................................................      21
                  Borrowed Man............................................................................      21
                  Average Rate Computation................................................................      21
                  Work Wait...............................................................................      22
                  Electric Power Failure .................................................................      22
                  Injured During Work.....................................................................      22
                  Work Hardening Procedures...............................................................      23
                  Union Meetings and Scheduled Overtime ..................................................      23
                  Overtime Agreement .....................................................................      24
</TABLE>

                                      -ii-

<PAGE>   3
<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                       PAGE
-------           -----                                                                                       ----
            
<S>              <C>                                                                                        <C>
    IX            STANDARD ALLOWED HOURS..................................................................      24
                  Incentive Compensation Plan.............................................................      24
                  New or Varied Jobs and Operations.......................................................      25
                  Standard Allowed Hour...................................................................      25
                  Written Confirmation and Effective Date of SAH..........................................      26
                  Procedural Interpretation of Section....................................................      26
                  Grievances Regarding Incentive Standards................................................      27
                  Availability of Time Study Data.........................................................      28
                  Union Time Study Engineer...............................................................      28
                  Standard Data...........................................................................      29

    X             PAID HOLIDAYS...........................................................................      29
                  Holidays Observed.......................................................................      29
                  Eligibility.............................................................................      29
                  Leave of Absence........................................................................      29
                  Sunday Holidays ........................................................................      29
                  Tenth Paid Holiday .....................................................................      30
                  Holidays on Saturday....................................................................      30
                  Holiday Pay.............................................................................      30
                  Holidays During Approved Vacation.......................................................      30
                  Multiple Holidays on Same Day...........................................................      30
                  Pay Rate................................................................................      30
                  Overtime and Premium Pay................................................................      30

    XI            PAID VACATIONS..........................................................................      30
                  Vacation................................................................................      30
                  Pay Rate................................................................................      31
                  Intermittent Vacation...................................................................      31
                  Plant Shutdown and Staggered Vacation...................................................      32
                  Eligibility.............................................................................      32
                  Scheduling of Staggered Vacations.......................................................      32
                  No Accumulation.........................................................................      32
                  Shift Premium...........................................................................      32

    XII           ABSENTEE - NO REPORT....................................................................      33
</TABLE>


                                      -iii-


<PAGE>   4


<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                       PAGE
-------           -----                                                                                       ----
            
<S>              <C>                                                                                        <C>
    XIII          UIU PENSION TRUST.......................................................................      33

    XIV           UNITED STEELWORKERS HEALTH AND WELFARE FUND.............................................      35
                  Benefit Plan(s).........................................................................      35
                  Contribution Rates......................................................................      35
                  Eligibility.............................................................................      36
                  Employee Contributions..................................................................      36
                  Sickness and Health and Life Insurance..................................................      36
                  Payment of Contributions................................................................      36
                  Coverage................................................................................      36
                  Election of Category of Coverage and Right to Change....................................      37
                  Requirements............................................................................      37
                  Hold Harmless...........................................................................      37
                  Reinstatement of Coverage...............................................................      37
                  Part Time Employees.....................................................................      38
                  Audit Rights............................................................................      38
                  Availability of Benefits................................................................      38

    XV            JURY SERVICE............................................................................      38

    XVI           BEREAVEMENT PAY.........................................................................      38
                  Definition..............................................................................      38
                  Payment.................................................................................      39

    XVII          BULLETIN BOARDS.........................................................................      39
                  Bulletin Boards.........................................................................      39
                  Posting of Notices......................................................................      39

    XVIII         MILITARY CLAUSE.........................................................................      39

    XIX           EMPLOYEE BIRTHDAY PAY...................................................................      40

    XX            EQUAL EMPLOYMENT OPPORTUNITY............................................................      40

    XXI           SAVING CLAUSE...........................................................................      41
                  Separability............................................................................      41
                  Federal and State Laws..................................................................      41
</TABLE>

                                     -iv-


<PAGE>   5
<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                       PAGE
-------           -----                                                                                       ----
            
<S>              <C>                                                                                        <C>
    XXII          SEVERANCE AND PLANT CLOSINGS............................................................      41

    XXIII         DURATION AND TERMINATION OF SUPPLEMENT..................................................      41
                  Effective Dates.........................................................................      41
                  Entire Agreement........................................................................      41
                  Modification or Termination ............................................................      41

    XXIV          CONTRACT RE-OPENER .....................................................................      42

                  SIGNATURES..............................................................................      43

                  APPENDIX "A"............................................................................      44
</TABLE>



                                       -v-


<PAGE>   6



                             JACKSONVILLE AGREEMENT


                                          Language from Jacksonville Supplement
                                          Language from Master Agreement


                                    AGREEMENT
                                    ---------

         This Agreement, made this 20th day of October, 1997, by and between
Simmons Company, Jacksonville, Florida (hereinafter referred to as the COMPANY)
and the United Steelworkers of America, AFL, CIO, CLC (hereinafter referred to
as the Union) on behalf of its Local Union No. 425, for and on behalf of itself
and the employees of said COMPANY at its plant located at Jacksonville, Florida.

                                   WITNESSETH

         NOW, THEREFORE, in consideration of the promises and of mutual
         covenants and Agreements of the parties hereinafter set forth, the
         parties do hereby agree as follows:

                                    ARTICLE I
                                    ---------

                         RECOGNITION AND UNION SECURITY

         1.01 The UNION and the COMPANY shall cooperate to promote the welfare
of the COMPANY and efficiency of its factory operations. It is also the
intention of the parties to provide an orderly procedure between the COMPANY and
the UNION and, therefore, all Agreements or understandings concerning hours,
wages and working conditions between the COMPANY and the employees covered by
this contract are to be made by the COMPANY with the UNION as the representative
of said employees. No individual employee or group of employees, nor member of
the COMPANY shall have the authority to abridge or modify this Agreement in any
manner.

         1.02 EMPLOYEES COVERED. The persons covered by this contract include
all employees of the COMPANY described in Article VIII, Section 8.01, employed
in its Jacksonville, Florida plant, excluding executives, sales employees,
office workers, supervisors, inspectors, departmental coordinators or persons in
any way identified with management.

         1.03 UNION SECURITY.

              (a)    The COMPANY agrees that as a condition of employment all
                     employees in the bargaining unit shall become members of
                     the UNION after the thirtieth day of their employment or
                     thirty (30) days after the execution date of this
                     Agreement, whichever is later. All employees who become
                     members of the UNION shall remain members of the UNION in
                     good standing by proper tender of dues and initiation fees
                     during the term of this Agreement.


                                       -1-


<PAGE>   7



              (b)    The UNION agrees to accept into membership and make
                     membership available to all employees upon the same terms
                     and conditions generally applicable to other members
                     without discrimination.

              (c)    Within five (5) days after receipt of written notice from
                     the UNION that any employee has failed, pursuant to the
                     terms of this article, to tender payment of the regular
                     dues and initiation fee uniformly required as a condition
                     of acquiring or retaining membership in the UNION, the
                     COMPANY shall discontinue its employment of such employee.
                     The COMPANY shall not be required by the UNION to
                     discontinue the employment of any employee for any other
                     reason.

              (d)    Upon demand by the UNION that an employee be discharged
                     because he is delinquent in the payment of his regular dues
                     or initiation fee, the COMPANY shall promptly notify the
                     employee that his discharge has been demanded and the
                     employee shall have a reasonable time as determined by the
                     UNION in which to rectify the matter before the discharge
                     is placed in effect. If the discharge of an employee is
                     effected by the request of the UNION pursuant to paragraphs
                     a, b, c, or d of this section, the UNION agrees to
                     indemnify the COMPANY from any final determination of
                     liability for this action if, prior to the discharge, the
                     COMPANY sends an overnight letter to the District Director
                     notifying him of the requested discharge. Failure of the
                     District Director to respond by Overnight mail within five
                     (5) days will be deemed concurrent with the local UNION
                     request.

              (e)    The COMPANY shall have the exclusive right to hire and
                     shall be the sole judge of the requirements and
                     qualifications of each applicant until the completion of
                     the probationary period set forth in Section 7.11 of this
                     Agreement.

              (f)    The provisions of this section shall be applicable only to
                     the extent permitted by applicable state and federal law.

              (g)    No UNION member shall be compelled to train employees of a
                     non-UNION shop.

         1.04 CHECK-OFF. Upon written individual voluntary authorization by each
employee and subject to the requirements of any applicable local, state or
federal law, membership dues and initiation fees of the UNION as authorized and
approved by the United Steelworkers UNION Executive Board due and unpaid shall
be deducted from the wages of all employees covered by this Agreement and
remitted by the COMPANY each and every month to the International
Secretary-Treasurer. This article or any section thereof shall not be operative
where prohibited by state law. The UNION agrees that it will indemnify and save
the COMPANY harmless from any and all liability, claims, responsibility, damages
or suit which may arise out of any action taken by the COMPANY in accordance
with the terms of this article or in reliance upon the authorization mentioned
herein.

                                       -2-


<PAGE>   8



         1.05 UNION REPRESENTATIVE SENIORITY. The President of the local UNION
shall have top seniority in his classification and in the plant on all layoffs.
All UNION stewards shall have top seniority in their respective classification
and department on all layoffs. The seniority of the President of the local UNION
shall supersede that of any department steward in the event of conflict.

         1.06 LEAVE OF ABSENCE FOR UNION ACTIVITY. An employee, who returns to
work after an authorized leave of absence for UNION activity shall be returned
to his former labor grade assignment in line with his seniority. If said
assignment is not in existence at that time, he/she shall go where his/her
seniority will take him/her.

         1.07 UNION REPRESENTATIVES BUSINESS. UNION representatives will be
clocked down by the Supervisor for any Union Business during employee work
hours. When a Union Official conducts approved Union Business throughout the
day, whether paid by the Union or the Company, time worked in excess of eight
(8) hours will be paid at the overtime rate. If MANAGEMENT approves a meeting
during scheduled working hours, the committee shall receive labor grade rate for
the time spent in such meeting.

         1.08 SPECIFICATION INFORMATION. Specification information will be made
available to employees or UNION officials as required.

                                   ARTICLE II
                                   ----------

                             DISCIPLINARY PROCEDURE

         2.01 JUST CAUSE. The COMPANY shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).

         2.02 INTERVIEW AND HEARING. In the event that disciplinary action
involving loss of wages (suspension and/or discharge) is taken against any
employee, the employee involved must be given an interview concerning such
disciplinary action, in which he must be represented by a shop steward or an
officer of the UNION.

         The UNION representative will be informed prior to the disciplinary
action being taken and must be given an opportunity (not to exceed fifteen (15)
minutes) to discuss the case with the affected employee and to participate in
the interview with the COMPANY concerning the matter. The interview may be of
very short duration and shall not be construed as part of the grievance
procedure, as described in Article III of this Agreement, inasmuch as the
primary function of the interview is to make certain that a UNION representative
is aware of the discipline and that the employee knows precisely what he or she
is disciplined for.

         In cases of physical altercation or where the employee is not on
COMPANY premises at the time of the disciplinary action, the interview will be
dispensed with.


                                       -3-


<PAGE>   9



         A discharged employee shall be entitled to a hearing before the COMPANY
plant Labor Relations Committee at 10:00 a.m. on the day following his
discharge, provided the employee is notified of the hearing and is physically
able to attend, at which time the merits of the case will be discussed between
the UNION and the COMPANY.

         In the event an employee is unable to attend or the UNION is unable to
find such employee, the hearing may be held in abeyance for a period of one (1)
week. If the hearing is delayed because of unavailability of the employee, the
COMPANY is not liable for any wage during such period.

         2.03 GOOD FAITH DUTIES. No employee acting in the capacity of a UNION
officer or UNION representative shall be disciplined for carrying out in good
faith his duties under the provisions of this Agreement or as permitted by
applicable law.

         2.04 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (12) months, the employee
shall be considered to have corrected himself. This shall not include such
serious offenses as no-strike clause violations, insubordination, stealing,
cheating, physical assault, damaging COMPANY property, and poor quality.

         2.05 DISCIPLINARY POLICY. The COMPANY'S corporate view is that the
disciplinary procedure is not designed to punish employees, particularly for
less serious offenses, but, rather, to educate, correct and train people as
effective team members who can be counted on to give reliable productive
performance.

         Finally, time itself is the best measure of correction in any
individual, regardless of job or authority. In the situation of the lesser
offenses as contrasted with the more serious offenses described in Section 2.04,
each manager is cautioned with the need to believe that the employee has
corrected his/her problem in the event there is no repetition of such within one
year of the last infraction. In that event, the process is to begin anew.

                                   ARTICLE III
                                   -----------

                       GRIEVANCE PROCEDURE AND ARBITRATION

         3.01     GRIEVANCE PROCEDURE

                  A.       It is the intent of the parties to this Agreement
                           that the grievance procedure hereby established shall
                           serve as a means for the prompt disposition and
                           amicable settlement of such grievances as may arise
                           between the COMPANY and its employees or the COMPANY
                           and the UNION.

                           A grievance is defined as any dispute (excluding
                           discharges for those employees in probationary
                           period) between the COMPANY and employee(s)

                                       -4-


<PAGE>   10



                           or between the COMPANY and the UNION over the
                           application, interpretation, or alleged violation of
                           an express provision of this Agreement, where
                           applicable.

                  B.       Should any grievance arise between the COMPANY and
                           any of the COMPANY's employees involving a work
                           assignment, the employee involved shall continue to
                           perform the assignment in question while the
                           grievance is being processed unless it will endanger
                           his/her life, limb, or safety, or that of other
                           employees or where the contract expressly disavows
                           cessation of such assignment.

                  C.       The aggrieved employee may discuss the matter with
                           the employee's immediate supervisor and UNION
                           representative if requested. Any resolution by the
                           supervisor or steward shall not act as a precedent in
                           future cases.

         3.02 GRIEVANCES - STEP 1. If the grievance is not settled in verbal
discussion described in Section 1(C) above, the grievance shall be reduced to
writing on forms to be made available for such purpose, with each form signed
and dated by the aggrieved employee and/or his/her designated UNION
representative. The designated UNION representative shall present the grievance
form to the supervisor within five (5) working days from the date of the
occurrence or knowledge of occurrence. The grievance shall specify the incident
involved, the facts or alleged facts relied upon to support the contention of
the employee, the section of this Agreement relied upon, where applicable, the
interpretation requested by the grievant; and shall show on its face the date of
the incident. The supervisor has two (2) work days to answer.

         3.03 GRIEVANCES - STEP 2. A grievance not settled at Step 1 shall be
presented to the Operations Manager and/or the Human Resource Manager within
three (3) work days from the Step 1 answer. The Operations Manager and/or Human
Resource Manager within two (2) days shall meet and discuss the matter with the
employee and a UNION representative. The Operations Manager and/or Human
Resource Manager shall then have three (3) work days to answer.

         3.04 GRIEVANCES - STEP 3. If a settlement is not obtained in Step 2,
the grievance shall be referred to the COMPANY's Vice President - Human
Resources, or his designated representative, as Step 3 by the local UNION
representative within five (5) working days from the date of the reply under
Step 2. The International Representative of the UNION shall meet with the
COMPANY's Vice President - Human Resources, or the representative he designates,
within a reasonable time (not to exceed thirty (30) calendar days). A written
answer by the COMPANY to the grievance considered at such meeting shall be given
to the International Representative of the UNION within five (5) working days
after such meeting.


                                       -5-


<PAGE>   11



         If an employee is needed as witness in the process of Step 1 or 2 by
the UNION, it is understood that any pay lost by the witness or others resulting
from his/her absence from work will be reimbursed by the UNION.

         3.05 RESOLUTION BY DEFAULT. Failure on the part of either party to
respond to any step within the grievance procedure within the time limits
established by this article will resolve the grievance against the party failing
to respond. Resolution by default, however, shall not establish a precedent for
similar grievances. Time limits may be extended by mutual written agreement.
Whenever time limits are set out in this article, they shall be work days
exclusive of Saturdays, Sundays, and holidays recognized by this Agreement.

         3.06 ARBITRATION OF DISPUTES. If the grievance is subject to
arbitration as provided herein and all conditions in Section 3.01 above have
been satisfied, including the applicable time limits, then the UNION on behalf
of the aggrieved employee or aggrieved employees may, within ten (10) calendar
days of the COMPANY's answer in Step 3, file a written request to the Operations
Manager or his designee that the grievance be submitted to arbitration for
determination pursuant to this article.

         3.07 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
UNION files its written request for arbitration pursuant to Section 3.06 above,
the COMPANY or the UNION may write either the Federal Mediation and Conciliation
Service or the American Arbitration Association to request that it submit a
panel of seven (7) arbitrators. The UNION shall notify the COMPANY of its first
strike, and each party shall then alternately strike one name until only one
name remains who shall be designated as the impartial arbitrator. Either party
reserves the right to reject the entire panel prior to any striking of
arbitrators and to request one additional panel of arbitrators per grievance.

         In the event the UNION and the COMPANY are unable to agree to a base
rate on a new classification as provided in Section 8.11, the dispute may be
appealed to arbitration for determination by a qualified time study arbitrator.

         Appeals under the Standard Allowed Hour Formula as described in Article
IX, if warranted, shall be carried to arbitration under the above described
procedure; however, in this instance, the Impartial Chairman of the Arbitration
Board must be a qualified time study engineer.

         3.08 AUTHORITY OF ARBITRATOR. In interpreting and applying the
provisions of this Agreement and in making findings of fact, the arbitrator's
interpretation and application must be in accord with the spirit and letter of
this Agreement and any amendments thereto. The function of the arbitrator shall
be judicial rather than legislative in nature. No arbitrator shall have the
jurisdiction or authority to add to, take from, nullify, or modify any of the
terms of this Agreement or any amendments or Letters of Understanding applicable
thereto. In no event shall any of the COMPANY's rights ever be deemed or
construed to have been modified, diminished, or impaired by any past practice or
course of conduct except where contained in an express provision of this
Agreement.

                                       -6-


<PAGE>   12



         The arbitrator shall be bound by the facts and evidence submitted to
him/her in the hearing and may not go beyond the terms of this Agreement in
rendering his/her decision. No such decision may include or deal with any issue
not directly involved in the grievance submitted to him/her or with any matter
which is not expressly made subject to arbitration by the terms of this
Agreement. No decision of the arbitrator shall require the payment of an hourly
rate different from the applicable one negotiated by the parties and expressly
set forth in this Agreement. The decision of the arbitrator shall be in writing
and such decision shall be final and binding upon the parties when rendered upon
a matter within the authority of the arbitrator and within the scope of the
matters subject to arbitration as provided in this Agreement and in accordance
with the procedures specified in this Agreement.

         3.09 EXPEDITED ARBITRATION. The UNION or the COMPANY may invoke the
expedited grievance procedure, as distinguished from the ordinary grievance
procedure, in the event an employee is discharged, suspended, disqualified from
a job, disciplined for failure to meet production standards, loss or reduction
of earnings or in the event there is a seniority dispute. Such request shall be
asserted in writing, by next day mail, given to the other party. The party
requesting the expedited grievance procedure shall immediately contact the
American Arbitration Association headquarters (New York City) to request the
first available arbitrator from a national pre-agreed panel of fifteen (15)
arbitrators (see Appendix A) who can hear the case within seven (7) calendar
days.

         The arbitrator shall hold an arbitration hearing as expeditiously as
possible, but in no event later than seven (7) calendar days after receipt of
said notice. The decision of the arbitrator shall issue forthwith and in no
event later than three (3) days after the conclusion of the hearing unless the
grieving party agrees to waive this time limitation with respect to all or part
of the relief requested. The arbitrator's written opinion will follow within
thirty (30) days and such decision shall be final and binding on both parties.

         All costs for the hearing and service of the arbitrator designated
herein, or for any other person selected pursuant to the aforementioned
procedure, shall be borne by the parties jointly. Each party will bear the
expense of its representatives and for the presentation of its own case.

                                   ARTICLE IV
                                   ----------

                          HOURS OF WORK AND PREMIUM PAY

         4.01 WORK WEEK. For the purpose of computing overtime pay, eight (8)
hours shall constitute a day's work; forty (40) hours, from Monday to Friday
inclusive, shall constitute a week's work.



                                       -7-


<PAGE>   13



         4.02     OVERTIME HOURS.

                  A.       All authorized time worked before regular starting
                           time and/or after regular quitting time, including
                           authorized time worked during the regular lunch
                           period, shall be paid at time and one-half the
                           average straight time hourly earnings as computed in
                           Section 8.13 reflecting the earnings for the week in
                           which the overtime is worked.

                  B.       Anyone reporting to work after their regular starting
                           time will receive overtime pay only upon completion
                           of eight (8) hours work.

         4.03 SATURDAY AND SUNDAY WORK. All work on Saturday as such will be
paid at time and one-half. Also, double time will be paid for all work performed
on Sunday, except in the case of any shift beginning in the preceding day and
continuing into Sunday. Double time shall be paid to employees who are scheduled
to work and perform work on a holiday.

         4.04 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work scheduled, regular or overtime. An employee who did not receive notice
of overtime on his or her previous shift worked shall not be compelled to work
overtime on that particular day (except for those employees on vacation or
approved leave of absence). Employees who have a valid reason may be excused by
management from working regular or overtime work at any particular time.

              (a)    Overtime. Except for plant security, continuous shift
                     operations, emergency, or maintenance, the COMPANY will not
                     require production employees to work in excess of 10 hours
                     per day on Monday, Tuesday, Wednesday, Thursday, 8 hours on
                     Friday, and/or in excess of 8 hours on Saturday, provided,
                     however, that no employee will be compelled to work more
                     than two consecutive Saturdays, except for the five (5)
                     months listed as peak months. Up to ten (10) hours may be
                     scheduled on Fridays and employees are required to work the
                     scheduled hours. For those working the scheduled Friday
                     hours, overtime on the succeeding Saturday and/or Sunday
                     will be on a voluntary basis. In those five (5) months
                     listed as peak months, employees shall be available for
                     Saturday work when production schedules so require. A
                     tentative schedule for these five (5) months will be given
                     by December 15th. In the event any of these five (5) months
                     need to be changed, a sixty (60) day notice will be given.

              (b)    During the months described above the Jacksonville plant
                     UNION committee and the Operations Managers have the
                     authority to agree to further enhance the varying starting
                     times for selected operations in order to satisfy the
                     scheduling needs for quick turn deliveries as well as to
                     further ensure prompt delivery to customers. Three (3) days
                     notice is also required for such change.


                                       -8-


<PAGE>   14



              (c)    Production on Sundays and holidays and in excess of the
                     hours described in (a) above may be performed by volunteers
                     but will not be mandatory.

              (d)    If a holiday falls on Friday, then Saturday work shall be
                     performed by volunteers.

         4.05 NO PYRAMIDING. There shall be no pyramiding of any premium or
overtime pay under this Agreement for the same hours worked. Where one or more
premiums or overtime rate is payable, the single higher rate shall be paid.

         4.06 SHIFT SCHEDULE. The following is the usual shift schedule. The
shift schedule below will be modified to permit local plant management to vary
the starting time up to one hour either before or after the described normal
starting time for those operations needed to balance the flow of work without
penalty of overtime premium. The COMPANY is required to give three (3) calendar
days notice of such change in writing to the UNION as well as posting such on
the Bulletin Board and giving notice to the individual involved. Failure to give
three (3) days notice for shift varying times will not release the COMPANY from
payment of overtime premium pay. When it is necessary to temporarily assign an
employee, or group of employees, from a permanent shift assignment to take care
of customer demands, the COMPANY may adjust shift hours, plus or minus up to one
hour, with reasonable notice (reasonable means by the end of the prior working
day) without penalty of overtime premium.

              A.     The normal starting time for the first shift will be 7:00
                     a.m. and employees will receive a thirty (30) minute lunch
                     period without pay.

              B.     The normal starting time for the second shift will be 3:30
                     p.m. and employees will receive a thirty (30) minute lunch
                     period without pay. As customer requirements demand, the
                     start time can be varied, without penalty of overtime
                     premium, from between 2:30 and 4:30 p.m.

              C.     When three shifts are to be worked in any department, the
                     first shift will begin work at 7:00 a.m. and continue until
                     3:30 p.m. with a thirty (30) minute lunch period without
                     pay; the second shift will begin work at 3:30 p.m. and
                     continue to work until 12:00 midnight with a thirty (30)
                     minute lunch period without pay; and the third shift will
                     begin work at 12:00 midnight and continue to work until
                     7:00 a.m. with a thirty (30) minute lunch period without
                     pay.

              D.     REST PERIODS. It is agreed that two (2) rest periods of ten
                     (10) minutes will be given during each eight (8) hour
                     shift. One rest period is to be taken before the normal
                     lunch period, and the other rest period is to be taken
                     after the lunch hour.


                                       -9-


<PAGE>   15



         4.07 TEMPORARY ASSIGNMENT. When it is necessary to temporarily assign
an employee, or group of employees, from a permanent shift assignment to take
care of customer demands, the UNION may mutually agree with the COMPANY to the
adjustment of shift hours and reasonable notice ("reasonable" means by the end
of the prior working day) will be given to the employee(s) involved without
penalty of overtime premium.

         4.08 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.

         4.09 REPORTING PAY. When an employee reports for work at the regular
starting time of his/her shift without previous notice not to report and his/her
regular work is not available for him/her, he/she will receive a minimum of four
(4) hours work or pay, provided, however, that at the COMPANY's option, he/she
may be assigned to another job for any portion of said four (4) hours, in which
event he/she will be paid at average rate as computed in Section 8.13 for
whatever time is spent at that job. The COMPANY shall have no liability
regarding the above paragraph in the event of a breakdown of power outside of
plant or if inside of plant and not maintained by the COMPANY, a general plant
fire, Act of God, Act of Public Enemy, or because of conditions beyond the
control of the COMPANY.

                                    ARTICLE V
                                    ---------

                             NO STRIKE - NO LOCKOUT

         Neither the UNION nor any of the employees in the bargaining unit
covered by this Agreement will collectively, concertedly, or individually
encourage, engage in, or participate in, directly or indirectly, any strike,
deliberate slowdown, stoppage, or other interference with production of work
during the term of this Agreement; and the COMPANY during the term of this
Agreement will not lock out any of the employees covered by this Agreement.

                                   ARTICLE VI
                                   ----------

                            MANAGEMENT RIGHTS CLAUSE

         The UNION recognizes the right of the COMPANY to conduct its business,
to operate its plants, and to direct the working forces in such manner as it
sees fit but not inconsistent with the terms of this Agreement and it is
understood that the COMPANY retains all management rights not specifically
covered by this Agreement.



                                      -10-


<PAGE>   16



                                   ARTICLE VII
                                   -----------

                                    SENIORITY

         The COMPANY recognizes the principle of seniority among its employees
         and agrees that all layoffs occasioned by lack of work and recalls from
         layoff shall be by seniority as herein provided.

         7.01 ACCUMULATION OF SENIORITY. Seniority shall continue and accumulate
while the employee is continuously employed by the COMPANY and during the
following periods of absence from work:

              (a)    Up to twelve (12) months in case of disability or illness;

              (b)    During the first twelve (12) months of layoff;

              (c)    During military service;

              (d)    When an employee is elected or appointed to a UNION office,
                     such employee shall be given a leave of absence in writing
                     for the term of his office or any renewal thereof. The
                     UNION shall give the COMPANY two (2) weeks prior notice in
                     such situation;

              (e)    The manner of return to employment shall be as provided
                     herein.

              (f)    To be eligible for a leave of absence, an employee must
                     have completed the probationary period provided in Section
                     7.10 and the leave request must be in writing.

         7.02 LOSS OF SENIORITY RIGHTS. Seniority shall terminate for the
following reasons:

              (a)    When an employee resigns;

              (b)    When an employee is discharged;

              (c)    For absence from the EMPLOYER's payroll longer than twelve
                     (12) continuous months due to layoff. If an employee is
                     laid off with less than six (6) months of service, his
                     recall rights and seniority will remain in effect only as
                     long as his length of service with the Company.

              (d)    When an employee is recalled to work after a layoff and
                     does not return to work promptly thereafter without good
                     cause.

              (e)    When an employee falsifies any information given in
                     connection with his/her application for employment or in
                     connection with a leave of absence.


                                      -11-


<PAGE>   17



              (f)    In order to determine whether an employee returning from a
                     sick leave, job-connected or not, is physically able to
                     satisfactorily perform the work without risking further
                     injury to himself/herself or others, the COMPANY may
                     require such returning employee to submit medical proof of
                     his/her recovery, including a physical examination by a
                     COMPANY doctor if desired by the EMPLOYER.

              (g)    When the employee refuses to accept available work such
                     refusal will terminate the right of recall and result in
                     the loss of all seniority rights.

         7.03 LAYOFF.

              A.     When there is not sufficient work for all employees,
                     probationary employees with less than sixty (60) days
                     seniority, shall first be laid off. If further reduction of
                     the work force is necessary, employees will be laid off in
                     accordance with Section 7.03. The Company recognizes the
                     principle of seniority (last hired will be the first laid
                     off) among its employees and agrees that all lay offs
                     occasioned by lack of work and subsequent recalls from
                     layoff shall be by seniority. Bumping rights or options
                     will be given first to the most senior person to be laid
                     off.

              B.     In the event of a layoff, the reduction will be by
                     classification and seniority, giving the effected employee
                     the following options:

                     1.     Bump the least senior employee in Group 5;
                     2.     Bump least senior employee in the Plant;
                     3.     Bump the least senior employee in a job class for
                            which the laid off employee has previously
                            qualified;
                     4.     Be placed on surplus labor.

                     Inasmuch as both the Company and Union firmly believe in
                     the value of employee seniority, affected employees with 10
                     years or more of seniority will have the additional option
                     of bumping the least senior employee (providing this
                     employee has less than 10 years seniority) within any of
                     the classifications listed in 8.01 with the exception of
                     maintenance and lift truck operators. The senior employee
                     will have to qualify on the new job within the determined
                     training period per Section 8.01 or will be placed on the
                     least senior job in skill Group 5.

              C.     Each employee affected by lay off will be given an
                     interview regarding bump, surplus and recall. It is the
                     responsibility of the employee to identify in writing which
                     job he/she wishes to be recalled for. Employees may make
                     changes to the list of jobs (add/delete) they will return
                     to at anytime prior to 



                                      -12-


<PAGE>   18

                     receiving notification of recall from the Company. These
                     changes must be made in writing through the Human Resources
                     office.

              D.     The COMPANY has the right to train employees in any
                     particular grouping provided such employees are the
                     youngest untrained in seniority and provided further such
                     employees are physically able to perform such jobs. The
                     term "not physically able" as used herein shall mean that
                     the subject employee has a permanent physical disability or
                     condition that prevents him/her from performing his/her job
                     in a satisfactory manner, and that this fact has been
                     verified in writing by a physician.

              E.     The COMPANY will train such senior employees as they
                     request additional training in new jobs. Payment for
                     training purposes will be at the existing base rate or
                     labor grade rate of the new or old job, whichever is
                     highest. When the employee earns piecework, he/she shall
                     receive such.

              F.     Refreshing of skills will be paid at average rate as
                     follows:

                     Employees who have been off the job:

                     Less than 60 days off job        No training allowance
                     60 days - 6 months               12 hours training 
                     greater than 6 months            24 hours training

              G.     Any employee who is trained on a new job may not declare
                     himself/herself ineligible for such skill until he/she has
                     made himself/herself available to the COMPANY for a minimum
                     of eighteen (18) months.

              H.     Any employee assigned to his/her secondary skill must be
                     assigned to such for a minimum of one (1) hour.

              I.     During layoff, any employee shall have the right to declare
                     himself or herself eligible for any and all skills he/she
                     has previously qualified for provided such skills will be
                     available to the COMPANY for a continuous eighteen (18)
                     month period thereafter.

              J.     The borrowed man clause will be available whenever an
                     employee is taken off his/her regular classification for
                     the convenience of the COMPANY.

         In the event there is any conflict between the provisions of the above
Article VII and the remainder of this Agreement, the above shall govern.

         7.04 RIGHT OF RECALL


                                      -13-


<PAGE>   19

              A.     The COMPANY recognizes the principle of seniority (last
                     laid off will be first recalled) in line with the following

              B.     The Company will return the most senior employee on lay off
                     to such employee's former job classification, when an
                     opening occurs in that classification, before placing the
                     job up for bid provided the employee has specified in
                     writing they would return to their former classification
                     during a lay off interview. Employees will be recalled by
                     seniority then priority.

              C.     IN THE EVENT A JOB is posted and there are no bidders, the
                     most senior employee on lay off will be recalled for that
                     job in line with information provided in the lay off
                     interview.

         7.05 NOTICE OF RECALL. An employee on layoff who is recalled for work
will be notified by overnight mail. Failure to report to the Employment Office
within forty-eight (48) hours after the receipt of notice to report will result
in the termination of seniority. Overnight letters to employees being recalled
will read:

         "Job available.  UNION Contract requires you report within 48 hours"

The burden of proving delivery of notice by overnight mail to the employee's
last known address shall solely be that of the COMPANY.

         7.06 CHANGE OF ADDRESS. It will be the duty of employees to keep the
COMPANY advised of any change of residence. Any employee who fails to do so or
who fails to respond to the notice in Section 7.05 shall have no recall rights
to the then available job, but his seniority will not be forfeited until the
UNION has been notified of his failure to respond in which event the UNION will
have five (5) days in which to locate said employee. Failure on the part of the
UNION to locate the employee within the above five (5) days will mean forfeiture
of all seniority rights by the employee involved.

         7.07 DEFINITION AND NOTICE OF LAYOFF. A temporary layoff is when an
employee is laid off for a period of more than eight (8) working hours but not
exceeding five (5) working days. A "permanent" layoff is when an employee is
laid off for more than five (5) working days. On permanent layoff, the COMPANY
shall give a notice of five (5) working days.

         During the five (5) day working notice period, the employee who has
been notified that he/she is to be laid off will share the available work in
his/her classification with those who will be retained.

         When the hours of work reach a minimum of thirty-two (32) hours per
week, a discussion will be held between the COMPANY and the UNION for the
purpose of determining layoff.


                                      -14-


<PAGE>   20


         7.08 FURLOUGH. In order to provide a more reasonable work schedule for
senior employees when hours are shortened due to lack of orders, the Plant
Operations Manager will have the responsibility of placing on furlough those
employees who are not needed to fill the daily production schedule. Furlough
will be offered first on a voluntary basis according to seniority with the
affected classification. If there are not enough volunteers, then the COMPANY
will furlough the most junior employees(s) in the affected classification. The
furloughed employees will be placed on surplus labor so as to make them eligible
for unemployment benefits during such furlough period, if otherwise eligible.
Employee health and dental insurance will be maintained in accordance with
Article XIV for the entire length of furlough. It is understood that a furlough
may be for any length of time provided such does not exceed sixty (60) days at
any given time. For record keeping purposes, the President for Local #425 or his
appointee will be notified of such furlough by letter signed by the involved
Operations Manager.

         In the event, variation in customer demands requires employees to
return from furlough earlier than announced, such return shall be offered first
to the most senior employee in the classification being recalled; however, the
senior employee will not be forced to return if there will still be junior
employees on furlough within the classification. If the furlough turns into a
permanent layoff, the most senior employee may choose to remain out of work on
layoff status, with recall rights as granted in Section 7.04.

         With regard to recall from furlough, the COMPANY liability shall be
limited to notification to the UNION that such employee could not be reached by
telephone or was unavailable because of other commitments. Because state
unemployment rules pay reduced benefits for partial unemployment, the plant or
operations manager will project furlough time in multiples of five (5) working
days. ANY FURLOUGH can be triggered at any day of the week. For example, if a
holiday falls on Tuesday, the COMPANY will declare furlough to begin Wednesday
and continue through for a continuous minimum of five (5) working days.

         Should a planned furlough affect a single employee a third time, the
COMPANY and the UNION will meet to discuss the necessity prior to invoking
furlough of the affected employee.

         7.09 JOB BIDDING. When it is necessary to fill a new job or vacancy,
such positions will be filled as follows:

              A.     Check the return to former classification forms of
                     employees presently on the active payroll.

              B.     Vacant jobs will be posted for bid by shift, and awarded by
                     seniority. Successful bidders who are changing shift only
                     will not be held to the 10 month penalty if they are
                     otherwise eligible to bid.

              C.     Position will be posted on the bulletin board for
                     twenty-four (24) hours. The COMPANY will award the job to
                     successful bidder with most seniority. In order to 


                                     -15-


<PAGE>   21

                     be eligible to bid employee must have at least ten (10)
                     months seniority, and must not have been the successful
                     bidder on current job within last ten (10) months.

              D.     It is agreed that the successful bidder will remain at
                     his/her new job for a period of ten (10) months before
                     being eligible to bid on another job. Successful job
                     bidders will be transferred to their new job classification
                     within thirty days. Lead positions will not be posted for
                     job bids. If lead persons are designated for a
                     classification they shall be paid $1.00 per hour above the
                     highest rate of the classification(s) they are assigned to
                     lead.

         7.10 DISQUALIFICATION.

              A.     In the event a successful bidder is unable to
                     satisfactorily learn the new job in accordance with the
                     learning curve, such employee may be placed on surplus
                     labor for the first disqualification. In the event an
                     employee twice fails to qualify on a job that was
                     successfully bid for, such employee will be disqualified
                     from further bidding.

              B.     Employees may be disqualified for bona fide physical
                     reasons in which event they will go to surplus labor. The
                     term "bona fide physical reasons" as used herein shall mean
                     the subject employee has a permanent disability or
                     condition that prevents such employee from performing the
                     job in a satisfactory manner and such disability is
                     verified in writing by a licensed physician.

         7.11     PROBATIONARY PERIOD. New employees shall be considered
                  probationary employees until they have completed the
                  probationary period of sixty (60) days. During the
                  probationary period an employee may be discharged at the
                  discretion of the COMPANY with or without cause. Any employee
                  who completes his/her probationary period shall commence
                  his/her seniority as of the date of employment and his/her
                  seniority shall remain in full force and effect and shall
                  accumulate thereafter until terminated, as herein provided. No
                  employee shall be required to serve more than one (1)
                  probationary period, provided such employee is rehired within
                  one year. The COMPANY, however, retains the right to terminate
                  such employee in the event he or she has not demonstrated the
                  ability to successfully perform the job within 30 days of
                  rehire.

         7.12 RETURN FROM PROMOTION OUT OF BARGAINING UNIT. In the event that an
employee covered by this Agreement is promoted to a supervisory position or to
any other position outside of the bargaining unit, and is thereafter transferred
back into a classification within the bargaining unit, he/she shall be credited
with the amount of seniority which he/she had acquired. He/she shall not be
eligible to replace any employee other than the one with the least seniority in
the classification in which he/she has experience.

                                      -16-


<PAGE>   22


         7.13 SENIORITY LIST. Upon the first anniversary of the execution of
this Agreement, a basic seniority list shall be prepared containing the names of
all employees who are covered by this Agreement and who have been in the employ
of the COMPANY at least one (1) year and the date of the commencement of their
respective employment. Copies of this seniority list shall be posted on the
bulletin boards, and a copy shall be delivered to the UNION. The seniority list
shall be revised from time to time as necessary, and a list of deletions and
hires shall be furnished to the UNION.

         7.14 CHANGE IN UNION REPRESENTATIVES. It is agreed that the UNION will
keep the COMPANY notified at all times of the persons who are officers and shop
stewards of the UNION.

                                  ARTICLE VIII
                                  ------------

                                      WAGES

                SKILL GROUP CLASSIFICATIONS AND LABOR GRADE RATE
                ------------------------------------------------
                               JACKSONVILLE PLANT
                               ------------------

         8.01 The COMPANY and the UNION have agreed upon the following Labor
Grade Rates and the job evaluation assignment to Labor Grade for all employees:

<TABLE>
<CAPTION>
Skill                                       Dir              Labor Grade Effective               Weeks of
                                                             ---------------------
Group Classification                        Ind    10/16/97   10/16/98   10/15/99  10/16/00      Training
--------------------                        ---    --------   --------   --------  --------      --------
<S>     <C>                              <C>       <C>        <C>        <C>        <C>            <C>
   I.    SEWING
         ------
         A. Border Machine Op.              Dir      9.19        9.49       9.79     10.09            6
         B. Quilt Machines                  Dir      8.96        9.26       9.56      9.86            8
         C. Box Spring Sewing               Dir      8.82        9.12       9.42      9.72            8
         D. Mattress Sewing                 Dir      8.82        9.12       9.42      9.72            8
         E. Miscellaneous Border Operts     Dir      8.75        9.05       9.35      9.65            4
         F. Double Overcast                 Dir      9.02        9.32       9.62      9.92            4

  II.    MATTRESS
         --------
         A. Close Mattress                  Dir      9.60         9.90     10.20     10.50           20
         B. Hog Ring                        Dir      8.89         9.19      9.49      9.79            6

 III.    BEAUTYREST/HMB
         --------------
         A. Ultrasonic Coilers              Dir      9.19         9.49      9.79     10.09            8
         B. HMB Assembly                    Dir      8.89         9.19      9.49      9.79            4

 IV.     BOX SPRING
         ----------
         A. Assemble Frame                  Dir      8.89         9.19      9.49      9.79            4
         B. Assemble Box Spring             Dir      8.89         9.19      9.49      9.79            4
         C. Upholster Box Spring            Dir      8.89         9.19      9.49      9.79            4

 V.      INDIRECT LABOR
         --------------
         A. Warehouse                       Ind      9.40         9.70     10.00     10.30            3
         B. Repair Quilt, Matt, Box Spring  Ind      9.40         9.70     10.00     10.30            4
</TABLE>

                                      -17-
<PAGE>   23
<TABLE>
<S>     <C>                              <C>       <C>        <C>        <C>        <C>             <C>

         C. Material Handler                Ind      9.03         9.33      9.63      9.93            2
         D. Sweepers                        Ind      8.93         9.23      9.53      9.83            1
         E. Packing Machine                 Ind      10.31       10.61     10.91     11.21            4
         F. Lift Truck Operator             Ind      9.90        10.20     10.50     10.80            4
         G. Cutter                          Ind      9.23         9.53      9.83     10.13            4

 VI.     MAINTENANCE
         -----------
         1. One Skill                       Ind      12.20       12.50     12.80     13.10
         2. Two Skills                      Ind      13.70       14.00     14.30     14.60
         3. Three Skills                    Ind      15.20       15.50     15.80     16.10
</TABLE>

         Continuation of skills through approved accredited curriculum will be
paid at .15 per hour.

         Qualifications & Training

         Due to the variety of functions that employees in the mechanics
classification must perform, it is imperative that employees entering the
classification have some formal education and training in maintenance functions.
This training may be through high school vocational courses, technical schools,
or community college courses, as long as the training can be verified by the
school. Vacant positions in the mechanics classification will be posted for bid
with qualifying skills that are necessary to enter into the job. To continue the
training and education of mechanics in the classification, the COMPANY will use
a tuition reimbursement program and reimburse employee costs of approved
training with a passing (C) grade. Further, those employees who go beyond the
three skill level will be eligible for an additional increase of .15 per hour on
their base rate for each skill they attain through an approved accredited
curriculum. Uniforms will be furnished to all employees designated in the
mechanics classification at an equally shared cost between the COMPANY and each
employee.

         8.02 HIRING RATE.

         A.   New employees will be hired at $7.50 effective October 16, 1997.

         B.   Progression:

              Incentive employees will receive either the hiring rate or their
              incentive earnings, whichever is higher, once they demonstrate
              that they can meet quality standards set by the COMPANY.

              Hourly workers shall receive an increase of fifteen cents ($0.15)
              per hour after completing thirty (30) days with the COMPANY and
              shall receive an additional fifteen cents ($0.15) per hour after
              completing the 2nd thirty (30) days with the COMPANY and shall
              receive labor grade rate for their respective assignment after
              completing ninety (90) days with the COMPANY.

              A rate of $7.50 was set for part-time and temporary employees, and
              no benefits, holidays or vacation days will be paid. At the time
              the COMPANY determines that 


                                      -18-
<PAGE>   24

              a temporary position is full time, or at the end of one year
              (whichever comes first), the temporary job will be filled in
              accordance with the contract.

              The COMPANY will not have part-time or temporary employees working
              if regular employees are not working all scheduled hours per week
              unless the regular employees have refused to work on the job being
              performed by the part-time or temporary employees.

              The COMPANY has agreed that no more than ten (10) incentive
              employees will be classified as part-time or temporary. No limit
              will be set for the number of non-incentive classified.

       C.     Probationary Period.

              New employees shall be considered probationary employees during
              the first sixty (60) days of service with the COMPANY and may be
              discharged for any reason during this period. If retained in
              employment after the expiration of the sixty (60) day probationary
              period, the seniority rating of new employees shall commence with
              the first day of their last employment with the COMPANY

         8.03 TRAINING RATE. The training rate shall be $7.50 per hour for newly
hired employees. Base rate will be paid for employees who are transferred or who
are the successful bidders.

                     (i)    Employees who are recalled, transferred, bids,
                            bumped or rolled to another incentive job shall
                            immediately receive the training rate where such
                            training rate is provided or their incentive
                            earnings for such job, which ever is higher. Any
                            employee who is recalled, transferred, bids, bumped
                            or rolled to a day work job shall immediately
                            receive the top rate for the classification of said
                            job.

                     (ii)   In all cases involving transfer, bid, bump, roll or
                            promotion, the employee or employees concerned shall
                            receive a trial period of at least thirty (30)
                            working days, provided the employee shows
                            satisfactory progressive improvements. Such trial
                            period may be extended by mutual Agreement BETWEEN
                            THE COMPANY and the UNION. If the employee fails to
                            show satisfactory improvement and is about to be
                            disqualified, the UNION will be so advised
                            immediately. If the employee and the UNION request
                            an extension of time the COMPANY will consider such
                            request.

         8.04 INCENTIVE COMPENSATION PLANS. It is agreed that the COMPANY at any
time may install an incentive compensation plan in any operation where in its
judgment such a plan is practicable. Such incentive compensation plans, when
established, may be made applicable to individuals or groups of individuals
depending upon the nature of the work, and will provide an 

                                      -19-


<PAGE>   25



earnings opportunity to experienced average employees twenty-five percent (25%)
higher than the labor grade rate. It is further agree that the COMPANY may at
any time discontinue and terminate all or part of any incentive compensation
plan where in its judgment the incentives have proven unsound.

         If a new job is added or there is a change in method (change in method,
means, or processes) so that the operator is required to work on a job for which
there is no standard, he/she shall be paid his/her average hourly rate until a
new standard is submitted for the time he/she spends on such unrated job.

         8.05 INVENTORY WORK: The Company will select those employees best
suited to work inventory, based on the following factors: (1) length of service
and (2) qualifications (ability to read, write, compute, weigh and identify the
components and products). Direct workers will be paid at average rate, indirect
workers at base rate.

         8.06 GENERAL WAGE INCREASE: A general wage increase of thirty (30)
cents per hour for all hourly employees and thirty (30) cents per hour for all
incentive employees will be granted effective October 16, 1997. For incentive
employees the increase will be applied to the previous quarterly average and
paid effective November 1, 1997. All basic rates, all hourly rates and all labor
grades will be increased to reflect the increase.

         8.07 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.

         8.08 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 1999. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.

         8.09 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.

         8.10 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.


                                     -20-


<PAGE>   26



         8.11 ESTABLISHMENT OF NEW CLASSIFICATIONS. In the event it becomes
necessary to establish a new classification, the COMPANY and the UNION shall
meet for the purpose of reaching agreement as to the rate for such
classification.

         The COMPANY and the UNION, in an attempt to reach an Agreement, shall
take into consideration similar classifications in the plant previously or
presently in existence.

         If the parties fail to reach an agreement within three (3) working
days, the resolution of the rate will be moved to expedited arbitration (in
accordance with the procedure outlined in Article III). The COMPANY will assign
a temporary employee at his average rate to the new classification who shall
perform the operation until such time as an agreement is reached or is resolved
by arbitration. When the rate of the disputed classification is agreed upon or
resolved as provided above, the job will be filled in accordance with the terms
of this Agreement set forth in 7.09.

         8.12 BORROWED MAN. When an employee is borrowed for the convenience of
the COMPANY and given a type of work to perform on which he/she has not been
qualified (previously earned incentive rate), then his/her rate shall be his/her
average hourly earnings rate, provided such average rate is greater than his/her
earnings on incentive or the hourly rate for the work being performed. In those
cases where an employee is borrowed into a job on which he/she has been
previously qualified, his earnings shall be at incentive rate for that job. The
Refreshing of Skills chart will apply to these individuals. Employees who have
been trained on a job may not delete themselves from that job unless it is
mutually agreed upon by both the COMPANY and the UNION. With respect to
training, seniority will be honored at the end of the training period
established by contract if an employee is borrowed during the training period.
Trainers will not be borrowed unless no one in the plant can do the job. Those
frequently borrowed will be eligible for an additional $.15 on their base rate
for additional skill qualification. The maximum number of skills carried would
be limited to three, the employee's regular skill classification plus two
additional skills.

         8.13 AVERAGE RATE COMPUTATION. Individual average hourly earnings rates
for employees working in incentive classifications will be computed quarterly by
dividing the total number of hours that the incentive worker has worked,
including average rate payment, if any, into the total straight time earnings of
that individual. The hours shall include the total hours of any incentive worker
except those hours when the worker is in a holiday or vacation status, or time
working any classification other than the worker's own. A copy of such average
hourly earnings shall be made available to the UNION. Each year the COMPANY will
advise the UNION, in writing, the specific dates which determine the period of
earnings on which averages are based.

        In the event an employee has not established an average hourly rate due
to the fact that the employee has not worked during the immediately preceding
calendar quarter, then the employee's average rate shall be equal to the
employee's average rate for the last quarter the employee worked.

         8.14 WORK WAIT If, due to absenteeism, mechanical failure, lack of
materials (component or supplies), an incentive worker is required to wait for
any continuous period of more than ten (10) 

                                      -21-


<PAGE>   27



minutes, after he/she has notified his/her foreman, he/she shall be compensated
at his/her labor grade rate for all lost time.

         An incentive worker's work wait status shall commence only after he/she
notifies his/her own foreman, who shall forthwith record the time. If the
employee's own foreman is not available, he/she shall notify any other foreman.

         The COMPANY shall have no liability regarding this paragraph in the
event of a breakdown of power outside the plant, or if inside the plant and not
maintained by the COMPANY, general plant fire, act of GOD, act of public enemy,
or because of conditions beyond the control of the COMPANY.

         8.15 ELECTRIC POWER FAILURE. It is agreed that in the event of an
electric power failure, employees will stand by their work stations until
instructed by the COMPANY to either go home or to resume work. If the COMPANY,
within one (1) hour after the moment of power failure, instructs the employees
to either go home or to resume work, the employees will be paid at his base rate
for the time lost within this one (1) hour.

         If the COMPANY does not instruct any employee within one (1) hour after
the beginning of such power failure to either go home or to resume work, he/she
will be paid for this loss of time in accordance with Section 4.09 if an
incentive worker, and at the regular day work rate of his/her classification, if
a day worker, for all time lost from the end of the first minute of power
failure to the time he/she is instructed to either go home or to resume work.

         8.16 INJURED DURING WORK

              A.     If an employee is injured in the plant while performing his
                     work assignment and it is necessary for him to receive
                     treatment by either the COMPANY nurse or COMPANY doctor
                     during his regularly scheduled working hours, the COMPANY
                     shall pay for the time spent in the treatment of such
                     injury on the day the injury occurred at his/her average
                     rate if an incentive worker or his/her hourly rate if an
                     hourly worker. If either the nurse or doctor certifies that
                     such injured employee is unable to continue work because of
                     such injury, the COMPANY will pay for the balance of
                     his/her scheduled shift at his/her average rate for
                     incentive worker and hourly rate for hourly worker. If the
                     doctor requests subsequent visit(s) during his/her
                     regularly scheduled shift for the treatment of this injury,
                     the COMPANY will pay for the time spent in this treatment
                     at the employee's average rate for incentive worker and
                     hourly rate for hourly worker. To minimize employee
                     inconvenience, such subsequent visits will be scheduled, if
                     possible, during the employee's regular shift. However,
                     where a second or third shift employee is injured on the
                     job and subsequently requires additional treatment for this
                     injury, then such visits shall be scheduled by the
                     COMPANY's 

                                      -22-

<PAGE>   28

                     Personnel Department at a time consistent with the treating
                     doctor's office hours.

              B.     The employee will be clocked out in time to make the
                     appointment as scheduled. When the employee leaves the
                     doctor or nurse, he/she will receive a release form that
                     will show the completion time of the appointment. Upon
                     returning to his/her department, the employee will present
                     this form to his/her supervisor and will be clocked back in
                     for return to work.

              C.     It is agreed that for all such visits off the COMPANY
                     premises, upon request, the COMPANY will furnish
                     transportation if the employee is unable to drive or has no
                     means of transportation.

              D.     None of the sections of this paragraph are to be so
                     construed that benefits will inure in addition to or
                     pyramiding on disability payments or workers' compensation
                     payments.

         8.17 WORK HARDENING PROCEDURES. Any employee who has suffered a work
related injury and has been released by his/her attending physician to return to
work on a limited status will be placed on a job which he/she can physically
perform without aggravating the injury. During this time, he/she will be paid
the rate of the job which he/she can perform.

         It is expected that the employee will be used in this "work hardening"
job until such time as he/she is once again able to physically perform his/her
regular job. Provided that the injury is of a temporary nature and the employee
returns to his/her regular job after a "reasonable and customary recuperation
period," the COMPANY will reimburse the employee for the difference in pay
between his/her regular rate of pay and the "work hardening" job rate of pay.

         Each situation will be reviewed and evaluated by management on an
individual basis.

         8.18 UNION MEETINGS AND SCHEDULED OVERTIME. In the event a UNION
meeting conflicts with a COMPANY schedule or work and such meetings cannot be
rescheduled to a more convenient time, it is understood that the employees
desiring to attend the UNION meeting may do so providing they return from the
meeting directly to the plant and work the hours lost because of the
interruption.

         EXAMPLE: The COMPANY schedules a regular workday of eight (8) hours
plus two (2) hours of overtime, or a schedule from 7:00 a.m. to 5:30 p.m. The
UNION calls a meeting at 3:30 p.m. that runs until 5:30, the employee who
attended the two (2) hour UNION meeting must return to the plant and work the
two (2) hours to assure the integrity of the COMPANY schedule. Failure to report
after the meeting and work the two (2) hours will subject the offending employee
to disciplinary action.

         8.19 OVERTIME AGREEMENT.

                                     -23-


<PAGE>   29




                  A.       WITHIN CLASSIFICATION

                           Overtime for work regularly performed within any
                           particular classification will be assigned as equally
                           as practicable among qualified employees. Where
                           questions arise, the most senior employee in this
                           classification shall receive the first right of
                           refusal. If there is an insufficient number of
                           volunteers available, the COMPANY may assign the
                           required overtime to the least senior employee until
                           the required manpower needs are satisfied.

                  B.       PROJECT LABOR

                            1.     Employees who are qualified to do work which
                                   is not directly related to the manufacture or
                                   shipping of the product (i.e: Project Labor),
                                   may request to be placed on a waiting list
                                   for such labor. Said list will be posted on a
                                   quarterly basis and the work will be
                                   distributed in as equal a basis as
                                   practicable. Employees who have performed
                                   such work during the week in which the work
                                   falls, including Saturday, will be given
                                   preference over those who have more seniority
                                   but who did not perform such work during the
                                   week. If an employee is unavailable to work
                                   when required, he/she will lose his/her turn.

                            2.     The rate of pay for work performed outside
                                   the regular classification will be $8.50/hr.

                                   ARTICLE IX
                                   ----------

                             STANDARD ALLOWED HOURS

         9.01 INCENTIVE COMPENSATION PLAN. It is agreed that the COMPANY, at any
time, may install an incentive compensation plan in any operation, job, or
variation of any operation or job where, in its judgment, such a plan is
practicable. When an incentive program is implemented the
Company will provide the incentive earnings opportunity for the Plant as a whole
that will approximate the incentive earnings opportunity which existed prior to
the implementation of the new incentive program. Such incentive compensation
plans, when established, may be made applicable to individuals or groups of
individuals and will provide for skilled employees an incentive earning
opportunity for increased productivity. Effective October 15, 1982, the standard
allowed hour system will replace the price per piece (piecework) system. It is
recognized by the parties, however, that certain bonus plans such as packing,
pre-loading, off-bearing, and allocating (shipping), and ultrasonic, etc. may
nevertheless continue, inasmuch as special circumstances make it difficult to
effect a conversion to SAH at this time. The Standard Allowed Hour System of
Payment will be in effect at the plant.

                                      -24-

<PAGE>   30


         9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the foreman shall notify the shop
steward and the operator's experience time shall begin on the date of this
notification

         Whenever time studies are necessary, the floor observations of the
COMPANY's Time Study Engineer will be of at least thirty (30) minutes duration
in order to assure a representative sample of the job. The operator who is to be
time studied or analyzed will be paid his/her average hourly rate until a new
standard is submitted.

         The COMPANY shall select an average operator, or as close to average as
possible, for time methods analysis. Average is defined as an operator working
at a normal pace under normal working conditions, with the skills required for
the specific job. Until a new standard or incentive value is submitted, the
employee who works on a unit for which there is no standard or standard allowed
hour will be paid his/her average hourly rate for such unit.

         9.03 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.

                       SAH per piece             =        TSM
                                                          ---
                                                          60

                  The Basic Rate of the Classification will be as stated herein.

         The BASIC PRODUCTION EXPECTANCY will be determined by dividing a SIXTY
(60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%) rating
increased by a ten percent (10%) rest, fatigue, and delay allowance (effective
10/16/94, the RFD factor on new or revised standards shall be twelve and
one-half percent (12.5%)).

          Basic Production Expectance  =    60 MINUTE HOUR 
                                            --------------
                                            100% Time/Piece Allowance Plus 
                                            10% RFD Allowance (12.5% on new 
                                            or revised standards after 10/16/94)

          Basic Production Expectance x SAH = Hours Earned
          Hours Earned x Base Rate = Rate per Hour

                          Example of Incentive Earnings
                      OPPORTUNITY OFFERED BY ABOVE FORMULA
                      ------------------------------------

          1362 SAH          =       TSM OF 8.1738
                                    -------------
                                    60 Minute Hour

          7.3405 Pieces per hour

                                      -25-


<PAGE>   31





                  Basic Production Expectancy =  60 MINUTE HOUR
                  (Cycle base minutes)           --------------
                                                 7.4307 (100% Time/Piece) plus
                                                  .7431 (10% RFD Allowance)
                  TSM                            8.1731 (Total Standard Minutes)

                  A.       7.3405 pieces/hour 100% at 25% incentive pace equals 
                           9.1756 pieces/hour
                  B.       9.1756 pieces @ SAH .1362 = 1.25 hours earned
                  C.       Base Rate - $6.18
                  D.       1.25 hours earned x Base Rate 6.18 = $7.72/hour
                  E.       Earnings/Hour             7.72
                                                     ----
                           Base Rate                 6.18 = 125% incentive
                           Earnings opportunity at +25% incentive pace

         9.04     WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.

                  A.       It is agreed that, whenever an SAH standard is
                           computed, it shall be submitted in writing to the
                           operator and become effective immediately. This
                           computation may consist on an actual clocking of the
                           work or an analysis of previous standards or records
                           of comparable or similar work. The COMPANY will
                           furnish a complete written prescribed job methods
                           description to the UNION whenever new standards or
                           revised standards are submitted. Once such job
                           methods change is submitted in writing, the COMPANY
                           has a ninety (90) day period in which to adjust the
                           time in the event such adjustment is necessary. If
                           such time value is neither adjusted by the COMPANY
                           nor grieved by the UNION, neither party can expect
                           revision of such change after the expiration of
                           ninety (90) days. No standard changes can be
                           effected without a written job methods change.

                  B.       The written confirmation referred to above will
                           indicate whether the standards were developed from a
                           clocking analysis, local plant standard data, or a
                           combination of time study and data.

         9.05     PROCEDURAL INTERPRETATION OF SECTION.  Current standards are 
guaranteed unless the COMPANY makes a change in method, means, process,
equipment, production conditions, or product design. Where such change results
in an addition to the standard task time, an adjustment will be made to
proportionately reflect the change.

         In those instances where the change results in greater output, the time
will be proportionately adjusted to reflect the diminution in task time. Thus,
standards will be revised to reflect the changes of the job, operation, or
variation of any operation in the degree the change in the task affects the
standard upward or downward.

         Where the change represents less than five percent (5%) of the cycle
base minutes, the COMPANY will use standard data from its bank of appropriate
basic time study standards in determining the new task time reflecting the
change. The COMPANY may restudy the operation in those instances where the
elements of work affected by the revised method exceed five percent (5%) of the
originally submitted cycle base minutes of the entire task. In those instances
where there 
                                      -26-


<PAGE>   32



was no original time study taken, where standards were set by negotiations, or
where element breakdown was not measured, or where the additions and deletions
are not sufficiently distinct to permit addition or subtraction from work
content, the COMPANY will develop time from a restudy of the entire operation.
Every time a change of sufficient impact to justify a modification of standard
is contemplated, all other changes from the time the standards were last
established will, of course, be included in the new measurement of the task. It
is contemplated that there will be occasions where preceding and succeeding
elements will be affected by change. Similarly, it is contemplated that
preceding and succeeding operations for classifications may be affected by a
change. In those instances, it will be necessary to measure and modify the
impact of such change. Once the appropriate addition or deletion is developed,
such time will be translated into an SAH on the basis of current labor grades or
basic rates.

         In order to preserve the integrity of earnings as well as integrity of
job methods and product quality, it is agreed that neither the supervisor nor
the employee can change the prescribed method of performing the incentive task.
All changes and resulting standards, in order to become effective and binding,
must be initiated in writing by the Time Study Department. For identification
purposes, the COMPANY, on October 15, 1973, installed an administrative
procedure on all new time studies which enables a departmental shop steward or
other designated UNION official to sign a copy of such new standard data or
chart issued as a consequence of such new time study.

         9.06     GRIEVANCES REGARDING INCENTIVE STANDARDS

                  A.       Before submitting any grievance on an SAH standard,
                           the operator will work at the submitted standard for
                           a period of at least thirty (30) calendar days.

                  B.       If, after thirty (30) calendar days from the date on
                           which the standard is submitted, the operator(s) is
                           not satisfied with the standard, such operator(s)
                           shall have the right of protesting said standard by
                           submitting a written complaint in accordance with
                           the grievance and arbitration procedure of this
                           Agreement, provided this right is exercised within a
                           period of ninety (90) calendar days from the date
                           the standard was originally submitted. Failure to
                           exercise this right of protest within the
                           above-described ninety (90) calendar days shall
                           constitute an automatic acceptance of the submitted
                           standard. Whenever a standard has been automatically
                           accepted by failure of the UNION to initiate action
                           under the grievance and arbitration procedure within
                           ninety (90) days, no new grievance can be submitted
                           in connection with this particular standard. A
                           resolution of grievances over incentive standards
                           shall be retroactive to the date the protested
                           standard was originally submitted.

                  C.       If the COMPANY Time Study Department finds no error
                           in the submitted standard and the matter is still in
                           dispute, then it may be processed in accordance with
                           the grievance and arbitration procedure to determine
                           whether 

                                      -27-


<PAGE>   33



                           or not the standard as established is
                           contrary to the provisions of this Agreement.

                  D.       It is agreed by the parties hereto that in the case
                           of disputes concerning the accuracy of the COMPANY's
                           clocking analysis the impartial chairman described in
                           Section 3.07 must be a qualified time study engineer.
                           The findings of the impartial chairman shall be final
                           and binding on both parties and shall be retroactive
                           to the date the SAH was originally submitted.

         9.07 AVAILABILITY OF TIME STUDY DATA. The COMPANY agrees that it will
conform to the law with respect to making available such time study data as may
be needed by authorized UNION officials from time to time in the course of
processing grievances under this Agreement with regard to incentive standards.
It is agreed that such data will not be misused and that it will be kept
strictly confidential so as to insure that COMPANY means, methods, and
production processes will never be revealed to parties not bound by this
Agreement. The UNION time study engineer and the COMPANY time study engineer
will meet for the purpose of resolving the question of unsupported time study
back-up data.

         9.08 UNION TIME STUDY ENGINEER. Whenever a local UNION party to this
Agreement desires to have the International UNION designated time study engineer
visit one of the plants in order to verify COMPANY standards or job content as
the consequence of a grievance by that local UNION, the procedures will be as
follows:

                  A.       The UNION counsel shall write the COMPANY Senior Vice
                           President Human Resources suggesting a list of dates
                           a minimum of two (2) weeks prior to the proposed
                           visit.

                  B.       The COMPANY designee will respond by either selecting
                           from the UNION list or by offering alternative dates.

                  C.       Once the above two (2) designees complete
                           arrangements, they will notify their respective local
                           COMPANY and UNION representatives the agreed upon
                           dates for the visit.

         9.09 STANDARD DATA. Consistent with the mutual desire of the parties to
minimize or eliminate the grievances and problems now inherent in work
measurement via stop watch and also the attendant difficulties occasioned by
disagreement over pace determination, the COMPANY will, whenever feasible, set
incentive job standards by use of pre-determined, pre-leveled time values, i.e.,
use of a data bank.

         To ensure greater objectivity, the COMPANY will detail and define more
completely the methods involved in each operation.

                                    ARTICLE X
                                    ---------


                                      -28-


<PAGE>   34



                                  PAID HOLIDAYS

         10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:

                    New Years Day
                    Martin Luther King's Birthday
                    President's Day
                    Good Friday
                    Memorial Day
                    Independence Day
                    Labor Day
                    Thanksgiving Day
                    Friday after Thanksgiving Day
                    Day before or after Christmas as indicated by the COMPANY
                    Christmas Day

         10.02 ELIGIBILITY. In order to be eligible for the holiday payment, an
employee must have completed his/her probationary period on the day of the
holiday and have worked the last scheduled work day before and the first
scheduled work day after the holiday, for a minimum of four (4) hours.

         10.03 LEAVE OF ABSENCE. When an eligible employee is on an approved
leave of absence which does not exceed (30) days and a holiday occurs during
this period, he shall receive pay for such holiday. (Employee would be eligible
for one two-day holiday, if applicable.)

         10.04 SUNDAY HOLIDAYS. In applying this procedure, when any of the
above-enumerated holidays falls on Sunday and the day following is observed as
the holiday by the state or federal government, it shall be paid as such
holiday.

         10.05 TENTH PAID HOLIDAY. It is understood that the COMPANY shall
notify the UNION thirty (30) calendar days in advance whether the tenth (10th )
paid holiday is the day before or the day after Christmas Day each year.

         10.06 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday
falls on Saturday it shall, at the discretion of the Operations Manager, be
celebrated on either the preceding Friday or the following Monday. Notice of the
date selected will be posted two (2) weeks in advance. In the above situation,
no work will be scheduled on such Saturday to avoid holiday premium pay.

         10.07 HOLIDAY PAY.  Holiday pay shall be included in the pay check for 
the pay period in which the holiday falls.

         10.08 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
fall within an eligible employee's approved vacation period and the employee is
absent from work during his 

                                      -29-


<PAGE>   35



regularly scheduled work week because of such vacation, the employee shall be
paid for such holiday in addition to vacation pay and shall have such day off.

         10.09 MULTIPLE HOLIDAYS ON SAME DAY: If any two (2) or more of the paid
holidays shall occur on the same day, the employee will be paid for each of said
holidays but shall have only one (1) day off.

         10.10 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in Section 8.13 for incentive workers;
day workers will be paid at eight (8) times the employees regular day work
hourly rate. Shift premium shall be included in holiday pay computation for
eligible employees. New employees (after qualified) will be paid the average of
the last two (2) full weeks if the average is over the base.

         10.11 OVERTIME AND PREMIUM PAY. For purposes of computing overtime and
premium pay, holidays herein designated shall be regarded as days worked in the
week in which they occur whether or not work was actually performed during such
hours.

                                   ARTICLE XI
                                   ----------

                                 PAID VACATIONS

         11.01 VACATION. The COMPANY will grant paid vacation to employees as
follows:

                  (a)      Employees with from one (1) to three (3) years of
                           continuous service shall receive an annual week of
                           vacation with pay for forty (40) hours if otherwise
                           eligible;

                  (b)      Employees with three (3) to twelve (12) years of
                           continuous service shall receive two (2) weeks of
                           vacation with pay for eighty (80) hours if otherwise
                           eligible;

                  (c)      Employees with twelve (12) to eighteen (18) years of
                           continuous service shall receive three (3) weeks of
                           vacation with pay for one-hundred twenty (120) hours
                           if otherwise eligible;

                  (d)      Employees with eighteen (18) or more years of
                           continuos service shall receive four (4) weeks of
                           vacation with pay for one-hundred sixty (160) hours
                           if otherwise eligible;

                  (e)      Full vacation benefits will be paid to those who are
                           otherwise eligible in the following circumstances:

                           (1)      To the employee's estate in the event of the
                                    death of the employee;


                                      -30-


<PAGE>   36



                           (2)      To the employee in the year of his or her 
                                    retirement.

                  (f)      The COMPANY will pay one additional week vacation pay
                           at vacation rate for employees with twenty five (25)
                           or more years of seniority with no additional time
                           off.

         11.02 PAY RATE. Pay for each week of vacation will be figured at forty
(40) times an employee's average hourly earning rate of the previous quarter if
an incentive worker and the employee's regular hourly rate if paid on an hourly
rate, excluding overtime premiums.

         11.03 INTERMITTENT VACATION. Full vacation benefits will be paid to all
employees who work at sometime during the calendar year with the exception of
employees who are on a layoff status or who quit or are discharged. Those
employees will be paid on a prorated basis of 1/12 for each month worked (five
(5) working days will be considered a month worked, 1/12 credit).

         A.       Any employee returning from an approved leave of absence must
                  work sixty (60) days to be eligible to take vacation time.

         B.       If an employee returns in December he/she will receive full
                  vacation benefits for that calendar year provided sixty (60)
                  days are worked upon return.

         C.       Employees who have returned from a Leave of Absence may sell
                  one week of vacation with no time restrictions. Requests to
                  sell additional weeks will be reviewed and granted by
                  management on an individual basis.

         D.       Beginning in 1998, employees entitled to 80 hours (2 weeks) of
                  vacation or more may take one (1) week of vacation at eight
                  (8) hour intervals (by days) with one (1) week or more notice
                  and seniority permitting. Time of payment for this week is to
                  be determined.

         11.04 PLANT SHUTDOWN AND STAGGERED VACATION. The COMPANY shall notify
the UNION, no later than January 1 of each vacation year, whether the plant will
shut down or whether there shall be staggered vacation on an individual employee
basis. Prior to January 1 of each year, vacations for eligible employees will be
scheduled by classification and seniority in accordance with period January 1 to
December 31. If the COMPANY decides on plant shutdown, those employees who had
their vacation time earlier and are not eligible for any more vacation time
during the year, and not required to work during the shutdown, will be
furloughed during the plant shutdown.

         The COMPANY may elect to ship finished products, modify, maintain, or
install equipment and manufacture process or finished product in order to
balance work flow, satisfy customer needs, or balance production schedules and
stock during a shutdown for vacation purposes.

         11.05 ELIGIBILITY. Eligibility for vacation will be determined by
measuring the year of earned vacation benefit pay from the anniversary date of
hire, rather than by calendar or fiscal year.

                                      -31-


<PAGE>   37




         11.06 SCHEDULING OF STAGGERED VACATIONS. If vacations are staggered,
then vacations for eligible employees will be scheduled by classification and
seniority in accordance with anticipated production requirements during the
period from January 1 to December 31, except that third and fourth weeks of
vacation for eligible employees may not normally be scheduled during the months
of May, June, July, August and September. Employees shall indicate in writing on
a form furnished by the COMPANY their preferences for vacation dates during the
month of December of each year. At that time also, employees eligible for a 3rd
week's vacation who wish to receive money in lieu of vacation and employees
eligible for the seniority bonus who wish to take vacation time off in lieu of
the bonus shall so indicate on the form. Vacation time will not be altered
except when operational needs are affected by illness. Exceptional cases of
third or fourth week vacations during the period of May, June, July, August and
September may occasionally be arranged when the Staff Representative can
mutually agree to such with the Operations Manager or the Human Resources
Manager.

         11.07 NO ACCUMULATION. Employees may not accumulate vacation benefits
but must take them when eligible. Hardship cases may be considered and money may
be taken in lieu of vacation provided the COMPANY will advise the UNION of the
reason for such prior to payment of the vacation money to the employees
involved.

         11.08 SHIFT PREMIUM.  Shift premium will be included in vacation pay 
computation for employees otherwise eligible.


                                      -32-


<PAGE>   38



                                   ARTICLE XII
                                   -----------

                              ABSENTEES - NO REPORT

         Any employee who does not report for work on any work day shall report
the reason thereof to the Personnel Manager, or his foreman, within three (3)
hours after the beginning of his work shift. This report is to be made by
telephone or written note. The following schedule of reprimands will prevail for
any employee who does not report as per above:

                  First offense                      Written reprimand

                  Second offense                     One day layoff

                  Third offense                      Two days layoff

                  Fourth offense                     Discharged permanently

                                  ARTICLE XIII
                                  ------------

                                UIU PENSION TRUST

         UIU Pension Trust provides employees represented by the Union with
certain pension benefits as are from time to time determined by the Trustees.
The parties to this Agreement desire that the pension benefits now granted and
which may hereafter be granted by the Trustees be provided to the employees
covered by this Agreement.

         The Company agrees, therefore, beginning with the month of November
1988, and for each month thereafter for the duration of this Agreement, to
contribute, by no later than the tenth (10th) day of each month, to the UIU
Pension Trust a sum a money in an amount equal to six percent (6%) of the total
gross earnings accrued during the immediately preceding calendar month by all
the employees who were covered by this Agreement during the said immediately
preceding calendar month, including the total gross earnings of any such
employee whose employment was terminated during the said immediately preceding
month. The Company shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the Company
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The Company
further agrees to supply to the Trust such information as may from time to time
be requested by it in connection with the benefits provided by said Trust to
said employees. The parties agree, however, that the coverage of a newly
employed employee shall not begin until the first day of the first calendar
month following the expiration of twelve (12) months from the commencement of
this employment, meaning that in calculating the contribution due hereunder for
the first twelve (12) months of coverage for the said newly hired employee,
his/her total gross earnings for the entire preceding twelve (12) months shall
be considered. Thereafter, the Company will make contributions each calendar
month. This exception for newly employed employees shall not apply in the case
of employees who have been previously

                                      -33-


<PAGE>   39



covered under the UIU Pension Trust in which event the Company shall report such
employees and make contributions as required herein beginning with the first
calendar month following the date of the commencement of such employment.

         For the purposes of this clause only, a part time employee is defined
as one who is employed to regularly work less than the number of hours
established as the regular work week, which definition does not include regular
full time employees who are employed to work a full work week but who might be
working shorter hours due to lack of work, sickness, etc. Part time employees
shall not receive coverage hereunder nor shall their earnings be considered in
calculating the contributions due hereunder. For the purposes of accurate record
keeping, however, part time employees shall be listed on the contribution report
and their total gross earnings shown. Nothing in this clause shall be construed
as an affirmation or negation of the Company's right to employ part time
employees or as an indication of what other clauses of this Agreement might or
might not apply to certain employees.

         In the event there is a default in the payment of contributions as
required herein, the payment thereof may be enforced by either process of law or
arbitration and if either suit or arbitration is initiated, the debt owing to
the Fund shall be increased to include the cost of suit and/or arbitration and
an attorney's commission of ten percent (10%) of the payments then in default.

         In consideration of the Company's aforesaid contributions to the Trust
as herein above provided and for so long as the Company's participation in the
Trust is accepted by the Trustees, the Trustees will, beginning with the date of
receipt by the Trust of the Company's first said contribution and continuing for
such part of the duration of this Agreement as the Company fully complies with
the terms of this clause in all respects, extend and make available to employees
covered by this Agreement the pension benefits for which such employees are
eligible under the Declaration of Trust, as amended from time to time, which is
by this reference incorporated herein and made a part hereof. If, during the
life of this Agreement, the Company's participation in the Trust is rejected or
terminated by the Trustees, this clause shall be null and void and this
Agreement shall be reopened and negotiations between the parties entered into,
but only as to the subject of the establishment of other benefits in place of
the UIU Pension Trust, but at a cost of the Company not to exceed to the cost of
the contribution hereunder.



                                      -34-


<PAGE>   40



                                   ARTICLE XIV
                                   -----------

                       THE UNITED STEELWORKERS OF AMERICA
                             HEALTH AND WELFARE FUND

         14.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers Of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.

         14.02 CONTRIBUTION RATES. The month for which the contribution is due
is referred to as the "benefit month" and the month immediately preceding the
benefit month is referred to as the "wage month." The Company shall each and
every benefit month make the following monthly contribution to the Fund on each
and every eligible employee who elects benefit coverage.

         EFFECTIVE 11/1/97
         -----------------
<TABLE>
<CAPTION>

                  The United Steelworker                             
                  ----------------------                   Employee
                  Of America Plan             Company     Contribution        Total
                  ---------------             -------     ------------        -----

              <S>                          <C>            <C>              <C>    
                  Single                      $209.02        $ 12.97          $221.99
                  Single Plus One              349.00          22.69           371.69
                  Family                       445.53          31.21           476.74
</TABLE>

                  The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any increase in total insurance premium costs in the second
year which exceeds five (5%) percent over the total insurance premium costs in
the first year will give the Company the option to cease participation in the
USWA Health and Welfare Fund. This same option will apply if the total insurance
premium costs in the third year exceed by more than five (5%) percent the total
insurance premium costs from the second year and similarly if the fourth year
exceeds the third year by more than five (5%) per cent. Any contributions or
increases or decreases in insurance premium contribution costs in the second,
third, and or fourth years will be shared in the same ratio of eighty nine (89%)
percent employer and eleven (11%) percent employee. If the Company opts out, the
Company and the Union reserve the right to review the plan and mutually
determine continuation of coverage through a plan offering comparable coverage.


                                      -35-


<PAGE>   41



         14.03 ELIGIBILITY. Eligible employees are all full time employees
employed within the Union's bargaining unit who have completed thirty (30) days
employment prior to the first calendar day of the benefit month. The term also
includes eligible employees who did not work at all during the wage month for
any of the following reasons:

                  A.  Disability due to sickness or accident, up to a maximum
                      of six (6) months per disability;
                  B.  Vacation; or
                  C.  Attendance at Union or fund Convention, seminar or
                      grievance hearing.

         The Company is not required to make a contribution on an employee whose
employment is terminated during the wage month.

         14.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the Company to deduct the employee's contributions from the employee's
wages and to transmit same to the Fund. When supplied with such a written
authorization, the Company agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the Company contributions.

         Employees who refuse or neglect to provide the Company with the
necessary written authorization to deduct the required employee contributions
will receive no Fund coverage. In those cases in which an employee has supplied
the Company with the required written authorization but because of lack of wages
the Company is unable to deduct the employee contribution for a particular
benefit month, it is the obligation of the employee to pay, in a timely fashion,
to the Company for transmittal to the Fund the required employee contribution.
The coverage of such an employee failing to make the required payment on time is
automatically terminated. Employee pre-tax co-pay will be deducted on a weekly
basis.

         14.05 SICKNESS AND HEALTH AND LIFE INSURANCE. For those eligible
employees who do not elect medical and dental coverage during the defined time
period, the Company will make a monthly contribution to the Fund of $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.

         14.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the Company
on the tenth (10th) day of the benefit month, commencing with the month of
November 1994 and each and every month thereafter so long as this Agreement is
in force.

         14.07    COVERAGE.

                  A.       HOSPITAL AND MEDICAL BENEFITS.  Coverage for newly 
                           hired employees and any named dependents will begin
                           on the first (1st) day of the month following
                           completion of thirty (30) days of employment.
                           Previously covered employees shall be covered the
                           first (1st) day of the calendar month following their
                           return to work.

                                     -36-


<PAGE>   42




                  B.       DISABILITY BENEFITS.  Newly hired employees shall be 
                           eligible for sixty percent (60%) indemnity payment if
                           disabled after completing six (6) months of
                           employment.

                  C.       These provisions for newly hired employees shall not
                           apply in the case of those employees who have been
                           "previously covered" under the Fund. Such employees
                           and their dependents shall be eligible for all
                           benefits from the date of hire.

         14.08 ELECTION OF CATEGORY OF COVERAGE AND RIGHT TO CHANGE. Employees
shall elect a category of coverage no later than the first day of the calendar
month following the completion of thirty (30) days employment. This election may
be changed only as provided for in the Plan. Newly born children must be
enrolled within thirty-one (31) days of birth.

         14.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company shall report the names, status, hire and termination dates as
applicable, as well as the total gross earnings of each eligible employee during
the wage month.

         The Company further agrees to supply to the Fund such further
information as may from time to time be requested by it in connection with the
benefits provided by said Fund to said employees and to permit audits of its
books and records by the Fund for the sole purpose of determining compliance
with the terms and conditions of this Agreement.

         14.10 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America Health and Welfare Fund agree to hold harmless and
indemnify the Company from any and all claims, grievances, lawsuits, actions at
law or inequity relating to the Plan except a claim that the Company has not
paid the contribution required by this Agreement.

         The Company does not agree to be bound by, and expressly disavows any
obligations imposed upon the Company by, the provisions of any Trust Agreement
or other document pertaining to The United Steelworkers Of America Health and
Welfare Fund to which the Company is not a signatory party.

         14.11 REINSTATEMENT OF COVERAGE. The Fund may, in its sole discretion,
elect to reinstate coverage either retroactively or prospectively or both once
the amounts owed to the Fund by the Company are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.

         14.12 PART TIME EMPLOYEES. For the purpose of Fund coverage, a part
time employee is one who is hired to regularly work less than the number of
hours established as the regular work week in this Agreement, which definition
does not include regular full time employees who are hired to

                                      -37-


<PAGE>   43



work a full work week but who might be working short hours because of lack of
work, sickness, etc. Part time employees shall not receive Fund coverage nor
shall the Company pay a contribution for such employees. Nothing in this clause
shall be construed as an affirmation or negation of the Company's right to hire
part time employees.

         14.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers Of America Health and Welfare Fund periodically.

         14.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers Of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company's said employee the benefits for which employees are
eligible under the above-designated benefit plan. No benefits will be paid or
services furnished to any employee or employees for whom the Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.

                                   ARTICLE XV
                                   ----------

                                  JURY SERVICE

         Any employee duly called to perform his civic duty to serve on a jury
panel shall be compensated by the COMPANY for the difference between the daily
jury pay and average hourly earnings as computed in Section 8.13 if an incentive
worker or the hourly day work rate for the classification if a day worker of the
employee based on an eight (8) hour work day. Any employee who is excused from
serving shall not be required to report to his job to complete a partial shift.
In the event the employee has been excused for a full day, he shall report to
his job and continue working until told to report again for jury duty.

                                   ARTICLE XVI
                                   -----------

                                 BEREAVEMENT PAY

         16.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) days for time lost due to death in the immediate family. Immediate
family is defined as mother, mother-in-law, father, grandparents, father-in-law,
brother, half brother, sister, half sister, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the COMPANY
with reasonable proof of death and relationship.

         16.02 PAYMENT. The pay for such loss of time from work will be for
eight (8) hours, straight time at the employee's previous quarter average hourly
rate if an incentive employee and at the classification rate of pay if a day
worker.

                                  ARTICLE XVII
                                  ------------


                                      -38-


<PAGE>   44




                                 BULLETIN BOARDS

         17.01 BULLETIN BOARDS. The UNION may put up bulletin boards at
locations specified by the COMPANY for the following non-controversial UNION
announcements:

                  A.       Notice of UNION recreational or social affairs;
                  B.       Notice of UNION nominations or elections and results 
                           of such elections and nominations;
                  C.       Notice of UNION appointment;
                  D.       Notice of UNION meetings;
                  E.       Notices pertaining to The United Steelworkers Of 
                           America Health and Welfare and UIU Pension Programs.

         17.02 POSTING OF NOTICES. The UNION agrees that all notices so posted
as above stated shall be signed by the Secretary or other authorized officer of
the UNION and he alone shall have the power to post such notices on behalf of
the UNION and further agrees that notices are to remain on the bulletin board
for a period of not more than two (2) weeks.

         Before any notices are posted in accordance with the foregoing, a copy
of such notice shall be delivered to the COMPANY Operations Manager, or to the
Human Resources Manager where there are such officials. Any of the
aforementioned representatives of the COMPANY may remove from the bulletin board
any notice which does not conform to the requirements of this article.

                                  ARTICLE XVIII
                                  -------------

                                 MILITARY CLAUSE

         The COMPANY agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.


                                      -39-


<PAGE>   45



                                   ARTICLE XIX
                                   -----------

                              EMPLOYEE BIRTHDAY PAY

         Each employee who meets the requirements for holiday eligibility will
receive an additional eight (8) hours pay (computed as per Section 8.13) during
the week in which his birthday occurs, even though he may be on vacation or
absent due to illness or accident. Should the birthday fall on a Saturday,
Sunday, or holiday, the employee will nevertheless receive the abovementioned
eight (8) hours pay. In the event an employee desires to take a day off from
work on his birthday in lieu of eight (8) hours pay, he may do so only if he
gives five (5) working days prior notice to his supervisor. The above will be
administered so as to permit an employee to select a day off in the event his
birthday falls on a Saturday, Sunday, or holiday. Employees on layoff status
will not be eligible for birthday pay if such birthday falls later than fifteen
(15) calendar days following the layoff.

         Employees who are eligible for birthday pay and elect to receive pay in
lieu of a day off by January 1 will receive a $100 birthday check, exclusive of
payroll deductions. If not elected by January 15, the appropriate clauses of the
contract will apply.

                                   ARTICLE XX
                                   ----------

                          EQUAL EMPLOYMENT OPPORTUNITY

         The COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, national origin or ancestry, age, sex
(including pregnancy and any illness arising out of and occurring during the
course of pregnancy, childbirth, or related to medical condition), disability,
or veteran status except where religion, sex, national origin, or age is a bona
fide occupational qualification or where a bona fide seniority or merit system
affects compensation, terms, conditions or privileges of employment. Our policy
relates to all phases of employment, including recruitment, placement,
promotion, training, demotion, transfer, layoff, recall and termination, rates
of pay, employee benefits, and participation in all COMPANY sponsored employee
activities.

         We are opposed to all forms of harassment including sexual, racial,
ethnic, or religious harassment. Unwelcome sexual advances, requests for sexual
favors, and other verbal or physical conduct of a sexual nature or verbal or
physical conduct directed at a person's race, color, religion, sex, national
origin, age, handicap, or veteran's status may constitute harassment. Claims of
harassment which come to our attention may result in discipline up to and
including discharge. At any time, if you believe that you have been harassed,
you must report the harassment to your immediate Supervisor or your Human
Resources Manager or your Operations Manager. A confidential investigation will
be conducted.


                                      -40-


<PAGE>   46



                                   ARTICLE XXI
                                   -----------

                                  SAVING CLAUSE

         21.01 SEPARABILITY. If any provision of this Agreement is invalid or
illegal in any state, then such provision shall be considered to be deleted in
its entirety or to be inoperative in said state in which it is illegal or
invalid and the remaining provisions of this Agreement will continue in full
force and effect.

         21.02 FEDERAL AND STATE LAWS. The parties recognize the need to
maintain compliance with all federal statutes and regulations and nothing in
this Agreement shall be construed to prevent the COMPANY from taking actions
necessary to comply with federal law. Further, to the extent any provision of
this Agreement conflicts with a federal statute or regulation, the federal law
shall govern.

                                  ARTICLE XXII

                          SEVERANCE AND PLANT CLOSINGS
                          ----------------------------

         In the event the COMPANY decides to close this facility presently
organized by the United Steelworkers, sixty (60) day notice of such event will
be given to the District Director of the United Steelworkers of America. Those
employees affected by the plant closing shall continue to be covered under their
existing USWA Health and Welfare Fund benefits as outlined in Article XIV of the
Collective Bargaining Agreement for an additional four (4) months, and the
COMPANY shall be responsible for the payment of the contributions for the four
(4) month period of coverage.

                                  ARTICLE XXIII
                                  -------------

                     DURATION AND TERMINATION OF SUPPLEMENT

         23.01.   EFFECTIVE DATES. This Agreement shall be in full force and
                  effect from October 16, 1997 until October 15, 2001.

         23.02.   ENTIRE AGREEMENT. The parties agree that there shall be no
                  reopening of this Agreement and that this Agreement
                  constitutes the entire Agreement between the parties on the
                  subjects of multi-plant bargaining and at no time during the
                  life of this Agreement shall either party have any obligation
                  to negotiate or bargain with the other party with respect to
                  any points not covered by this Agreement and as to matters
                  covered by this Agreement only in the manner and to the extent
                  herein provided.

         23.03.   MODIFICATION OR TERMINATION.  This Agreement, when signed by 
                  the officers of the COMPANY and the UNION, shall become
                  effective as described above for a period of four (4) years
                  and shall continue to remain in full force and effect from
                  year to

                                      -41-


<PAGE>   47


                  year thereafter, unless written notices is given by either
                  party hereto to the other on or before sixty (60) days prior
                  to the annual expiration date, requesting that the Agreement
                  be modified or terminated. In the event of such notification,
                  the parties hereto shall immediately confer and negotiate with
                  reference to a new or modified Agreement. Negotiations for a
                  new contract shall commence not later than thirty (30) days
                  from the date of the written notice herein mentioned.

                                  ARTICLE XXIV
                                  ------------

                               CONTRACT RE-OPENER

         The Company will introduce a new incentive pay plan during the term of
this agreement. The Plan is called "Pay Plus". Certain features of the Plan
remain undetermined as of October 15, 1997. Therefore, the parties agree that
during the term of this agreement there will be a limited re-opener regarding
aspects of the Plan. The Company will notify the Union not less than forty-five
(45) days prior to the implementation date of the Pay Plus Plan at the
Jacksonvillle facility. During this forty-five (45) days period, the Company and
Union will meet to discuss such Pay Plus matters as (but not limited to) base
rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.

         Notwithstanding Article V, if agreement is not reached regarding the
matters to be discussed during the forty-five (45) days or extension thereof,
the parties are free to exercise their rights to engage in activity in support
of their respective positions. In the case of the Union this shall include, but
not be limited to, a strike or other legal means in support of its position. In
the case of the Company this shall include, but not be limited to,
implementation of the Plan, a lockout, and/or in the case of a strike, the
hiring of replacements. The right to strike shall not give rise to a sympathy
strike in support of employees at other Simmons plants where the Pay Plus Plan
is implemented or in the process of being implemented. Further, the Union agrees
to provide a ten (10) day written notice prior to the commencement of a strike;
and the Company agrees to provide a ten (10) day written notice prior to the
commencement of a lockout.

         Finally, nothing in this re-opener provision should be construed as
limiting the Company's rights under Article IX.


                                      -42-


<PAGE>   48



         IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated, this ___________ day of ___________, 1998.

THE UNITED STEELWORKERS OF                          SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #425

/s/ George F. Becker
______________________________________     ___________________________________
George F. Becker                           Company
International President

/s/ Leo W. Gerard                               /s/ Ken Barton
______________________________________     By: _______________________________
Leo W. Gerard, International
Secretary/Treasurer

/s/ Richard H. Davis
______________________________________
Richard H. Davis, International
Vice-President Administration

/s/ Leon Lynch
______________________________________
Leon Lynch, International
Vice-President, Human Affairs

/s/ Victoria Key
______________________________________
Victoria Key, Staff Representative
Coordinator

/s/ Homer Wilson
______________________________________
District Director

/s/ C. G. Lanharn
______________________________________


/s/ Allie M. Mill
______________________________________
Committee

/s/ Larry C. Worges
______________________________________
Committee

______________________________________
Committee

______________________________________
Committee



                                       43

<PAGE>   49


                                  JACKSONVILLE
                                  ------------
                                  APPENDIX "A"
                                  ------------

                      ARBITRATORS FOR EXPEDITED ARBITRATION

                               GENERAL ARBITRATORS

                                 Richard Adelman
                                   Jack Clarke
                                David Concepcion
                                  Donald Crane
                                 William Heekin
                                  I. B. Helburn
                               Diane Dunham Massey
                                 Elvis Stephens
                                Michael Rappaport
                                  David Vaughn

                             TIME STUDY ARBITRATORS

                                Herman Birnbrauer
                                  John Lillich
                                Louis Imundo, Jr.
                               Lawrence Mann, Jr.
                                 James Reynolds





                                      -44-