Exhibit 10.37


 


THE SEALY
CORPORATION BONUS PLAN


 


Sealy Corporation (the “Company”) hereby adopts the bonus Plan (the “Plan”)
for the benefit of certain employees and subject to the terms and provisions
set forth below.


 


1.                                       Purpose.  The Sealy Corporation Bonus
Plan is intended to attract and retain employees in key positions of Sealy
Corporation and selected subsidiaries (the “Company”), to motivate participants
toward achieving the Company’s objectives and to reward participants for their contributions
to the success of the Company.


 


2.                                       Administration. The Plan is administered by the Board of
Directors of the Company. The Board may delegate any of its rights and duties
under the Plan to the Human Resources Committee or an officer of the Company.
The Board establishes administrative rules, determines employee eligibility,
establishes the awards to be made under the Plan and their terms and
conditions.  In addition, the Board has
authority to adjust or modify the Plan or its operations to deal with unusual or
unanticipated events in a fair and equitable manner. The Board shall construe
and interpret the Plan and its determinations shall be final and binding upon
all Plan participants.


 


3.                                       Participation. 
Participants in the Plan are selected during each fiscal year by the
Board from exempt salaried employees. Participants are assigned to a bonus
group at the sole discretion of the Board, with groupings generally as follows:


 


	
  Group
  8:

  	
   

  	
  Selected
  Senior Company Executives

  
	
   

  	
   

  	
   

  
	
  Group
  7:

  	
   

  	
  Senior
  Company Executives

  
	
   

  	
   

  	
   

  
	
  Group
  6:

  	
   

  	
  Corporate
  and Regional Vice Presidents

  
	
   

  	
   

  	
   

  
	
  Group
  5:

  	
   

  	
  Other
  Senior Management

  
	
   

  	
   

  	
   

  
	
  Group
  4:

  	
   

  	
  Plant
  Managers, Sales Managers

  
	
   

  	
   

  	
   

  
	
  Group
  3:

  	
   

  	
  Other
  Middle Management

  
	
   

  	
   

  	
   

  
	
  Group
  2:

  	
   

  	
  Plant
  Controllers, Senior Professionals and Supervisors

  
	
   

  	
   

  	
   

  
	
  Group
  1:

  	
   

  	
  Selected
  Exempt Employees

  



 


Non-exempt employees (eligible for overtime) and Sales Representatives
shall not participate in
the Bonus Plan. Participation in the Plan in one year does not establish an
employment relationship for a fixed duration and does not confer the right to
continue in the employ of the Company or to participate in the Plan or any
similar plan in any subsequent year. Participants may be added or have their
bonus group changed during a fiscal year on a pro-rated basis at the discretion
of the Board.


 


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4.                                       Amount of Award.  
Bonus awards under the Plan are based on the degree to which the
financial performance of the Company, its operating plants, regions and
selected subsidiaries meet the goals established for each fiscal year.


 


Individual awards under the Plan are based on the performance of the
business segment (i.e., Company, division, plant and/or region) to which such
participant is assigned. The percentage of salary used in the bonus award
calculation for each Group increases from zero to a stated maximum as
performance exceeds the minimum goal according to the following Schedule of
Bonus Awards:


 


	
  GROUP

  	
   

  	
  MINIMUM

  	
   

  	
  TARGET

  	
   

  	
  MAXIMUM

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  (As
  determined by the Board for each participant)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  0%

  	
   

  	
  35%

  	
   

  	
  70%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  0%

  	
   

  	
  30%

  	
   

  	
  60%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  0%

  	
   

  	
  25%

  	
   

  	
  50%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  0%

  	
   

  	
  20%

  	
   

  	
  40%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  0%

  	
   

  	
  15%

  	
   

  	
  30%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  0%

  	
   

  	
  10%

  	
   

  	
  20%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  0%

  	
   

  	
  5%

  	
   

  	
  10%

  



 


Subject to section 5 below, bonus awards will be calculated as a
percentage of a participant’s weighted average annual rate of base salary in
effect for the fiscal year for which a bonus is payable.


 


5.                                       Special Circumstances. A participant’s bonus award will be
prorated based upon the number of days of active employment during the fiscal
year under any of the following circumstances occurring during the fiscal year:


 


a)                                      the participant is hired or rehired after the
beginning of the fiscal year;


 


b)                                     the participant terminates employment by
reason of (1) death, (2) long term disability, or (3) retirement
(after attainment of age 65 or attainment of age 62 with 10 or more years of
service); or


 


c)                                      the participant experiences a period of
unpaid leave of absence (whether by layoff, workers compensation leave or other
leave of absence) for a continuous period of 30 days or more.


 


A participant who is transferred or promoted during the fiscal year
will receive a prorated bonus based upon the number of days worked at each
location/segment and/or in each bonus classification group.


 


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6.                                       Goals.  The goals for the
participating segments will be based on corporate cash requirements, budgets
and expected results. The bonus goals are defined as follows:


 


Maximum is
the goal assigned to each segment that provides a bonus payout of two times the target payment.


 


Target is the
goal assigned to each segment that provides a bonus payout at target.


 


Minimum is
the goal assigned to each segment that must be achieved prior to any bonus
payout.


 


Segments will be measured on one or more from among the following
goals, as reported for each segment per Sealy internal financial statements;
specifically, Report 60 (Income Statements) and Report 70 (Balance Sheets)
issued monthly:


 


	
  a)

  	
   

  	
  Corporate
  Operating Cash Flow
  (COCF), defined as:

  
	
   

  	
   

  	
  Income
  from Operations

  
	
   

  	
   

  	
  Plus
  Depreciation

  
	
   

  	
   

  	
  Minus
  Corporate General and Administrative Expenses

  
	
   

  	
   

  	
  Plus
  or minus Other Income and Expenses

  
	
   

  	
   

  	
   

  
	
  b)

  	
   

  	
  Corporate
  Return on Investment
  (CROI) defined as:

  
	
   

  	
   

  	
  Net
  Income before Extraordinary Items

  
	
   

  	
   

  	
  Divided
  by Average Net Tangible Assets

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Net Tangible Assets is defined as:

  
	
   

  	
   

  	
  Current Assets

  
	
   

  	
   

  	
  plus Property, Plant, & Equipment

  
	
   

  	
   

  	
  minus Current Liabilities (excluding current
  portion of debt)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Average Net Tangible Assets is further defined as:

  
	
   

  	
   

  	
  (Net Tangible Assets at the close of the prior fiscal year plus Net
  Tangible Assets at the close of the current fiscal year) divided by two

  
	
   

  	
   

  	
   

  
	
  c)

  	
   

  	
  Segment
  Operating Cash Flow/Capital Charge (SOCF) defined as:

  
	
   

  	
   

  	
  Income
  from Operations

  
	
   

  	
   

  	
  Plus
  Depreciation

  
	
   

  	
   

  	
  Minus
  Business Unit General and Administrative Expenses (where applicable)

  
	
   

  	
   

  	
  Minus
  Capital Charge

  
	
   

  	
   

  	
  plus
  or minus Other Income or Expenses

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Capital Charge is further defined as a fixed percentage of:

  
	
   

  	
   

  	
  (Accounts Receivable plus Inventory minus Accounts
  Payable)

  



 


3





















 


	
  d)

  	
   

  	
  Segment
  Return on Investment
  (SROI) defined as:

  Segment Operating Cash Flow/Capital Charge (SOCF)

  Divided by Average Net Tangible Assets for the Business Unit

      calulated as in (c) and (b) above,
  respectively

  
	
   

  	
   

  	
   

  
	
  e)

  	
   

  	
  Aggregate
  Income from Plant Operations (IPO/A) which is defined as aggregate income from plant operations attributed to certain
  customers. The Aggregate IPO for any customer is based on the products sold
  to those accounts, the gross profit margin of the products sold from the
  plants where they were produced and the fully apportioned selling,
  administrative and overhead expenses associated with the accounts.

  
	
   

  	
   

  	
   

  
	
  f)

  	
   

  	
  Other
  Targets approved by the Board

  



 


Adjustments
will be provided for:  i) Extraordinary
Items as defined by APB 30, e.g. “unusual in nature and infrequent in
occurrence”; ii) any financial impact of new accounting pronouncements; and
iii) any other items approved by the Board or the HR Committee.


 


The following table describes the segment percentage and measurement
before taking into account the application of any other targets described in (f) above:


 


Goal as Percent of Overall Target Bonus*


	
  Segment

  	
   

  	
  COCF

  	
   

  	
  CROI

  	
   

  	
  SOCF

  	
   

  	
  SROI

  	
   

  	
  IPO/A

  	
   

  	
  Other

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy, Inc.

  	
   

  	
  50%

  	
   

  	
  50%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  USA
  Bedding

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  US
  Sales Districts

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  50%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US
  Sales Regions

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  50%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  National
  Accounts

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  50%

  	
   

  	
   

  
	
  Contract
  Sales

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  50%

  	
   

  	
   

  
	
  Sealy/S&F
  Plants

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  US
  Operations Regions

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Components-Spring25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Components-Pad

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Components-Total

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy
  Canada

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy
  Mexico

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy
  Intnatl-Devel

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Sealy
  Intnatl-Total

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Samuel
  Lawrence Furn.

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
  25%

  	
   

  	
   

  	
   

  	
   

  
	
  Other

  	
   

  	
   

  	
   

  	
  (As determined by the Board)

  	
   

  	
   

  	
   

  	
   

  



 










*                 The
percentage allocation of goals may be modified where necessary to provide for
the most appropriate reflection of the organizational structure and goals.


 


4





















 


7.                                       Eligibility and Method of Payment of Award.  A
participant must be employed by the Company on November 30 of the fiscal
year for which a bonus is payable, to be eligible to receive a bonus award for
such fiscal year, unless employment is terminated by reason set forth in Section 5(b).
All such bonus awards shall be paid in a single cash lump sum, less applicable
withholding, on the January 31 immediately succeeding the end of such
fiscal year, or, if later, promptly after the completion of the audit of the
Company’s financial statements.


 


8.                                       Amendment and Termination. The Plan is effective December 1,
1996. The Board may amend, terminate or otherwise modify the Plan at any time.


 


IN WITNESS HEREOF, SEALY CORPORATION, by its
appropriate officers duly authorized, has executed this instrument this 30th
day of Oct., 1996.


 


 


	
   

  	
  SEALY
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Ron L. Jones
  President / C.E.O.

  
	
   

  	
  By

  	
  Title

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Jeffrey C. Claypool
  VP Human Resources

  
	
   

  	
  By

  	
  Title

  



 


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